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
 
 
 
 
 
 10-K
 
 ☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
 December 31, 2019
 
 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
 
 
 000-04604
 
 Cincinnati Financial Corporation
 
 
 Ohio31-0746871(State of incorporation)(I.R.S. Employer Identification No.)
 
 6200 S. Gilmore Road
 Fairfield
  Ohio
  45014-5141
 
 513
  870-2000
 
 
 
 Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stock, $2.00 parCINFNasdaq Global Select Market
 
 
 
 
 Yes
 
 No
 
 
 Yes
 
 Yes
 
 
 
  
 
 
 
 Large accelerated filer
        ☐
 ☐
 
 
 
 
 ☐
 
 15,792,340,443
 
 162,686,260
 
 
 
 Portions of the definitive Proxy Statement for Cincinnati Financial Corporation’s Annual Meeting of Shareholders to be held onMay 2, 2020, are incorporated by reference into Part III of this Form 10-K. 
 
  
 
 
 
 
 Part I4Item 1.Business4Cincinnati Financial Corporation – Introduction4Our Business and Our Strategy5Our Segments17Other30Regulation31Item 1A.Risk Factors35Item 1B.Unresolved Staff Comments46Item 2.Properties46Item 3.Legal Proceedings46Item 4.Mine Safety Disclosures46Part II47Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities47Item 6Selected Financial Data49Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations50Introduction50Executive Summary51Critical Accounting Estimates56Recent Accounting Pronouncements63Financial Results64Liquidity and Capital Resources98Safe Harbor Statement114Item 7A.Quantitative and Qualitative Disclosures About Market Risk117Item 8.Financial Statements and Supplementary Data123Responsibility for Financial Statements123Management’s Annual Report on Internal Control Over Financial Reporting124Report of Independent Registered Public Accounting Firm125Consolidated Balance Sheets128Consolidated Statements of Income129Consolidated Statements of Comprehensive Income130Consolidated Statements of Shareholders’ Equity131Consolidated Statements of Cash Flows132Notes to Consolidated Financial Statements133Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure183Item 9A.Controls and Procedures183Item 9B.Other Information183Part III184Item 10.Directors, Executive Officers and Corporate Governance184Item 11.Executive Compensation186Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters186Item 13.Certain Relationships and Related Transactions, and Director Independence187Item 14.Principal Accounting Fees and Services187Part IV188Item 15.Exhibits, Financial Statement Schedules188
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
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 •providing insurance market stability through financial strength •producing competitive, up-to-date products and services •developing associates committed to superior service 
 
 
 
 •Commitment to our professional independent insurance agencies and to their continued success •Financial strength to fulfill our promises and be a consistent market for our agents’ business, supporting stability and confidence •Operating structure that supports local decision making, showcasing our claims excellence and allowing us to balance growth with underwriting discipline 
 
 •Underwriting profit (loss) – Includes revenues from earned premiums for insurance and reinsurance policies or contracts, reduced by losses and loss expenses from associated insurance coverages. Those revenues are further reduced by underwriting expenses associated with marketing policies or related to administration of our insurance operation. The net result represents an underwriting profit when revenues exceed losses and expenses. •Investment income – Is generated primarily from investing the premiums collected for insurance policies sold, until funds are needed to pay losses for insurance claims or other expenses. Interest income from bond investments or dividend income from stock investments are the main categories of our investment income, with additional contribution from compounding effects over time. •Investment gains and losses – Occur from appreciation or depreciation of invested assets over time. Gains or losses are generally recognized from changes in market values of equity securities without a sale or when invested assets are sold or become impaired. 
 
 
  
 
 
 
 •choose to sell a limited product line or only one type of insurance (monoline carrier) •target a certain segment of the market (for example, personal insurance) •focus on one or more states or regions (regional carrier) 
 
 •independent agents, who represent multiple carriers •captive agents, who represent one carrier exclusively •direct marketing to consumers 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 Agency DataYears ended December 31,20192018Property casualty agency relationships, January 11,7571,702New appointments that market all or most of The Cincinnati Insurance Companies' products11798New appointments that market only personal lines insurance products for Cincinnati Insurance7069Changes due to consolidation and other(148)(112)Property casualty agency relationships, December 311,7961,757Property casualty reporting locations2,4582,344New relationship appointments112111Active states4542
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 •Our $11.698 billion fixed-maturity portfolio is diversified and exceeds total insurance reserves. The portfolio had an average rating of A2/A, and its fair value exceeded total insurance reserve liabilities by approximately 30% at December 31, 2019. No corporate bond exposure accounted for more than 0.7% of our fixed-maturity portfolio, and no municipal exposure accounted for more than 0.2%. •The strength of our fixed-maturity portfolio provides an opportunity to invest for potential capital appreciation by purchasing equity securities. Our $7.752 billion equity portfolio minimizes concentrations in single stocks or industries. At December 31, 2019, no single security accounted for more than 5.6% of our portfolio of publicly traded common stocks, and no single sector accounted for more than 24%. 
 
 
 
 
 
 
  
 
 
 •We ended 2019 with a 1.0-to-1 ratio of property casualty premiums to surplus, a key measure of property casualty insurance company capacity and security. A lower ratio indicates more security for policyholders and greater capacity for growth by an insurer. We believe our ratio provides ample flexibility to diversify risk by expanding our operations into new geographies and product areas. The estimated industry average ratio was 0.8-to-1 at year-end 2019, based on industry data reported through the first nine months of 2019. •We ended 2019 with a 6.6% ratio of life statutory adjusted risk-based surplus to liabilities, a key measure of life insurance company capital strength. A higher ratio indicates an insurer’s stronger security for policyholders and capacity to support business growth. (Dollars in millions)Statutory InformationAt December 31,20192018Standard market property casualty insurance subsidiaryStatutory capital and surplus$5,620$4,919Risk-based capital5,6544,952Authorized control level risk-based capital823723Risk-based capital to authorized control level risk-based capital ratio6.96.8Written premium to surplus ratio1.01.0Excess and surplus lines insurance subsidiaryStatutory capital and surplus$526$479Risk-based capital526479Authorized control level risk-based capital5441Risk-based capital to authorized control level risk-based capital ratio9.811.8Written premium to surplus ratio0.60.5Life insurance subsidiaryStatutory capital and surplus$204$191Risk-based capital239223Authorized control level risk-based capital5351Total liabilities excluding separate account business3,6433,538Risk-based capital to authorized control level risk-based capital ratio4.54.4Life statutory risk-based adjusted surplus to liabilities ratio6.66.4
 
 
 
 
 
  
 
 
 
 
 Insurer Financial Strength RatingsRatingagencyStandard market propertycasualty insurance subsidiaryLife insurancesubsidiaryExcess and surplus linesinsurance subsidiaryOutlookRatingTierRatingTierRatingTierA.M. Best Companyambest.comA+Superior2 of 16A+Superior2 of 16A+Superior2 of 16StableFitch Ratingsfitchratings.comA+Strong5 of 21A+Strong5 of 21---StableMoody's InvestorsServicemoodys.comA1Good5 of 21------PositiveS&P Global Ratingsspratings.comA+Strong5 of 21A+Strong5 of 21---Stable
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 (Dollars in millions)Earnedpremiums% of totalearnedAgencylocationsAveragepremium perlocationYear ended December 31, 2019Ohio$80615.1%250$3.2Illinois2955.51531.9Georgia2915.51072.7North Carolina2745.11102.5Indiana2644.91182.2Pennsylvania2634.91421.9Michigan2103.91351.6Tennessee1893.5623.0Virginia1773.3712.5Alabama1663.1523.2
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
 (Dollars in millions)201920182017Percent oftotal 2019Segment:Commercial lines insurance$3,410$3,245$3,20258.4%Personal lines insurance1,4351,3781,29424.6Excess and surplus lines insurance3032492195.2Life insurance3182982785.5Other3681581256.3Total$5,834$5,328$5,118100.0%Business line:Commercial lines insurance:Commercial casualty$1,131$1,080$1,08219.4%Commercial property98593291916.9Commercial auto73568265112.6Workers' compensation2943113265.0Other commercial2652402244.5Total commercial lines insurance3,4103,2453,20258.4Personal lines insurance:Personal auto62062260310.6Homeowner63158854210.8Other personal1841681493.2Total personal lines insurance1,4351,3781,29424.6Excess and surplus lines insurance3032492195.2Life insurance:Term life insurance1961811673.4Universal life insurance3744410.6Other life insurance and annuity products8573701.5Subtotal3182982785.5Other3681581256.3Total$5,834$5,328$5,118100.0%
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 •Commercial lines insurance •Personal lines insurance •Excess and surplus lines insurance •Life insurance •Investments 
 
 
 
 
  
 
 
 
 
 
 •Commercial casualty – Provides coverage to businesses against third-party liability from accidents occurring on their premises or arising out of their operations, including injuries sustained from products or liability related to professional services. Specialized casualty policies may include similar coverage such as umbrella liability or employment practices. The commercial casualty business line includes liability coverage written as part of commercial package policies. •Commercial property – Provides coverage for loss or damage to buildings, inventory and equipment caused by covered causes of loss such as fire, wind, hail, water, theft and vandalism, as well as business interruption resulting from a covered loss. Commercial property also includes other coverages such as inland marine, which covers losses related to builder’s risk, cargo or equipment. Various property coverages can be written as stand-alone policies or can be added to a commercial package policy. •Commercial auto – Protects businesses against liability to others for both bodily injury and property damage, medical payments to insureds and occupants of their vehicles, physical damage to an insured’s own vehicle from collision and various other perils, and damages caused by uninsured motorists. •Workers’ compensation – Covers employers for government-specified benefits from work-related injuries to employees. •Other commercial lines – This includes several other types of insurance products for businesses, including: ◦Management liability and surety – Includes director and officer (D&O) liability insurance, which covers liability for actual or alleged errors in judgment, breaches of duty or other wrongful acts related to activities of organizations and can optionally include other liability coverages. We market primarily to nonprofit organizations, privately held businesses, healthcare organizations, financial institutions and educational institutions. The for-profit portion includes approximately 180 bank or savings and loan financial institutions, with none having assets of $1 billion or more. The surety portion includes contract and commercial surety bonds for losses resulting from dishonesty, failure to perform and other acts and also includes fidelity bonds for fraudulent acts by specified individuals or dishonest acts by employees. ◦Machinery and equipment – Specialized coverage provides protection for loss or damage to boilers and machinery, including production and computer equipment and business interruption, due to sudden and accidental mechanical breakdown, steam explosion or artificially generated electrical current. 
 
 
 
 
 
  
 
 
 (Dollars in millions)Earnedpremiums% of totalearnedAgencylocationsAveragepremium perlocationYear ended December 31, 2019Ohio$48114.5%241$2.0Pennsylvania2146.51301.6Illinois2086.31431.5Indiana1815.51181.5North Carolina1815.41061.7Georgia1534.6951.6Virginia1384.2662.1Michigan1354.11261.1Tennessee1354.1622.2Missouri1063.2512.1
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 •Personal auto – Protects against liability to others for both bodily injury and property damage, medical payments to insureds and occupants of their vehicle, physical damage to an insured’s own vehicle from collision and various other perils, and damages caused by uninsured motorists. In addition, many states require policies to provide first-party personal injury protection, frequently referred to as no-fault coverage. •Homeowner – Protects against losses to dwellings and contents from a wide variety of perils, as well as liability arising out of personal activities both on and off the covered premises. We also offer coverage for condominium unit owners and renters. •Other personal lines – This includes the other types of insurance products we offer to individuals, including dwelling fire, inland marine, personal umbrella liability and watercraft coverages. 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 (Dollars in millions)Earnedpremiums% of totalearnedAgencylocationsAveragepremium perlocationYear ended December 31, 2019Ohio$30321.6%224$1.4Georgia1208.6901.3North Carolina795.7890.9Alabama684.9481.4Indiana684.8870.8Michigan674.8970.7Illinois664.71030.6New York614.3900.7Kentucky543.9471.1Minnesota483.4580.8
 
 
 
 
 
  
 
 
 
 
 
 •Commercial casualty – Covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, including injuries sustained from products. Other coverages available include miscellaneous errors and omissions, professional liability and excess liability. Typical businesses covered include contractors, manufacturers, real estate owners and managers, retail, consultants, and bars or taverns. Policies covering liability at special events are also available. •Commercial property – Insures buildings, inventory, equipment and business income from loss or damage due to causes such as fire, wind, hail, water, theft and vandalism. Examples of property we commonly insure with excess and surplus lines policies include temporarily vacant buildings, habitational, restaurants and relatively higher-hazard manufacturing classes. 
 
 
 
 
 
 (Dollars in millions)Earnedpremiums% of totalearnedYear ended December 31, 2019Ohio$228.1%Illinois227.8Texas197.0Georgia186.5Indiana155.3North Carolina145.0Pennsylvania144.9Alabama124.3Florida114.0Minnesota113.9
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 •Term life insurance – Policies under which a death benefit is payable only if the insured dies during a specific period of time. Policy options include a return of premium provision, a benefit equal to the sum of all paid base premiums that is payable if the insured person survives to the end of the term. The policies are fully underwritten using traditional and accelerated methods. •Universal life insurance – Long-duration life insurance policies that are fully underwritten. Contract premiums are neither fixed nor guaranteed; however, the contract does specify a minimum interest crediting rate and a maximum cost of insurance charge and expense charge. The cash values, available as loans collateralized by the cash surrender value, are not guaranteed and depend on the amount and timing of actual premium payments and the amount of actual contract assessments. •Worksite products – Term life insurance, return of premium term life insurance and whole life insurance offered to employees through their employer. Premiums are collected by the employer using payroll deduction. Policies are issued using a simplified underwriting approach and on a guaranteed issue basis. Worksite insurance products provide our property casualty agency force with excellent cross-serving opportunities for both commercial and personal accounts. •Whole life insurance – Policies that provide life insurance for the entire lifetime of the insured. The death benefit is guaranteed never to decrease and premiums are guaranteed never to increase. While premiums are fixed, they must be paid as scheduled. These policies provide guaranteed cash values that are available as loans collateralized by the cash surrender value. The policies are fully underwritten. 
 
 •Deferred annuities that provide regular income payments that commence after the end of a specified period or when the annuitant attains a specified age. During the deferral period, any payments made under the contract accumulate at the crediting rate declared by the company but not less than a contract-specified guaranteed minimum interest rate. A deferred annuity may be surrendered during the deferral period for a cash value equal to the accumulated payments plus interest less the surrender charge, if any. •Immediate annuities that provide some combination of regular income and lump-sum payments in exchange for a single premium. 
 
 
  
 
 
 
 
 
 •Because our property casualty operations are held in high regard, property casualty agency management is predisposed to consider selling our life products. •Marketing efforts for both our property casualty and life insurance businesses are directed by our field marketing department, coordinated with our life field marketing representatives, which assures consistency of communication and operations. Life field marketing representatives are available to meet face-to-face with agency personnel and their clients as well. Our life headquarters underwriters and other associates are available to the agents and field team to assist in the placement of business. 
 
 •Term life insurance is our largest life insurance product line. We continue to develop and offer term products with features our agents indicate are important, such as a return of premium benefit and an option for an accelerated underwriting product for our personal lines agents. •We also offer products addressing the needs of businesses with key person and buy-sell coverages. We offer quality, personal life insurance coverage to personal and commercial clients of our agencies. 
 
 
 
 (Dollars in millions)Premiums% of totalYear ended December 31, 2019Ohio$5516.7%Pennsylvania237.0Illinois206.0Indiana205.9Georgia175.2
 
 
 
  
 
 
 
 
 
 
 
 (Dollars in millions)At December 31, 2019At December 31, 2018Cost or amortized costPercent of totalPercent of totalCost or amortized costPercent of totalPercent of totalFair valueFair valueTaxable fixed maturities$7,25049.4%$7,61739.1%$6,92049.4%$6,92641.7%Tax-exempt fixed maturities3,85826.34,08121.03,72326.63,76322.6Common equity securities3,37122.97,51838.73,19522.85,74234.6Nonredeemable preferredequity securities2101.42341.21731.21781.1Total$14,689100.0%$19,450100.0%$14,011100.0%$16,609100.0%
 
 
 •Fixed-maturity investments – Includes taxable and tax-exempt bonds and redeemable preferred stocks. During 2019, the combined effect of purchases and a net increase in unrealized gains offset sales and calls of fixed-maturity securities in our portfolio. During 2018, a net decrease in unrealized gains, in addition to sales and calls, offset purchases. •Equity investments – Includes common and nonredeemable preferred stocks. During 2019, the combined effect of purchases and a net increase in fair value offset sales of equity securities in our portfolio. During 2018, a net decrease in fair value and sales offset purchases. 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 At December 31,20192018Weighted average yield-to-amortized cost4.10%4.20%Weighted average maturity7.7yrs7.6yrsEffective duration4.8yrs5.2yrs
 
 
 (Dollars in millions)At December 31,20192018Investment-grade corporate$6,137$5,464States, municipalities and political subdivisions647541Commercial mortgage-backed301288Noninvestment-grade corporate264246Government-sponsored enterprises136310United States government10467Foreign government2810Total$7,617$6,926
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 Percent of common stock portfolioAt December 31, 2019At December 31, 2018CincinnatiFinancialS&P 500 IndustryWeightingsCincinnatiFinancialS&P 500 IndustryWeightingsSector:Information technology23.7%23.2%20.9%20.1%Financial15.713.015.613.3Industrials12.69.112.59.2Healthcare12.414.214.915.6Consumer discretionary9.79.710.510.0Energy6.34.36.75.3Consumer staples6.27.25.67.4Materials5.02.74.92.7Telecomm services3.410.43.510.1Utilities2.53.32.73.3Real estate2.52.92.23.0Total100.0%100.0%100.0%100.0%
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
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 •Insurance Holding Company Regulation – We are regulated as an insurance holding company system in the respective states of domicile of our lead standard market property casualty company subsidiary and its surplus lines insurance subsidiary. These regulations require that we annually furnish financial and other information about the governance and operations of the individual companies within the holding company system. Information about the risks posed by any noninsurance company subsidiaries must also be disclosed. All transactions within a holding company system affecting insurers must be fair and equitable. Notice to the state insurance commissioner is required prior to the consummation of transactions affecting the ownership or control of an insurer and prior to certain material transactions between an insurer and any person or entity in its holding company group. In addition, some of those transactions cannot be consummated without the commissioner’s prior approval. •Subsidiary Dividends – The Cincinnati Insurance Company is fully owned by Cincinnati Financial Corporation. The dividend-paying capacity of The Cincinnati Insurance Company and its fully owned subsidiaries is regulated by the laws of the applicable state of domicile. Under these laws, our domestic insurance subsidiaries must provide a 10-day advance informational notice to the insurance commissioner for the domiciliary state prior to payment of any dividend or distribution to its shareholders. Generally, the most our domestic insurance subsidiary can pay without prior regulatory approval is the greater of 10% of statutory capital and surplus or 100% of statutory net income for the prior calendar year. 
 •Insurance Operations – All of our domestic insurance subsidiaries are subject to licensing and supervision by departments of insurance in the states in which they do business. The nature and extent of such regulations vary, but generally are rooted in statutes that delegate regulatory, supervisory and administrative powers to state insurance departments. Such regulations, supervision and administration of the domestic insurance subsidiaries include: the standards of solvency that must be met and maintained; the licensing of insurers and their agents and brokers; the nature and limitations on investments; deposits of securities for the benefit of policyholders; regulation of standard market policy forms and premium rates; policy cancellations and nonrenewals; test audit programs; periodic examination of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of insurers or for other purposes; requirements regarding reserves for unearned premiums, losses and other matters; the nature of and limitations on dividends to policyholders and shareholders; the nature and extent of required participation in insurance guaranty funds; the involuntary assumption of hard-to-place or high-risk insurance business, primarily workers’ compensation insurance; and the collection, remittance and reporting of certain taxes and fees. Our primary insurance regulators in the U.S. have adopted the Model Audit Rule for annual statutory financial reporting. This regulation closely mirrors the Sarbanes-Oxley Act on matters such as auditor independence, corporate governance and internal controls over financial reporting. The regulation permits the audit committee of Cincinnati Financial Corporation’s board of directors to also serve as the audit committee of each of our insurance subsidiaries for purposes of this regulation. •Insurance Guaranty Associations – For certain obligations of insolvent insurance companies to policyholders and claimants, states assess each member insurer in an amount relative to the insurer’s proportionate share of business written by all member insurers in the state. While the amount of such assessments has not been material in recent years, we cannot predict the amount and timing of any future assessments or refunds on our insurance subsidiaries under these laws. •Shared Market and Joint Underwriting Plans – Assigned risk plans, reinsurance facilities and joint underwriting associations are mechanisms that generally provide applicants with various basic insurance coverages when they are not available in voluntary markets. States can require participation based upon the amount of an insurance company’s voluntary market share, and underwriting results related to these pools could be adverse to our company. 
 
  
 
 •Statutory Accounting – For public reporting, domestic insurance companies prepare financial statements in accordance with GAAP. However, certain data also must be calculated according to statutory accounting rules as defined in the NAIC’s Accounting Practices and Procedures Manual. While not a substitute for any GAAP measure of performance, statutory data frequently is used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies. •Insurance Reserves – State insurance laws require that property casualty and life insurers annually analyze the adequacy of reserves. Our appointed actuaries must submit an opinion that reserves are adequate for policy claims-paying obligations and related expenses. •Investment Regulation – Insurance company investments must comply with laws and regulations pertaining to the type, quality and concentration of investments. Such laws and regulations permit investments in federal, state and municipal obligations, corporate bonds, preferred and common equity securities, mortgage loans, real estate and certain other investments, subject to specified limits and other qualifications. •Risk-Based Capital Requirements – The NAIC’s risk-based capital (RBC) requirements for property casualty and life insurers serve as an early warning tool for the NAIC and state regulators to identify companies that may be undercapitalized and may merit further regulatory action. The NAIC has a standard formula for annually assessing RBC. The formula for calculating RBC for property casualty companies takes into account asset and credit risks but places more emphasis on underwriting factors for reserving and pricing. The formula for calculating RBC for life insurance companies takes into account factors relating to insurance, business, asset and interest-rate risks. 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 •Downgrade of the financial strength ratings of our insurance subsidiaries. We believe our strong insurer financial strength ratings, in particular, the A+ (Superior) ratings from A.M. Best for our standard market property casualty insurance group and each subsidiary in that group, are an important competitive advantage. See Item 1, Our Business and Our Strategy, Financial Strength, for additional discussion of our financial strength ratings. •Concerns that doing business with us is difficult or not profitable, perceptions that our level of service is no longer a distinguishing characteristic in the marketplace, perceptions that our products do not meet the needs of our agents’ clients or perceptions that our business practices are not compatible with agents’ business models. •Mergers and acquisitions could result in a concentration of a significant amount of premium in one agency. •Delays in the development, implementation, performance and benefits of technology systems and enhancements or independent agent perceptions that our technology solutions do not match their needs. 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 •Hurricanes in the gulf, eastern, southeastern and northeastern coastal regions. •Earthquakes in many regions, most particularly in the New Madrid fault zone, California, the Northwest and Southwest. •Tornado, wind and hail in the Midwest, South, Southeast, Southwest and the mid-Atlantic. •Wildfires. •On a worldwide basis, in the event of a severe catastrophic event or terrorist attack we may be exposed to material losses through our Cincinnati Re and Cincinnati Global operations. 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 •Competitiveness of premiums charged •Relationships among carriers, agents, brokers and policyholders •Underwriting and pricing methodologies that allow insurers to identify and flexibly price risks •Compensation provided to agents •Underwriting discipline •Terms and conditions of insurance coverage •Speed with which products are brought to market •Product and marketing innovations, including advertising •Technological competence and innovation •Ability to control expenses •Adequacy of financial strength ratings by independent ratings agencies such as A.M. Best •Quality of services and tools provided to agents and policyholders •Claims satisfaction and reputation 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 Plan categoryNumber of securities to beissued upon exercise ofoutstanding options,warrants and rights atDecember 31, 2019Weighted-average exerciseprice of outstandingoptions, warrants and rightsNumber of securities remainingavailable for future issuance underequity compensation plan (excludingsecurities reflected in column (a)) atDecember 31, 2019(a)(b)(c)Equity compensation plansapproved by security holders3,437,413$63.998,225,276Equity compensation plans notapproved by security holders———Total3,437,413$63.998,225,276
 
 
 
 
 
 
 PeriodTotal numberof sharespurchasedAverageprice paidper shareTotal number of sharespurchased as part ofpublicly announcedplans or programsMaximum number ofshares that may yet bepurchased under theplans or programsOctober 1-31, 2019553,535$111.94553,53514,876,785November 1-30, 2019———14,876,785December 1-31, 2019———14,876,785Totals553,535111.94553,535
 
 
 
 
 
 
  
 
 
 
 (In millions, except per share data and shares outstanding in thousands)Years ended December 31,20192018201720162015Consolidated Income Statement DataEarned premiums$5,604$5,170$4,954$4,710$4,480Investment income, net of expenses646619609595572Investment gains and losses, net *1,650(402)14812470Total revenues7,9245,4075,7325,4495,142Net income1,9972871,045591634Net income per common share:Basic$12.24$1.76$6.36$3.59$3.87Diluted12.101.756.293.553.83Cash dividends per common share:Ordinary declared2.242.122.001.921.84Ordinary paid2.212.091.981.901.82Special declared and paid——0.50—0.46Diluted weighted average shares165.1164.5166.0166.5165.6Consolidated Balance Sheet DataTotal investments$19,746$16,732$17,051$15,500$14,423Net unrealized investment portfolio gains4,7612,5983,5402,6252,094Deferred policy acquisition costs774738670637616Total assets25,40821,93521,84320,38618,888Gross loss and loss expense reserves6,1475,7075,2735,0854,718Life policy and investment contract reserves2,8352,7792,7292,6712,583Long-term debt788788787787786Shareholders' equity9,8647,8338,2437,0606,427Book value per share60.5548.1050.2942.9539.20Shares outstanding162,918162,843163,899164,387163,944Value creation ratio30.5%(0.1)%22.9%14.5%3.4%Consolidated Property Casualty Operations DataEarned premiums$5,334$4,920$4,722$4,482$4,271Unearned premiums2,7872,5152,4032,3062,200Gross loss and loss expense reserves6,0885,6465,2195,0354,660Investment income, net of expenses419401392384368Loss and loss expense ratio62.8%65.5%66.4%63.8%60.2%Underwriting expense ratio31.030.931.131.030.9Combined ratio93.8%96.4%97.5%94.8%91.1%
 
 *Investment gains and losses are integral to our financial results over the long term, but our substantial discretion in the timing of investment sales may cause this value to fluctuate substantially. Also, applicable accounting standards require us to recognize gains and losses from changes in fair values of equity securities and changes in embedded derivatives without actual realization of those gains and losses. We discuss investment gains and losses for the past three years in Item 7, Investments Results. 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 OneyearThree-year% averageFive-year% averageValue creation ratio:As of December 31, 201930.5%17.8%14.2%As of December 31, 2018(0.1)12.410.7As of December 31, 201722.913.613.9
 
 
 
 
 Years ended December 31,2019-20182018-2017201920182017Pt. ChangePt. ChangeValue creation ratio major components:Net income before investment gains8.9%7.4%13.5%1.5(6.1)Change in fixed-maturity securities, realized and unrealized gains5.5(3.2)1.18.7(4.3)Change in equity securities, investment gains16.6(3.8)8.620.4(12.4)Other(0.5)(0.5)(0.3)0.0(0.2)Value creation ratio30.5%(0.1)%22.9%30.6(23.0)
 
 
 
 
 (Dollars are per share)Years ended December 31,201920182017Value creation ratio:End of period book value*$60.55$48.10$50.29Less beginning of period book value48.1050.2942.95Change in book value12.45(2.19)7.34Dividend declared to shareholders2.242.122.50Total value creation$14.69$(0.07)$9.84Value creation ratio from change in book value**25.9%(4.3)%17.1%Value creation ratio from dividends declared to shareholders***4.64.25.8Value creation ratio30.5%(0.1)%22.9%
 
 
 
 
 
 
  
 
 
 •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 5.9% over the five-year period 2015 through 2019, exceeding the 4.3% estimated growth rate for the property casualty insurance industry, with 2019 representing industry data reported through the first nine months of 2019. 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 95% to 100%. Our GAAP combined ratio averaged 94.7% over the five-year period 2015 through 2019, slightly better than the performance target range. Performance as measured by the combined ratio is discussed in Consolidated Property Casualty Insurance Results. Our statutory combined ratio averaged 94.3% over the five-year period 2015 through 2019, compared with an estimated 100.1% for the property casualty industry, with 2019 representing industry data reported through the first nine months of 2019. 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 3.3% over the five-year period 2015 through 2019. ◦Over the five years ended December 31, 2019, our equity portfolio compound annual total return was 12.0% compared with a compound annual total return of 11.7% for the Index. Our equity portfolio favors larger-capitalization, high-quality, dividend growing stocks with a slight value orientation. For the year 2019, our equity portfolio total return was 31.9%, compared with 31.5% for the Index. 
 
 
 
  
 
 
 
 
 
 (Dollars in millions, except share data)At December 31,At December 31,20192018Total investments$19,746$16,732Total assets25,40821,935Short-term debt3932Long-term debt788788Shareholders' equity9,8647,833Book value per share60.5548.10Debt-to-total-capital ratio7.7%9.5%
 
 
 
 
 
 
 (In millions, except per share data)Years ended December 31,2019-20182018-2017201920182017Change %Change %Earned premiums$5,604$5,170$4,95484Investment income, net of expenses (pretax)64661960942Investment gains and losses, net (pretax)1,650(402)148nmnmTotal revenues7,9245,4075,73247(6)Net income1,9972871,045596(73)Comprehensive income2,423241,648nm(99)Net income per share - diluted12.101.756.29591(72)Cash dividends declared per share2.242.122.506(15)Diluted weighted average shares outstanding165.1164.5166.00(1)
 
 
 
 
 
 
 
  
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Consolidated property casualty data:Net written premiums$5,516$5,030$4,840104Earned premiums5,3344,9204,72284Underwriting profit3411861288345Pt. ChangePt. ChangeGAAP combined ratio93.8%96.4%97.5%(2.6)(1.1)Statutory combined ratio93.496.097.2(2.6)(1.2)Written premium to statutory surplus1.01.01.00.00.0
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 •Manage insurance profitability – Implementation of these initiatives is intended to enhance underwriting expertise and knowledge, thereby increasing our ability to manage our business while also gaining efficiency. Better profit margins can arise from additional information and more focused action on underperforming product lines, plus pricing capabilities we are expanding through the use of technology and analytics. In addition to enhancing company efficiency, improving internal processes also supports the ability of the independent agencies that represent us to grow profitably by allowing them to serve clients faster and to more efficiently manage agency expenses. •Drive premium growth – Implementation of these initiatives is intended to further penetrate each market we serve through our independent agencies. Strategies aimed at specific market opportunities, along with service enhancements, can help our agents grow and increase our share of their business. Premium growth initiatives also include expansion of Cincinnati Re and Cincinnati Global. Diversified growth also may reduce variability of losses from weather-related catastrophes. 
 
 
 
 
 
 
 •We expect the insurance marketplace to remain competitive, which is likely to cause carriers to pursue strategies that they believe could lead to economies of scale, market share gains or the potential for an improved competitive posture. •We expect the independent insurance agency system to remain strong, with continued agency consolidation. If soft insurance market conditions return in the near term, it will create additional risk for agencies. •A return of soft insurance market pricing could significantly affect growth rates and earned premium levels for some time into the future. If the economy falters, we may experience low or no premium growth for our property casualty segments. Premium growth also may lag as some of our growth initiatives require more time to reach their full contribution. In addition, economic factors, including inflation, may increase our claims and settlement expenses related to medical care, litigation and construction. •Financial markets continued to display volatility in recent years, and some predict more turbulence in the future from effects such as changes in government policy, growth challenges for emerging country economies or other geopolitical events that could also affect the U.S. economy and markets. Should financial markets decline temporarily, which could occur as part of typical market volatility patterns, the related book value component of our value creation ratio could also register a weak or negative result. 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 •type of claim involved •circumstances surrounding each claim •policy provisions pertaining to each claim •potential for subrogation or salvage recoverable •general insurance reserving practices 
 
 
 
 
  
 
 
 •For events designated as natural catastrophes resulting in losses incurred related to premiums written on a direct basis by The Cincinnati Insurance Companies, we calculate IBNR reserves directly as a result of an estimated IBNR claim count and an estimated average claim amount for each event. Once case reserves are established for a catastrophe event, we reduce the IBNR reserves. Our claims department management coordinates the assessment of these events and prepares the related IBNR reserve estimates. Such an assessment involves a comprehensive analysis of the nature of the event, of policyholder exposures within the affected geographic area and of available claims intelligence. Depending on the nature of the event, available claims intelligence could include surveys of field claims associates within the affected geographic area, feedback from a catastrophe claims team sent into the area, as well as data on claims reported as of the financial statement date. 
 •For events designated as natural catastrophes resulting in losses for Cincinnati Re and Cincinnati Global, we begin with a review of in-force policies, treaties and related limits likely to be affected by each event. For both Cincinnati Re and Cincinnati Global, use of information from third-party catastrophe models, industry estimates, and our own proprietary adjustments are utilized for the estimate of ultimate losses for each catastrophe event. Incurred losses from catastrophe events for both Cincinnati Re and Cincinnati Global can be designated catastrophes by PCS, or deemed as a catastrophe by the international insurance industry or, for Cincinnati Re, as reported by ceding companies. IBNR reserves are calculated as the difference between the estimate of the ultimate loss and loss expenses and the sum of total loss and loss expense payments and total case reserves. •For asbestos and environmental claims, we calculate IBNR reserves by deriving an actuarially-based estimate of total unpaid loss and loss expenses. We then reduce the estimate by total case reserves. We discuss the reserve analysis that applies to asbestos and environmental reserves in Liquidity and Capital Resources, Asbestos and Environmental Loss and Loss Expense Reserves. •For loss expenses that pertain primarily to salaries and other costs related to our claims department associates, also referred to as adjusting and other expense or AOE, we calculate reserves based on an analysis of the relationship between paid losses and paid AOE. Reserves for AOE are allocated to company, line of business and accident year based on a claim count algorithm. Claim counts reported and used in the reserving process are primarily measured by insurance coverages that are triggered when a loss occurs and a reserve is established. Coverages are defined as unique combinations of certain attributes such as line of business and cause of loss. Claims that are opened and closed without payment are included in the reported claim counts. Claim counts are presented on a direct basis only and do not reflect any assumed or ceded reinsurance. •For all other claims and events, including reinsurance assumed or ceded, IBNR reserves are calculated as the difference between an actuarial estimate of the ultimate cost of total loss and loss expenses incurred reduced by the sum of total loss and loss expense payments and total case reserves estimated for individual claims. Reserve amounts for those other claims and events are significant, and represent the majority of amounts shown as IBNR reserves and loss expense reserves in the table included in Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves. We discuss below the development of actuarially based estimates of the ultimate cost of total loss and loss expenses incurred. 
 
 
 
 
  
 
 
 •paid and reported loss development methods •paid and reported loss Bornhuetter-Ferguson methods •individual and multiple probabilistic trend family models 
 
 
 
 •company and industry pricing •company and industry exposure •company and industry loss frequency and severity •past large loss events •company and industry premium •company in-force policy count 
 
 
 •large loss activity and trends in large losses •new business activity •judicial decisions •general economic trends such as inflation •trends in litigiousness and legal expenses •product and underwriting changes •changes in claims practices 
 
 
  
 
 
 
 
 
 
 
 •Emergence of loss and defense and cost containment expenses, also referred to as DCCE, on an accident year basis. Historical paid loss, reported loss and paid DCCE data for the business lines we analyze contain patterns that reflect how unpaid losses, unreported losses and unpaid DCCE as of a financial statement date will emerge in the future. Unless our actuarial staff or management identifies reasons or factors that invalidate the extension of historical patterns into the future, these patterns can be used to make projections necessary for estimating IBNR reserves. Our actuaries significantly rely on this assumption in the application of all methods and models mentioned above. •Calendar year inflation. For long-tail and mid-tail business lines, calendar year inflation trends for future paid losses and paid DCCE do not vary significantly from a stable, long-term average. Our actuaries base reserve estimates derived from probabilistic trend family models on this assumption. •Exposure levels. Historical earned premiums, when adjusted to reflect common levels of product pricing and loss cost inflation, can serve as a proxy for historical exposures. Our actuaries require this assumption to estimate expected loss ratios and expected DCCE ratios used by the Bornhuetter-Ferguson reserving methods. They may also use this assumption to establish exposure levels for recent accident years, characterized by “green” or immature data, when working with probabilistic trend family models. •Claims having atypical emergence patterns. Characteristics of certain subsets of claims, such as high frequency, high severity, or mass tort claims, have the potential to distort patterns contained in historical paid loss, reported loss and paid DCCE data. When testing indicates this to be the case for a particular subset of claims, our actuaries segregate these claims from the data and analyze them separately. Subsets of claims that could fall into this category include hurricane claims or claims for other weather events where total losses we incurred were very large, individual large claims and asbestos and environmental claims. 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 (Dollars in millions)Net loss and loss expense range of reservesCarried reservesLow pointHigh pointStandard errorNet incomeeffectAt December 31, 2019Total$5,746$5,418$5,862$222$175Commercial casualty$2,209$1,959$2,377$209$165Commercial property3122793262419Commercial auto7046687363427Workers' compensation9498139999373Personal auto3243033361613Homeowners185175195108
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 •Commercial lines insurance •Personal lines insurance •Excess and surplus lines insurance •Life insurance •Investments 
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 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Earned premiums$5,334$4,920$4,72284Fee revenues11111100Total revenues5,3454,9314,73384Loss and loss expenses from:Current accident year before catastrophe losses3,2493,0262,88975Current accident year catastrophe losses351364368(4)(1)Prior accident years before catastrophe losses(219)(150)(91)(46)(65)Prior accident years catastrophe losses(29)(17)(28)(71)39Loss and loss expenses3,3523,2233,13843Underwriting expenses1,6521,5221,46794Underwriting profit$341$186$1288345Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year before catastrophe losses60.9%61.5%61.1%(0.6)0.4Current accident year catastrophe losses6.67.47.8(0.8)(0.4)Prior accident years before catastrophe losses(4.1)(3.1)(1.9)(1.0)(1.2)Prior accident years catastrophe losses(0.6)(0.3)(0.6)(0.3)0.3Loss and loss expenses62.865.566.4(2.7)(0.9)Underwriting expenses31.030.931.10.1(0.2)Combined ratio93.8%96.4%97.5%(2.6)(1.1)Combined ratio:93.8%96.4%97.5%(2.6)(1.1)Contribution from catastrophe losses and prior yearsreserve development1.94.05.3(2.1)(1.3)Combined ratio before catastrophe losses and prior yearsreserve development91.9%92.4%92.2%(0.5)0.2
 
 
 •Premiums – Agency renewal written premiums rose $161 million in 2019 and continued to contribute to growth in earned premiums and net written premiums that rose in each of our property casualty 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. 
 
 
  
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Agency renewal written premiums$4,519$4,358$4,19844Agency new business written premiums778652626194Other written premiums2192016nm25Net written premiums5,5165,0304,840104Unearned premium change(182)(110)(118)(65)7Earned premiums$5,334$4,920$4,72284
 
 •Combined ratio – The 2019 combined ratio improved by 2.6 percentage points compared with 2018, including a 1.1 percentage-point decrease in the ratio for natural catastrophe losses. The 2019 ratio for current accident year losses and loss expenses before catastrophes improved by 0.6 percentage points, reflecting a decrease in commercial lines large losses for new losses above $1 million described below, and what we believe are improvements to some of our loss experience due to recent-year initiatives to improve pricing precision and claims and loss control practices. The remainder of the 2019 combined ratio decrease included 1.0 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. 
 
 
 
 •Combined – Aggregate net recovery up to $50 million after retaining the first $125 million of each loss •Cincinnati Re-only – Aggregate net recovery up to $8 million after retaining the first $45 million in aggregate •Direct business-only in certain Western states – Aggregate net recovery up to $31 million for: ◦Earthquake: After retaining the first $20 million of each loss ◦Brushfire or wildfire: After retaining the first $40 million of each loss 
 
 
  
 
 
 
 
 
 
 
 (Dollars in millions, net of reinsurance)Excess and surplus linesCommercial linesPersonal linesDatesEventsRegionsOtherTotal2019Jan. 29 - Feb. 1Flood, ice, snow, windMidwest, Northeast$9$10$—$—$19Feb. 23-26Flood, freezing, hail, ice, snow, windMidwest, Northeast, South109——19Mar. 12-17Flood, hail, ice, snow, windMidwest, Northeast, West, South44—412May 16-17Flood, hail, windMidwest85——13May 26 - 28Flood, hail, windMidwest, Northeast, West, South7129——100Aug. 4-5Flood, hail, windMidwest48——12Aug. 10-11Flood, hail, windWest221——23Aug. 28 - Sep. 6Flood, hail, windSouth, International (Dorian)31—1115Oct. 7-20TyphoonInternational (Hagibis)———1212Oct. 20-21Flood, hail, windMidwest, South423——27All other 2019 catastrophes414711099Development on 2018 and prior catastrophes(25)2—(6)(29)Calendar year incurred total$151$139$1$31$3222018Jan. 8-10Flood, WindWest$—$10$—$—$10Mar. 1-3Freezing, Ice, Snow, WindNortheast, South55——10Mar. 18-21Flood, Hail, WindSouth1971—27Apr. 13-17Flood, Hail, WindMidwest, Northeast, South207——27Jul. 19-22Flood, Hail, WindMidwest, South98——17Aug. 27 - Sep. 7Flood, WindInternational (Jebi)———1515Sep. 13-19Flood, Hail, WindSouth728—181Oct. 10-12Flood, Hail, WindSouth3018—1563Nov. 8-21WildfireWest—10——10Nov. 29 - Dec. 2Flood, Hail, WindMidwest, South, West55——10All other 2018 catastrophes48431294Development on 2017 and prior catastrophes(21)4——(17)Calendar year incurred total$187$125$2$33$347
 
 
 
  
 
 
 
 
 
 (Dollars in millions)Accident year loss and loss expenses incurred and ratios to earned premiums:Accident year:201920182017201920182017as of December 31, 2019$3,600$3,301$3,13567.5%67.1%66.4%as of December 31, 20183,3903,19468.967.6as of December 31, 20173,25768.9
 
 
 
 
 
 
 
 
 
  
 
 
 (Dollars in millions, net of reinsurance)Years ended December 31,2019-20182018-2017201920182017Change %Change %Current accident year losses greater than $5,000,000$27$43$45(37)(4)Current accident year losses $1,000,000-$5,000,000243218212113Large loss prior accident year reserve development506951(28)35Total large losses incurred320330308(3)7Losses incurred but not reported5011054(55)104Other losses excluding catastrophe losses2,1181,8861,90312(1)Catastrophe losses309334327(7)2Total losses incurred$2,797$2,660$2,59253Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year losses greater than $5,000,0000.5%0.9%1.0%(0.4)(0.1)Current accident year losses $1,000,000-$5,000,0004.64.44.50.2(0.1)Large loss prior accident year reserve development0.91.41.0(0.5)0.4Total large loss ratio6.06.76.5(0.7)0.2Losses incurred but not reported0.92.21.1(1.3)1.1Other losses excluding catastrophe losses39.738.440.31.3(1.9)Catastrophe losses5.86.87.0(1.0)(0.2)Total loss ratio52.4%54.1%54.9%(1.7)(0.8)
 
 
 
 
 
  
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Commission expenses$989$911$86695Other underwriting expenses65159958792Policyholder dividends1212140(14)Total underwriting expenses$1,652$1,522$1,46794Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCommission expenses18.6%18.5%18.3%0.10.2Other underwriting expenses12.212.112.50.1(0.4)Policyholder dividends0.20.30.3(0.1)0.0Total underwriting expense ratio31.0%30.9%31.1%0.1(0.2)
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Earned premiums$3,319$3,218$3,16532Fee revenues55500Total revenues3,3243,2233,17032Loss and loss expenses from:Current accident year before catastrophe losses2,0461,9981,93323Current accident year catastrophe losses176208182(15)14Prior accident years before catastrophe losses(167)(136)(50)(23)(172)Prior accident years catastrophe losses(25)(21)(23)(19)9Loss and loss expenses2,0302,0492,042(1)0Underwriting expenses1,0531,0231,00931Underwriting profit$241$151$1196027Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year before catastrophe losses61.7%62.1%61.1%(0.4)1.0Current accident year catastrophe losses5.36.55.7(1.2)0.8Prior accident years before catastrophe losses(5.0)(4.2)(1.6)(0.8)(2.6)Prior accident years catastrophe losses(0.8)(0.7)(0.7)(0.1)0.0Loss and loss expenses61.263.764.5(2.5)(0.8)Underwriting expenses31.731.731.90.0(0.2)Combined ratio92.9%95.4%96.4%(2.5)(1.0)Combined ratio:92.9%95.4%96.4%(2.5)(1.0)Contribution from catastrophe losses and prior years    reserve development(0.5)1.63.4(2.1)(1.8)Combined ratio before catastrophe losses and prior yearsreserve development93.4%93.8%93.0%(0.4)0.8
 
 
 •Premiums – Earned premiums and net written premiums rose in 2019, including a $73 million increase in renewal written premiums that continued to include higher average pricing. New business written premiums in 2019 increased $93 million, or 22%, compared with 2018. Approximately one-third of the increase was from agencies appointed since the beginning of 2018. •Combined ratio – The 2019 combined ratio improved by 2.5 percentage points compared with 2018, including a 1.3 percentage-point decrease in the ratio component for natural catastrophe losses. Development on prior accident years’ loss and loss expense reserves before catastrophes during 2019 was 0.8 percentage points more favorable than in 2018. 
 
 
  
 
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Agency renewal written premiums$2,998$2,925$2,88022Agency new business written premiums510417397225Other written premiums(98)(97)(75)(1)(29)Net written premiums3,4103,2453,20251Unearned premium change(91)(27)(37)(237)27Earned premiums$3,319$3,218$3,16532
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 (Dollars in millions)Accident year loss and loss expenses incurred and ratios to earned premiums:Accident year:201920182017201920182017as of December 31, 2019$2,222$2,139$1,99867.0%66.5%63.1%as of December 31, 20182,2062,04768.664.6as of December 31, 20172,11566.8
 
 
 
 
 
 
 
 
 
  
 
 
 (Dollars in millions, net of reinsurance)Years ended December 31,2019-20182018-2017201920182017Change %Change %Current accident year losses greater than $5,000,000$27$37$39(27)(5)Current accident year losses $1,000,000-$5,000,000185182166210Large loss prior accident year reserve development496547(25)38Total large losses incurred261284252(8)13Losses incurred but not reported266461(59)5Other losses excluding catastrophe losses1,2221,1221,1849(5)Catastrophe losses142180150(21)20Total losses incurred$1,651$1,650$1,64700Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year losses greater than $5,000,0000.8%1.2%1.2%(0.4)0.0Current accident year losses $1,000,000-$5,000,0005.65.65.30.00.3Large loss prior accident year reserve development1.52.01.5(0.5)0.5Total large loss ratio7.98.88.0(0.9)0.8Losses incurred but not reported0.82.01.9(1.2)0.1Other losses excluding catastrophe losses36.734.937.41.8(2.5)Catastrophe losses4.35.64.7(1.3)0.9Total loss ratio49.7%51.3%52.0%(1.6)(0.7)
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Commission expenses$614$592$57743Other underwriting expenses42741941820Policyholder dividends1212140(14)Total underwriting expenses$1,053$1,023$1,00931Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCommission expenses18.5%18.4%18.2%0.10.2Other underwriting expenses12.912.913.30.0(0.4)Policyholder dividends0.30.40.4(0.1)0.0Total underwriting expense ratio31.7%31.7%31.9%0.0(0.2)
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Earned premiums$1,404$1,336$1,24158Fee revenues455(20)0Total revenues1,4081,3411,24658Loss and loss expenses from:Current accident year before catastrophe losses87583879346Current accident year catastrophe losses13712113913(13)Prior accident years before catastrophe losses(29)9(10)nmnmPrior accident years catastrophe losses24(4)(50)nmLoss and loss expenses98597291816Underwriting expenses41538936078Underwriting profit (loss)$8$(20)$(32)nm38Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year before catastrophe losses62.4%62.8%64.0%(0.4)(1.2)Current accident year catastrophe losses9.79.111.20.6(2.1)Prior accident years before catastrophe losses(2.1)0.6(0.9)(2.7)1.5Prior accident years catastrophe losses0.20.3(0.3)(0.1)0.6Loss and loss expenses70.272.874.0(2.6)(1.2)Underwriting expenses29.629.129.00.50.1Combined ratio99.8%101.9%103.0%(2.1)(1.1)Combined ratio:99.8%101.9%103.0%(2.1)(1.1)Contribution from catastrophe losses and prior years    reserve development7.810.010.0(2.2)0.0Combined ratio before catastrophe losses and prior years    reserve development92.0%91.9%93.0%0.1(1.1)
 
 
 •Premiums – Earned premiums and net written premiums continued to grow in 2019, driven by increases in renewal written premiums that reflected higher average pricing. Renewal written premiums rose $71 million, or 6%, in 2019, compared with 2018. Net written premiums from high net worth policies totaled approximately $408 million in 2019, compared with $309 million in 2018. •Combined ratio – The 2019 combined ratio improved 2.1 percentage points, compared with 2018, despite a 0.5 percentage-point increase in the ratio for 2019 natural catastrophe losses. Development on prior accident years’ loss and loss expense reserves before catastrophes during 2019 was 2.7 percentage points more favorable than in 2018. 
 
 
 
  
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Agency renewal written premiums$1,312$1,241$1,15667Agency new business written premiums158165161(4)2Other written premiums(35)(28)(23)(25)(22)Net written premiums1,4351,3781,29446Unearned premium change(31)(42)(53)2621Earned premiums$1,404$1,336$1,24158
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 (Dollars in millions)Accident year loss and loss expenses incurred and ratios to earned premiums:Accident year:201920182017201920182017as of December 31, 2019$1,012$950$93772.1%71.1%75.5%as of December 31, 201895994371.976.0as of December 31, 201793275.2
 
 
 
 
 
 
 
 
 
  
 
 
 (Dollars in millions, net of reinsurance)Years ended December 31,2019-20182018-2017201920182017Change %Change %Current accident year losses greater than $5,000,000$—$6$6(100)0Current accident year losses $1,000,000-$5,000,00051324359(26)Large loss prior accident year reserve development(1)43nm33Total large losses incurred50425219(19)Losses incurred but not reported1738(9)(55)nmOther losses excluding catastrophe losses66265062923Catastrophe losses13512213211(8)Total losses incurred$864$852$80416Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year losses greater than $5,000,0000.0%0.4%0.5%(0.4)(0.1)Current accident year losses $1,000,000-$5,000,0003.62.43.41.2(1.0)Large loss prior accident year reserve development(0.1)0.40.3(0.5)0.1Total large loss ratio3.53.24.20.3(1.0)Losses incurred but not reported1.22.8(0.7)(1.6)3.5Other losses excluding catastrophe losses47.248.750.7(1.5)(2.0)Catastrophe losses9.69.110.60.5(1.5)Total loss ratio61.5%63.8%64.8%(2.3)(1.0)
 
 
 
 
 
  
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Commission expenses$259$243$22379Other underwriting expenses15614613777Total underwriting expenses$415$389$36078Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCommission expenses18.5%18.2%18.0%0.30.2Other underwriting expenses11.110.911.00.2(0.1)Total underwriting expense ratio29.6%29.1%29.0%0.50.1
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Earned premiums$278$234$2091912Fee revenues2111000Total revenues2802352101912Loss and loss expenses from:Current accident year before catastrophe losses1521261132112Current accident year catastrophe losses122(50)0Prior accident years before catastrophe losses(11)(24)(29)5417Prior accident years catastrophe losses———00Loss and loss expenses142104863721Underwriting expenses856863258Underwriting profit$53$63$61(16)3Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year before catastrophe losses54.6%53.9%54.0%0.7(0.1)Current accident year catastrophe losses0.41.11.1(0.7)0.0Prior accident years before catastrophe losses(4.1)(10.6)(13.6)6.53.0Prior accident years catastrophe losses0.20.0(0.1)0.20.1Loss and loss expenses51.144.441.46.73.0Underwriting expenses30.429.129.71.3(0.6)Combined ratio81.5%73.5%71.1%8.02.4Combined ratio:81.5%73.5%71.1%8.02.4Contribution from catastrophe losses and prior yearsreserve development(3.5)(9.5)(12.6)6.03.1Combined ratio before catastrophe losses and prior yearsreserve development85.0%83.0%83.7%2.0(0.7)
 
 
 •Premiums – Earned premiums and net written premiums continued to grow during 2019, including an increase in new business written premiums and higher renewal written premiums that included average renewal estimated price increases in the low-single-digit range. New business written premiums grew 57% in 2019, reflecting opportunities to write larger policies and our additional marketing efforts. •Combined ratio – The combined ratio rose 8.0 percentage points in 2019, primarily due to less favorable reserve development on prior accident years. 
 
 
  
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Agency renewal written premiums$209$192$162919Agency new business written premiums1107068573Other written premiums(16)(13)(11)(23)(18)Net written premiums3032492192214Unearned premium change(25)(15)(10)(67)(50)Earned premiums$278$234$2091912
 
 
 
 
 
 
 
 (Dollars in millions)Accident year loss and loss expenses incurred and ratios to earned premiums:Accident year:201920182017201920182017as of December 31, 2019$153$122$10655.0%52.4%51.0%as of December 31, 201812810755.051.3as of December 31, 201711555.1
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 (Dollars in millions, net of reinsurance)Years ended December 31,2019-20182018-2017201920182017Change %Change %Current accident year losses greater than $5,000,000$—$—$—nmnmCurrent accident year losses $1,000,000-$5,000,0007437533Large loss prior accident year reserve development2—1nmnmTotal large losses incurred9441250Losses incurred but not reported782(13)300Other losses excluding catastrophe losses7650445214Catastrophe losses22200Total losses incurred$94$64$524723Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCurrent accident year losses greater than $5,000,0000.0%0.0%0.0%0.00.0Current accident year losses $1,000,000-$5,000,0002.51.81.50.70.3Large loss prior accident year reserve development0.6(0.1)0.40.7(0.5)Total large loss ratio3.11.71.91.4(0.2)Losses incurred but not reported2.43.60.8(1.2)2.8Other losses excluding catastrophe losses27.721.121.66.6(0.5)Catastrophe losses0.51.00.8(0.5)0.2Total loss ratio33.7%27.4%25.1%6.32.3
 
 
 
 
 
  
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Commission expenses$53$45$411810Other underwriting expenses322322395Total underwriting expenses$85$68$63258Ratios as a percent of earned premiums:Pt. ChangePt. ChangeCommission expenses18.9%19.3%19.2%(0.4)0.1Other underwriting expenses11.59.810.51.7(0.7)Total underwriting expenses ratio30.4%29.1%29.7%1.3(0.6)
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Earned premiums$270$250$23288Fee revenues4450(20)Total revenues27425423787Contract holders' benefits incurred28626725276Investment interest credited to contract holders(99)(96)(93)(3)(3)Underwriting expenses incurred86757915(5)Total benefits and expenses273246238113Life insurance segment profit (loss)$1$8$(1)(88)nm
 
 
 •Revenues – Earned premiums rose 8% for the year 2019, as shown in the table below that includes details by major line of business. Our largest life insurance product line, term life insurance, rose 8%. Net in-force policy face amounts rose 6% to $69.984 billion at year-end 2019 from $66.142 billion at year-end 2018 and $61.177 billion at year-end 2017. •Profitability – The life insurance segment frequently reports only a small profit or loss because most of its investment income is included in the investments segment results. We include only investment income credited to contract holders (interest assumed in life insurance policy reserve calculations) in life insurance segment results. The segment reported a $1 million profit in 2019, following profit of $8 million in 2018 and a loss of $1 million in 2017. It has averaged an annual profit of $1 million over the past five years. 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Term life insurance$186$172$15889Universal life insurance3937385(3)Other life insurance and annuity products4541361014Net earned premiums$270$250$23288
 
 
 
 
 
 
 
  
 
 
 •Contract holders’ benefits incurred, related to traditional life and interest-sensitive products, accounted for 76.9% of 2019 total benefits and expenses compared with 78.1% in 2018 and 76.1% in 2017. Total contract holders’ benefits increased as net death claims were higher in 2019, compared with 2018. Net death claims increased in 2019 and were above our mortality projections while remaining within our range of pricing expectations. •Underwriting expenses incurred, net of deferred acquisition costs, accounted for 23.1% of 2019 total benefits and expenses compared with 21.9% in 2018 and 23.9% in 2017. Expenses in 2019 increased 15%, compared with 8% growth in earned premiums. Expenses in 2018 decreased 5%, compared with 8% growth in earned premiums. In 2019, unlocking of interest rate and other actuarial assumptions decreased the amount of expenses deferred to future periods, increasing underwriting expenses. In 2018, unlocking of interest rate and other actuarial assumptions increased the amount of expenses deferred to future periods, decreasing underwriting expenses. 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Total investment income, net of expenses$646$619$60942Investment interest credited to contract holders'(99)(96)(93)(3)(3)Investment gains and losses, net1,650(402)148nmnmInvestments profit, pretax$2,197$121$664nm(82)
 
 
 •Investment income – Pretax investment income grew $27 million, or 4%, in 2019, primarily due to an increase from dividends. Dividend income reflected rising dividend rates and net purchases of equity securities from available funds. Interest income increased by $1 million in 2019, compared with 2018, as net purchases of fixed-maturity securities offset the continuing effects on bond yields of the low interest rate environment. Pretax investment income rose 2% in 2018, primarily due to an increase in 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 2019, 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. For 2018, we reported an investment loss, primarily due to unfavorable changes in fair values of equity securities we continued to hold. For 2017, we reported an investment gain largely due to investment sales that were discretionary in timing and amount. Those gains were reduced by other-than-temporary impairment (OTTI) charges. 
 
 
 
 
 
 
  
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Invested assets beginning balance:Fixed maturities$10,689$10,699$10,08506Equity securities5,9206,2495,334(5)17Other invested assets123103811927Invested assets beginning balance16,73217,05115,500(2)10Average acquisitions (dispositions), net34321534160(37)Annual average invested assets$17,075$17,266$15,841(1)9Total investment return:Investment income, net of expenses$646$619$60942Investment gains and losses, net1,650(402)148nmnmTotal invested assets change in unrealized gains and losses544(339)913nmnmTotal$2,840$(122)$1,670nmnmTotal return on invested assets, pretax16.6%(0.7)%10.5%
 
 
 
  
 
 
 
 •Interest income of $446 million in 2019 increased by $1 million, compared with 2018. The average fixed-maturity pretax yield declined by approximately 15 basis points but was offset by a larger average fixed-maturity portfolio that rose 4% on an amortized cost basis. Interest income in 2018 matched 2017 when that yield declined by approximately 17 basis points while the portfolio rose 4% on an amortized cost basis. •Dividend income rose $20 million, or 11%, in 2019, after rising 6% in 2018. Increases in dividend payment rates for most of the holdings in our common stock portfolio during both 2019 and 2018 drove the increases in dividend income. An increase in funds invested in that portfolio during both 2019 and 2018 also favorably affected dividend income. 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Investment income:Interest$446$445$44500Dividends201181170116Other125414025Less investment expenses131210820Investment income, pretax64661960942Less income taxes101951426(33)Total investment income, after-tax$545$524$467412Investment returns:Average invested assets plus cash and cash equivalents$18,697$17,397$16,657Average yield pretax3.46%3.56%3.66%Average yield after-tax2.913.012.80Effective tax rate15.615.423.4Fixed-maturity returns:Average amortized cost$10,876$10,479$10,057Average yield pretax4.10%4.25%4.42%Average yield after-tax3.423.553.24Effective tax rate16.616.426.7
 
 
 
  
 
 
 At December 31, 2019% YieldPrincipal redemptionsFixed-maturity yield profile:Expected to mature during 20204.28%$419Expected to mature during 20214.28949Expected to mature during 20224.15929Average yield and total expected redemptions from 2020 through 20224.23$2,297
 
 
 Years ended December 31,20192018Average pretax yield-to-amortized cost on new fixed-maturities:Acquired taxable fixed-maturities4.31%4.48%Acquired tax-exempt fixed-maturities3.313.69Average total fixed-maturities acquired4.144.38
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 (Dollars in millions)Years ended December 31,201920182017Investment gains and lossesEquity securities:Investment gains and losses on securities sold, net$26$9$—Unrealized gains and losses on securities still held, net1,626(404)—Gross realized gains——195Gross realized losses——(72)Other-than-temporary impairments——(3)Subtotal1,652(395)120Fixed maturities:Gross realized gains131225Gross realized losses(3)(2)—Other-than-temporary impairments(9)(5)(6)Subtotal$1$5$19Other(3)(12)9Total investment gains and losses reported in net income1,650(402)148Change in unrealized investment gains and lossesFixed maturities544(339)99Equity securities——816Total unrealized investment gains and losses reported in OCI544(339)915Total$2,194$(741)$1,063
 
 
 
  
 
 
 (Dollars in millions)Years ended December 31,201920182017Taxable fixed maturities:Impairment amount$9$5$6New amortized cost$20$8$—Percent to total amortized cost owned—%—%—%Number of securities other-than-temporarily impaired311Percent to number of securities owned—%—%—%Common equities:Impairment amount$—$—$3New cost$—$—$19Percent to total cost owned—%—%1%Number of securities other-than-temporarily impaired——5Percent to number of securities owned—%—%7%Totals:Impairment amount$9$5$9New cost or amortized cost$20$8$19Percent to total cost or amortized cost owned—%—%—%Number of securities other-than-temporarily impaired316Percent to number of securities owned—%—%—%
 
 
 (Dollars in millions)Years ended December 31,201920182017Fixed maturities:Energy$6$5$—Banks——6Real estate3——Total fixed maturities956Common equities:Energy——3Total common equities——3Total$9$5$9
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 (Dollars in millions)Years ended December 31,2019-20182018-2017201920182017Change %Change %Interest and fees on loans and leases$5$4$4250Earned premiums33313210715223Other revenues4113000Total revenues34213711215022Interest expense53535300Loss and loss expenses1959892997Underwriting expenses99423513620Operating expenses2316134423Total expenses370209193778Other loss$(28)$(72)$(81)6111
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 (Dollars in millions)Years ended December 31,201920182017Sources of liquidity:Insurance subsidiary dividends received$625$500$465Investment income received756562Proceeds from stock options exercised11913Uses of liquidity:Shareholders' dividend payments$355$336$400Share repurchases6712592Debt interest payments525252Pension contribution—1512
 
 
 
 
 
  
 
 
 
 
 
 (Dollars in millions)Years ended December 31,201920182017Premiums collected$5,495$5,028$4,846Loss and loss expenses paid(3,260)(2,847)(2,843)Commissions and other underwriting expenses paid(1,639)(1,549)(1,471)Cash flow from underwriting596632532Investment income received451428411Cash flow from operations$1,047$1,060$943
 
 
 
 
 
 
 
 
  
 
 
 
 •$28 million aggregate principal amount of 6.900% senior debentures due 2028. •$391 million aggregate principal amount of 6.920% senior debentures due 2028. •$374 million aggregate principal amount of 6.125% senior debentures due 2034. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 •Dividends to shareholders – The ability of our company to continue paying cash dividends is subject to factors the board of directors deem relevant. While the board and management believe there is merit to sustaining the company’s long record of dividend increases, our first priority is the company’s financial strength. Over the past 10 years, the company has paid an average of 69% of net income as dividends. Through 2019, the board had increased our cash dividend for 59 consecutive years. The board's decision in January 2020 to increase the dividend demonstrated confidence in the company’s strong capital, liquidity, financial flexibility and initiatives to grow earnings. •Common stock repurchase – Generally, our board believes that share repurchases can help fulfill our commitment to enhancing shareholder value. Consequently, the board has authorized the repurchase of outstanding shares, giving management discretion to purchase shares at reasonable prices in light of circumstances at the time of purchase. Our approach has been to hold capital adequate to support future growth of our insurance operations and repurchase shares at management's discretion. Repurchases are intended to offset the issuance of shares through equity compensation plans, primarily due to vesting of service-based 
 
  
 
 
 
 
 
 
 
 
 (Dollars in millions)YearYearsYearsThere-Payment due by period20202021-20222023-2024afterTotalGross property casualty loss and loss expense payments$2,144$2,172$826$946$6,088Gross life policyholder obligations781081295,1115,426Interest on long-term debt52104104319579Long-term debt———793793Short-term debt39———39Profit-sharing commissions152———152Finance lease obligations14189142Operating lease obligations543315Other liabilities1281878161Total$2,612$2,424$1,078$7,181$13,295
 
 
 
 •Commissions – We expect commission payments to generally track with written premiums. •Other operating expenses – Many of our operating expenses are not contractual obligations but reflect the ongoing expenses of our business. •Other invested assets – We expect to fund approximately $108 million for our private equity and real estate investments over the next several years. •Funds at Lloyd's – From time to time, we may be required to meet certain cash funding requirements on behalf of Cincinnati Global. During 2019, the parent company deposited $67 million with Lloyd's to meet these funding requirements. 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 (Dollars in millions)Loss reservesLoss expense reservesTotal gross reservesCase reservesIBNR reservesPercent of totalAt December 31, 2019Commercial lines insurance:Commercial casualty$937$680$622$2,23936.8%Commercial property33920644237.0Commercial auto40915714370911.6Workers' compensation404516931,01316.6Other commercial1087701853.0Subtotal2,1971,3809924,56975.0Personal lines insurance:Personal auto23346783575.9Homeowner13432412073.4Other personal496951232.0Subtotal41614712468711.3Excess and surplus lines1491021003515.8Cincinnati Re4720422534.2Cincinnati Global1557122283.7Total$2,964$1,904$1,220$6,088100.0%At December 31, 2018Commercial lines insurance:Commercial casualty$981$647$604$2,23239.5%Commercial property27012603426.1Commercial auto40215214169512.3Workers' compensation384542921,01818.0Other commercial997731793.2Subtotal2,1361,3609704,46679.1Personal lines insurance:Personal auto24050723626.3Homeowner1529402013.6Other personal466551162.1Subtotal43812411767912.0Excess and surplus lines11896842985.3Cincinnati Re3216922033.6Total$2,724$1,749$1,173$5,646100.0%
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 (Dollars in millions)CommercialPersonalE&SlineslineslinesOtherTotalsAs of December 31, 20192018 accident year$(67)$(10)$(6)$(7)$(90)2017 accident year(48)(6)(1)(6)(61)2016 accident year(4)(5)(1)(5)(15)2015 accident year(27)(1)(1)—(29)2014 accident year(16)(3)(1)—(20)2013 accident year(16)(2)(1)—(19)2012 and prior accident years(14)———(14)(Favorable)/unfavorable$(192)$(27)$(11)$(18)$(248)As of December 31, 20182017 accident year$(68)$11$(8)$3$(62)2016 accident year(34)2(3)(2)(37)2015 accident year(31)3(7)—(35)2014 accident year(3)(1)(5)—(9)2013 accident year(9)———(9)2012 accident year(10)(1)(1)—(12)2011 and prior accident years(2)(1)——(3)(Favorable)/unfavorable$(157)$13$(24)$1$(167)As of December 31, 20172016 accident year$(35)$(8)$(5)$(3)$(51)2015 accident year(4)2(8)—(10)2014 accident year(10)(2)(11)—(23)2013 accident year(12)(5)(4)—(21)2012 accident year111(1)—112011 accident year(20)———(20)2010 and prior accident years(3)(2)——(5)(Favorable)/unfavorable$(73)$(14)$(29)$(3)$(119)
 
 
 
 
 •Commercial casualty – During 2019 and 2018, we experienced favorable development on prior accident years after seeing adverse development in 2017 for this line of business. We continue to watch this line so we can detect unfavorable trends should they reoccur. 
 
  
 
 •Workers’ compensation – We continue to see favorable reserve development, for all prior accident years in aggregate. During 2019 and 2018, the trend for estimated payments to be made in future calendar years was stable compared to 2017. However, we continue to monitor this line closely, as a sudden increase in trend for future payments has a highly leveraged effect. •Commercial auto – Loss emergence continued to develop unfavorably during parts of 2019. This line of business has been troublesome for the industry in recent years. As part of the U.S. economic recession of a few years ago, slowing business activity influenced our estimates of reserves for ultimate losses and loss expenses during that period. As the economy slowly recovered, we believe we were slow to recognize some of the higher loss cost effects in current accident year reserve estimates for at least part of that period. As claims that occurred during that period have become more mature, paid and reported loss cost trends resulted in us increasing our estimated ultimate losses. Initiatives to improve profitability of our commercial auto line of business are discussed in Commercial Lines Insurance Results. 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 (Dollars in millions)RMS ModelAIR ModelPercentPercentGrossNetof totalGrossNetof totalProbability at December 31, 2019losseslossesequitylosseslossesequity2.0% (1 in 50 year event)$363$1251.3%$397$1271.3%1.0% (1 in 100 year event)5801401.45701391.40.4% (1 in 250 year event)9733553.68832702.70.2% (1 in 500 year event)1,3536526.61,2015255.3
 
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 (Dollars in millions)20192018Name of reinsurerTotalreceivableA.M. BestRatingTotalreceivableA.M. BestRatingMunich Reinsurance America$61A+$27A+Swiss Reinsurance America Corporation51A+42A+Michigan Catastrophic Claims Association43NA44NAHannover Re35A+11A+General Reinsurance Corporation29A++31A++
 
 
 
  
 
 
 •Property per risk treaty – The primary purpose of the property treaty is to provide capacity up to $50 million, adequate for the majority of the risks we write. It also includes protection for extra-contractual liability coverage losses. We retain the first $10 million of each loss. Losses between $10 million and $50 million are reinsured at 100%. The 2020 ceded premium estimate was $31 million, compared with $28 million for the 2019 estimate. •Property excess treaty – We purchased a property reinsurance treaty that provides an additional $50 million in protection for property losses. This treaty, along with the property per risk treaty, provides a total of $100 million of protection. The 2020 ceded premium estimate was approximately $3 million, compared with $2 million for the 2019 estimate. •Casualty per occurrence treaty – The casualty treaty provides capacity up to $25 million. Similar to the property treaty, it provides sufficient capacity to cover the vast majority of casualty accounts we insure and also includes protection for extra-contractual liability coverage losses. We retain the first $10 million of each loss. Losses between $10 million and $25 million are reinsured at 100%. The 2020 ceded premium estimate was $12 million, essentially unchanged from the 2019 estimate. •Casualty excess treaty – We purchase a casualty reinsurance treaty that provides an additional $45 million in protection for certain casualty losses. This treaty, along with the casualty per occurrence treaty, provides a total of $70 million of protection for workers’ compensation, extra-contractual liability coverage and clash coverage losses, which would apply when a single occurrence involves multiple policyholders of The Cincinnati Insurance Companies or multiple coverages for one insured. The 2020 ceded premium estimate was approximately $3 million, essentially unchanged from the 2019 estimate. •Property catastrophe treaty – To protect against catastrophic events such as wind and hail, hurricanes or earthquakes, we purchased property catastrophe reinsurance with a limit up to $800 million. Losses from the same occurrence can be aggregated into one limit over a 120-hour period and applied to the treaty towards recovery. The treaty contains one reinstatement provision. The coverage layer between $600 million and $800 million is a new feature in 2020 and includes coverage for Cincinnati Global, while the other layers exclude it. A portion of the layer provides an additional $60 million of earthquake-only coverage but does not include coverage for Cincinnati Global. The 2020 ceded premium estimate was $44 million, compared with $43 million for the 2019 estimate with its limit of $600 million. We retain the first $100 million of any loss, and a share of losses up to $800 million. The percentage share we retain for each layer of coverage is indicated below: ◦21.0% of losses between $100 million and $200 million ◦5.0% of losses between $200 million and $300 million ◦5.0% of losses between $300 million and $400 million ◦5.0% of losses between $400 million and $600 million ◦54.0% of losses between $600 million and $800 million 
 •Effective July 1, 2019, we renewed our property catastrophe occurrence and aggregate excess of loss treaty for a period of one year. The treaty has a total limit of $50 million for all coverages combined, with various combinations of occurrences for coverage up to the $50 million aggregate limit. The combined coverage noted below applies to business written on a direct basis and by Cincinnati Re. Cincinnati Global catastrophe losses are not applicable to the treaty. Ceded premiums for the one-year renewal period of coverage from this treaty are estimated to be approximately $9 million. Key coverages are summarized below. •Combined – Aggregate net recovery up to $50 million after retaining the first $125 million of each loss •Cincinnati Re-only – Aggregate net recovery up to $8 million after retaining the first $45 million in aggregate •Direct business-only in certain Western states – Aggregate net recovery up to $31 million for: ◦Earthquake: After retaining the first $20 million of each loss ◦Brushfire or wildfire: After retaining the first $40 million of each loss 
 •Our alternative reinsurance structure to protect against certain catastrophic events expired at the end of 2019 and was not renewed. That arrangement was collateralized reinsurance funded through the issuance of collateralized risk-linked securities, known as catastrophe bonds with Skyline Re Ltd. 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 •Property per risk treaty – The property treaty provides limits up to $5 million, which is adequate capacity for the risk profile we insure. It also includes protection for extra-contractual liability coverage losses. Cincinnati Specialty Underwriters retains the first $1 million of any policy loss. Losses between $1 million and $5 million are reinsured at 100% by The Cincinnati Insurance Company. •Casualty treaties – The casualty treaty is written on an excess of loss basis and provide limits up to $6 million, which is adequate capacity for the risk profile we insure. A second treaty layer of $5 million excess of $6 million is written to provide coverage for extra contractual obligations or clash exposures. The maximum retention for any one casualty loss is $2 million by Cincinnati Specialty Underwriters. Losses between $2 million and $6 million are reinsured at 100% by The Cincinnati Insurance Company. •Basket retention – Cincinnati Specialty Underwriters has purchased this coverage to limit our retention to $2 million in the event that the same occurrence results in both a property and a casualty loss. •Property catastrophe treaty – As a subsidiary of The Cincinnati Insurance Company, Cincinnati Specialty Underwriters is a named insured under our corporate property catastrophe treaty. All terms and conditions of this reinsurance coverage apply to policies underwritten by Cincinnati Specialty Underwriters. 
 
 
 
 
  
 
 
 
 
 
 
 (Dollars in millions)20192018Name of reinsurerTotalreceivableA.M. BestRatingTotalreceivableA.M. BestRatingSwiss Re Life & Health America, Inc.$77A+$83A+General Re Life Corporation41A++38A++Lincoln National Life Insurance Company36A+37A+Security Life of Denver Insurance Company24A27AEmployers Reassurance Corporation14B+13B+
 
 
 
 
  
 
 
 
 
 
 
 •Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns, environmental events, terrorism incidents or other causes •Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance •Inadequate estimates, assumptions or reliance on third-party data used for critical accounting estimates •Declines in overall stock market values negatively affecting the company’s equity portfolio and book value •Prolonged low interest rate environment or other factors that limit the company’s ability to generate growth in investment income or interest rate fluctuations that result in declining values of fixed-maturity investments, including declines in accounts in which we hold bank-owned life insurance contract assets •Domestic and global events resulting in capital market or credit market uncertainty, followed by prolonged periods of economic instability or recession, that lead to: ◦Significant or prolonged decline in the fair value of a particular security or group of securities and impairment of the asset(s) ◦Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities ◦Significant rise in losses from surety and director and officer policies written for financial institutions or other insured entities •Our inability to integrate Cincinnati Global and its subsidiaries into our on-going operations, or disruptions to our on-going operations due to such integration •Recession or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies •Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our ability to conduct business; disrupt our relationships with agents, policyholders and others; cause reputational damage, mitigation expenses and data loss and expose us to liability under federal and state laws •Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products •Delays, inadequate data developed internally or from third parties, or performance inadequacies from ongoing development and implementation of underwriting and pricing methods, including telematics and other usage-based insurance methods, or technology projects and enhancements expected to increase our pricing accuracy, underwriting profit and competitiveness •Increased competition that could result in a significant reduction in the company’s premium volume •Changing consumer insurance-buying habits and consolidation of independent insurance agencies that could alter our competitive advantages 
 
  
 
 •Inability to obtain adequate ceded reinsurance on acceptable terms, amount of reinsurance coverage purchased, financial strength of reinsurers and the potential for nonpayment or delay in payment by reinsurers •Inability to defer policy acquisition costs for any business segment if pricing and loss trends would lead management to conclude that segment could not achieve sustainable profitability •Inability of our subsidiaries to pay dividends consistent with current or past levels •Events or conditions that could weaken or harm the company’s relationships with its independent agencies and hamper opportunities to add new agencies, resulting in limitations on the company’s opportunities for growth, such as: ◦Downgrades of the company’s financial strength ratings ◦Concerns that doing business with the company is too difficult ◦Perceptions that the company’s level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace ◦Inability or unwillingness to nimbly develop and introduce coverage product updates and innovations that our competitors offer and consumers expect to find in the marketplace •Actions of insurance departments, state attorneys general or other regulatory agencies, including a change to a federal system of regulation from a state-based system, that: ◦Impose new obligations on us that increase our expenses or change the assumptions underlying our critical accounting estimates ◦Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations ◦Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business ◦Add assessments for guaranty funds, other insurance‐related assessments or mandatory reinsurance arrangements; or that impair our ability to recover such assessments through future surcharges or other rate changes ◦Increase our provision for federal income taxes due to changes in tax law ◦Increase our other expenses ◦Limit our ability to set fair, adequate and reasonable rates ◦Place us at a disadvantage in the marketplace ◦Restrict our ability to execute our business model, including the way we compensate agents •Adverse outcomes from litigation or administrative proceedings •Events or actions, including unauthorized intentional circumvention of controls, that reduce the company’s future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002 
 
  
 
 •Unforeseen departure of certain executive officers or other key employees due to retirement, health or other causes that could interrupt progress toward important strategic goals or diminish the effectiveness of certain longstanding relationships with insurance agents and others •Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location 
 
 
 
 
  
 
 
 
 
 
 
 
 •Political – the potential for a decrease in value due to the real or perceived impact of governmental policies or conditions •Regulatory – the potential for a decrease in value due to the impact of legislative proposals or changes in laws or regulations •Economic – the potential for a decrease in value due to changes in general economic factors (recession, inflation, deflation, etc.) •Revaluation – the potential for a decrease in value due to a change in relative value (change in market multiple) of the market brought on by general economic factors •Interest-rate – the potential for a decrease in value of a security or portfolio due to its sensitivity to changes (increases or decreases) in the general level of interest rates 
 •Fraud – the potential for a negative impact on an issuer’s performance due to actual or alleged illegal or improper activity of individuals it employs •Credit – the potential for deterioration in an issuer’s financial profile due to specific company issues, problems it faces in the course of its operations or industry-related issues •Default – the possibility that an issuer will not make a required payment (interest payment or return of principal) on its debt. Generally this occurs after its financial profile has deteriorated (credit risk) and it no longer has the means to make its payments 
 
 
 
 
 
 
  
 
 
 Taxablefixed maturitiesTax-exemptfixed maturitiesCommonequitiesNonredeemable preferredequitiesPoliticalAHAARegulatoryAAAAEconomicAAHARevaluationAAHAInterest rateHHAHFraudALAACreditALAADefaultALAA
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (Dollars in millions)Effect from interest rate change in basis points-200-100—100200At December 31, 2019$12,850$12,263$11,698$11,117$10,529At December 31, 2018$11,793$11,245$10,689$10,121$9,576
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 (Dollars in millions)Effect from market price change in percent-30%-20%-10%—10%20%30%At December 31, 2019$5,426$6,202$6,977$7,752$8,527$9,302$10,078At December 31, 2018$4,144$4,736$5,328$5,920$6,512$7,104$7,696
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 •The 157 holdings were fair valued between 90% and 100% of cost or amortized cost. The value of these securities fluctuates primarily because of changes in interest rates. The fair value of these 157 securities was $523 million at year-end 2019, and they accounted for $7 million in unrealized losses. •No fixed-maturity securities had a fair value below 90% of cost or amortized cost. 
 
 (Dollars in millions)Less than 12 months12 months or moreTotalAt December 31, 2019FairvalueUnrealizedlossesFairvalueUnrealizedlossesFairvalueUnrealizedlossesFixed maturity securities:Corporate$199$2$118$3$317$5States, municipalities and political subdivisions98110—1081Commercial mortgage-backed6———6—Government-sponsored enterprises26151—771United States government——4—4—Foreign government11———11—Total$340$4$183$3$523$7At December 31, 2018Fixed maturity securities:Corporate$2,082$51$501$36$2,583$87States, municipalities and political subdivisions82318340131,16331Commercial mortgage-backed77—6421412Government-sponsored enterprises49121162607United States government——331331Total3,031701,149584,180128
 
 
 
  
 
 
 (Dollars in millions)Numberof issuesAmortizedcostFairvalueGrossunrealizedgain (loss)GrossinvestmentincomeAt December 31, 2019Taxable fixed maturities:Fair valued below 70% of amortized cost—$—$—$—$—Fair valued at 70% to less than 100% of amortized cost144516509(7)12Fair valued at 100% and above of amortized cost1,6416,7347,108374282Investment income on securities sold in current year————30Total1,7857,2507,617367324Tax-exempt fixed maturities:Fair valued below 70% of amortized cost—————Fair valued at 70% to less than 100% of amortized cost131414——Fair valued at 100% and above of amortized cost2,1133,8444,067223119Investment income on securities sold in current year————3Total2,1263,8584,081223122Fixed-maturities summary:Fair valued below 70% of amortized cost—————Fair valued at 70% to less than 100% of amortized cost157530523(7)12Fair valued at 100% and above of amortized cost3,75410,57811,175597401Investment income on securities sold in current year————33Total3,911$11,108$11,698$590$446At December 31, 2018Fixed-maturities summary:Fair valued below 70% of amortized cost—$—$—$—$—Fair valued at 70% to less than 100% of amortized cost1,2624,3084,180(128)147Fair valued at 100% and above of amortized cost2,3446,3356,509174269Investment income on securities sold in current year————28Total3,606$10,643$10,689$46$444
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 •Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; •Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the company are being made only in accordance with authorizations of management and the directors of the company; and •Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 •We tested the effectiveness of controls related to loss and loss expense reserves, including those over the review of methods, models, assumptions and judgments used, and management’s review of the estimate. •We tested the underlying data that served as the basis for the actuarial analysis, including historical claims data, to test the reasonableness of key inputs to the actuarial estimate. •With the assistance of our actuarial specialists, we used the Company’s claims data and other inputs, to develop a range of independent estimates for the loss and loss expense reserves. We used these independent estimates to assess the reasonableness of the Company’s reserves by comparing our estimates to the Company’s recorded loss and loss expense reserves. •We compared the Company’s prior year estimates of expected incurred losses to actual experience during the current year to identify potential bias in the determination of loss and loss expense reserves. 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 (Dollars in millions, except per share data)December 31,December 31,20192018AssetsInvestmentsFixed maturities, at fair value (amortized cost: 2019—$11,108; 2018—$10,643)$11,698$10,689Equity securities, at fair value (cost: 2019—$3,581; 2018—$3,368)7,7525,920Other invested assets296123Total investments19,74616,732Cash and cash equivalents767784Investment income receivable133132Finance receivable7771Premiums receivable1,7771,644Reinsurance recoverable610484Prepaid reinsurance premiums5444Deferred policy acquisition costs774738Land, building and equipment, net, for company use (accumulated depreciation:2019—$276; 2018—$265)207195Other assets381308Separate accounts882803Total assets$25,408$21,935LiabilitiesInsurance reservesLoss and loss expense reserves$6,147$5,707Life policy and investment contract reserves2,8352,779Unearned premiums2,7882,516Other liabilities928804Deferred income tax1,079627Note payable3932Long-term debt and lease obligations846834Separate accounts882803Total liabilities15,54414,102Commitments and contingent liabilities (Note 16)——Shareholders' EquityCommon stock, par value—$2 per share; (authorized: 2019 and 2018—500 million shares;issued: 2019 and 2018—198.3 million shares)397397Paid-in capital1,3061,281Retained earnings9,2577,625Accumulated other comprehensive income44822Treasury stock at cost (2019—35.4 million shares and 2018—35.5 million shares)(1,544)(1,492)Total shareholders' equity9,8647,833Total liabilities and shareholders' equity$25,408$21,935
 
 
 
  
 
 
 
 
 (Dollars in millions, except per share data)Years ended December 31,201920182017RevenuesEarned premiums$5,604$5,170$4,954Investment income, net of expenses646619609Investment gains and losses, net1,650(402)148Fee revenues151516Other revenues955Total revenues7,9245,4075,732Benefits and ExpensesInsurance losses and contract holders' benefits3,6383,4903,390Underwriting, acquisition and insurance expenses1,7381,5971,546Interest expense535353Other operating expenses231613Total benefits and expenses5,4525,1565,002Income Before Income Taxes2,472251730Provision (Benefit) for Income TaxesCurrent13211129Deferred343(47)(444)Total provision (benefit) for income taxes475(36)(315)Net Income$1,997$287$1,045Per Common ShareNet income—basic$12.24$1.76$6.36Net income—diluted12.101.756.29
 
 
 
 
 
  
 
 
 
 
 (Dollars in millions)Years ended December 31,201920182017Net Income$1,997$287$1,045Other Comprehensive Income (Loss)Change in unrealized gains and losses on investments, net of tax (benefit) of $114, $(72) and $317, respectively430(267)598Amortization of pension actuarial gains and losses and prior service cost, net of tax (benefit) of $2, $(1) and $7, respectively5(3)7Change in life deferred acquisition costs, life policy reserves and other, net of tax (benefit) of $(3), $2 and $1, respectively(9)7(2)Other comprehensive income (loss)426(263)603Comprehensive Income$2,423$24$1,648
 
 
 
  
 
 
 
 (Dollars in millions)Years ended December 31,201920182017Common StockBeginning of year$397$397$397Share-based awards———End of year397397397Paid-In CapitalBeginning of year1,2811,2651,252Share-based awards(12)(17)(18)Share-based compensation302826Other755End of year1,3061,2811,265Retained EarningsBeginning of year7,6255,1805,037Cumulative effect of change in accounting for equity securities as ofJanuary 1, 2018—2,503—Adjusted beginning of year7,6257,6835,037Net income1,9972871,045Dividends declared(365)(345)(410)Reclassification of certain tax effects from accumulated othercomprehensive income——(492)End of year9,2577,6255,180Accumulated Other Comprehensive IncomeBeginning of year222,7881,693Cumulative effect of change in accounting for equity securities as ofJanuary 1, 2018—(2,503)—Adjusted beginning of year222851,693Other comprehensive income (loss)426(263)603Reclassification of certain tax effects to retained earnings——492End of year448222,788Treasury StockBeginning of year(1,492)(1,387)(1,319)Share-based awards212126Shares acquired - share repurchase authorization(67)(125)(92)Shares acquired - share-based compensation plans(9)(5)(7)Other345End of year(1,544)(1,492)(1,387)Total Shareholders' Equity$9,864$7,833$8,243(In millions)Common Stock - Shares OutstandingBeginning of year162.8163.9164.4Share-based awards0.70.70.8Shares acquired - share repurchase authorization(0.6)(1.8)(1.3)Shares acquired - share-based compensation plans(0.1)—(0.1)Other0.1—0.1End of year162.9162.8163.9
 
 
 
 
  
 
 
 
 
 (Dollars in millions)Years ended December 31,201920182017Cash Flows From Operating ActivitiesNet income$1,997$287$1,045Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization726355Investment gains and losses, net(1,640)408(148)Share-based compensation302826Interest credited to contract holders'444748Deferred income tax expense343(47)(444)Changes in:Investment income receivable(1)2—Premiums and reinsurance receivable(174)(109)77Deferred policy acquisition costs(61)(48)(36)Other assets(22)(1)(43)Loss and loss expense reserves163434188Life policy and investment contract reserves1079696Unearned premiums18411297Other liabilities74—24Current income tax receivable/payable92(91)67Net cash provided by operating activities1,2081,1811,052Cash Flows From Investing ActivitiesSale of fixed maturities1023623Call or maturity of fixed maturities1,2411,1271,172Sale of equity securities203403523Purchase of fixed maturities(1,742)(1,510)(1,723)Purchase of equity securities(382)(441)(513)Investment in finance receivables(34)(33)(32)Collection of finance receivables292523Investment in buildings and equipment(24)(20)(16)Change in other invested assets, net(72)(38)(15)Net cash used in investing activities(679)(451)(558)Cash Flows From Financing ActivitiesPayment of cash dividends to shareholders(355)(336)(400)Shares acquired - share repurchase authorization(67)(125)(92)Changes in note payable784Proceeds from stock options exercised11913Contract holders' funds deposited868479Contract holders' funds withdrawn(174)(183)(164)Other(54)(60)(54)Net cash used in financing activities(546)(603)(614)Net change in cash and cash equivalents(17)127(120)Cash and cash equivalents at beginning of year784657777Cash and cash equivalents at end of year$767$784$657Supplemental Disclosures of Cash Flow InformationInterest paid$53$53$52Income taxes paid349860Noncash ActivitiesConversion of securities$—$—$5Equipment acquired under finance lease obligations142114Cashless exercise of stock options957Other assets and other liabilities294875
 
 
 
  
 
 
 
 
 
 Summary of Significant Accounting Policies
 Nature of OperationsCincinnati Financial Corporation (CFC) operates through The Cincinnati Insurance Company and Cincinnati Global Underwriting Ltd.SM(Cincinnati Global) insurance subsidiaries andtwocomplementary subsidiary companies. Cincinnati Global was acquired effective February 28, 2019. Refer to Note 20, Acquisition, for additional information.The Cincinnati Insurance Company leads our insurance group that also includestwosubsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group markets a broad range of standard market commercial and personal policies. The group focuses on delivery of quality customer service to our select group of1,796independent insurance agencies with2,458reporting locations across45states. Other subsidiaries of The Cincinnati Insurance Company include: The Cincinnati Life Insurance Company, which markets life insurance and fixed annuities; and The Cincinnati Specialty Underwriters Insurance Company, which offers excess and surplus lines property casualty insurance products. The Cincinnati Insurance Company also conducts the business of our reinsurance assumed operations, Cincinnati ReSM.ThetwoCFC complementary subsidiaries are CSU Producer Resources Inc., which provides insurance brokerage services to our independent agencies so their clients can access our excess and surplus lines insurance products, and CFC Investment Company, which offers commercial leasing and financing services to our agents, their clients and other customers.Basis of PresentationOur consolidated financial statements include the accounts of the parent and its wholly owned subsidiaries and are presented in conformity with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include Cincinnati Global's results for the period from February 28, 2019, through December 31, 2019. Foreign exchange rates related to Cincinnati Global's operations did not have a material impact to our consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Our actual results could differ from those estimates.InvestmentsOur portfolio investments are primarily in publicly traded fixed-maturity and equity security investments. Fixed-maturity investments (taxable bonds, tax-exempt bonds, redeemable preferred equities and commercial mortgage- backed securities) classified as available for sale and equity investments (common and nonredeemable preferred equities) are recorded at fair value in the consolidated financial statements. Beginning January 1, 2018, changes in fair value of equity securities are now reported in net income instead of other comprehensive income as stated below under ‘Adopted Accounting Updates’. The number of fixed-maturity securities with fair value below 100% of amortized cost can be expected to fluctuate as interest rates rise or fall. Because of our strong capital and long-term investment horizon, our general intent is to hold fixed-maturity investments until maturity, regardless of short-term fluctuations in fair values.Impairment charges for fixed maturities are recorded for other-than-temporary declines in value if fair value is below amortized cost and, in the asset impairment committee’s judgment, the fair value is not expected to be recouped within a designated recovery period. Our invested asset impairment policy also states that fixed maturities with fair value below their amortized cost that the company (1) intends to sell or (2) more likely than not will be required to sell before recovery of their amortized cost basis are deemed to be other-than-temporarily impaired (OTTI). The amortized cost of any such securities is reduced to fair value as the new cost basis, and a realized loss is recorded in the period in which it is recognized. When these two criteria are not met, and the company believes that full collection of interest and/or principal is not likely, we determine the net present value of future cash flows by using the effective interest rate implicit in the security at the date of acquisition as the discount rate and compare that amount with the amortized cost and fair value of the security. The difference between the net present value of the expected future cash flows and amortized cost of the security is considered a credit loss and recognized as a 
 
  
 
 realized loss in the period in which it occurred. The difference between the fair value and the net present value of the cash flows of the security, the noncredit loss, is recognized in other comprehensive income as an unrealized loss. We hadnofixed-maturity securities with a noncredit loss for the years ended2019,2018and2017.We include the noncredit portion of fixed-maturity OTTI charges and unrealized gains and losses on fixed-maturity investments, net of taxes, in shareholders’ equity as accumulated other comprehensive income (AOCI). Investment gains and losses are recognized in net income based on the trade date accounting method.Included within our other invested assets were$71 millionand$60 millionof private equity investments,$32 millionand$33 millionof life policy loans and$29 millionand$30 millionof real estate through direct property ownership and development projects in the United States atDecember 31, 2019and2018, respectively. Other invested assets also included$164 millionheld on deposit at Lloyd's atDecember 31, 2019. Life policy loans are carried at the receivable value. The private equity investments provide their financial statements to us and generally report investments on their balance sheets at fair value. We use the equity method of accounting for private equity and real estate development investments. Lloyd's deposits are held as cash and cash equivalents.Investment income, net of expenses, consists mainly of interest and dividends. We record interest on an accrual basis and record dividends at the ex-dividend date. We amortize premiums and discounts on fixed-maturity securities using the effective interest method over the expected life of the security.Fair Value DisclosuresFair value is defined as the exit price or the amount that would be (1) received to sell an asset or (2) paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date. When determining an exit price, we rely upon observable market data whenever possible. We primarily base fair value for investments in equity and fixed-maturity securities (including redeemable preferred stock and assets held in separate accounts) on quoted market prices or on prices from the company’s nationally recognized pricing vendor, an outside resource that supplies global securities pricing, dividend, corporate action and descriptive information to support fund pricing, securities operations, research and portfolio management. The company obtains and reviews the pricing service’s valuation methodologies and related inputs and validates these prices by replicating a sample across each asset class using a discounted cash flow model. When a price is not available from these sources, as in the case of securities that are not publicly traded, we determine the fair value using various inputs including quotes from independent brokers. The fair value of investments not priced by the company’s nationally recognized pricing vendor is immaterial.For the purpose of ASC 825 disclosure, we estimate the fair value of our long-term senior notes on market pricing of similar debt instruments that are actively trading. We estimate the fair value of our note payable on the year-end outstanding balance because it is short term and tied to a variable interest rate. We estimate the fair value of liabilities for investment contracts and annuities using discounted cash flow calculations across a wide range of economic interest rate scenarios with a provision for our nonperformance risk. We estimate the fair value for policyholder loans on insurance contracts using a discounted cash flow model. Determination of fair value for structured settlements assumes the discount rates used to calculate the present value of expected payments are the risk-free spot rates plus an A3 rated bond spread for financial issuers atDecember 31, 2019, to account for nonperformance risk. See Note 3, Fair Value Measurements, for further details.Cash and Cash EquivalentsCash and cash equivalents are highly liquid instruments that include liquid debt instruments with original maturities of less than three months. These are carried at cost, which approximates fair value. 
 
  
 
 Property Casualty InsuranceThe consolidated property casualty companies actively write property casualty insurance through independent agencies in45states. Our 10 largest states generated54.8%and58.4%of total earned premiums in2019and2018, respectively. Ohio, our largest state, accounted for15.1%and15.9%of total earned premiums in2019and2018, respectively. Illinois, Georgia, North Carolina, Indiana and Pennsylvania each accounted for between4%and6%of total earned premiums in2019. Our largest single agency relationship accounted for approximately1.3%of our total property casualty earned premiums in2019. No aggregate agency relationship locations under a single ownership structure accounted for more than4%of our total property casualty earned premiums in2019. We record revenues for installment charges as fee revenues in the consolidated statements of income.Property casualty written premiums are deferred and recorded as earned premiums primarily on a pro rata basis over the terms of the policies. We record as unearned premiums the portion of written premiums that applies to unexpired policy terms. Expenses associated with successfully acquiring insurance policies – commissions, premium taxes and underwriting costs – are deferred and amortized over the terms of the policies. We assess recoverability of deferred acquisition costs at a level consistent with the way we acquire, service and manage insurance policies and measure profitability. We analyze our acquisition cost assumptions to reflect actual experience, and we evaluate potential premium deficiencies.Certain property casualty policies are not entered into policy underwriting systems as of the effective date of coverage. An estimate is recorded for these unprocessed written premiums. A large majority of the estimate is unearned and has no material impact on earned premiums.Premiums receivable are reviewed for impairment on a quarterly basis. We maintain an allowance for uncollectible premiums.We establish reserves to cover the expected cost of claims, losses and expenses related to investigating, processing and resolving claims. Although the appropriate amount of reserves is inherently uncertain, we base our decisions on past experience and current facts. Reserves are based on claims reported prior to the end of the year and estimates of unreported claims. We regularly review and update reserves using the most current information available. Any resulting adjustments are reflected in current calendar year insurance losses and policyholder benefits. We estimate that we may recover some of our costs through salvage and subrogation.Policyholder DividendsCertain workers’ compensation policies include the possibility of a policyholder earning a return of a portion of premium in the form of a policyholder dividend. The dividend generally is calculated by determining the profitability of a policy year along with the associated premium. We reserve for all probable future policyholder dividend payments. We record policyholder dividends as other underwriting expenses.Life InsuranceWe offer several types of life insurance and we account for each according to the duration of the contract. Short-duration life and health contracts are written to cover claims that arise during a short, fixed term of coverage. We generally have the right to change the amount of premium charged or cancel the coverage at the end of each contract term. We record premiums for short-duration life and health contracts similarly to property casualty contracts.Long-duration contracts are written to provide coverage for an extended period of time. Traditional long-duration contracts require policyholders to pay scheduled gross premiums, generally not less frequently than annually, over the term of the coverage. Premiums for these contracts, such as whole life insurance are recognized as revenue when due. Some traditional long-duration contracts, such as ten-pay whole life insurance, have premium payment periods shorter than the period over which coverage is provided. For these contracts, the excess of premium over the amount required to pay expenses and benefits is recognized over the term of the coverage rather than over the premium payment period. 
 
  
 
 We establish a liability for traditional long-duration contracts as we receive premiums. The amount of this liability is the present value of future expenses and benefits less the present value of future net premiums. Net premium is the portion of gross premium required to provide for all expenses and benefits. We estimate future expenses and benefits and net premium using assumptions for expected expenses, mortality, morbidity, withdrawal rates and investment income. We include a provision for deviation, meaning we allow for some uncertainty in making our assumptions. We establish our assumptions when the contract is issued, and we generally maintain those assumptions for the life of the contract. We use both our own experience and industry experience, adjusted for historical trends, in arriving at our assumptions for expected mortality, morbidity and withdrawal rates. We use our own experience and historical trends for setting our assumption for expected expenses. We base our assumption for expected investment income on our own experience, adjusted for current and future economic conditions.We capitalize acquisition costs for traditional long-duration contracts. We charge these capitalized costs associated with successfully acquiring traditional long-duration contract insurance policies in proportion to premium revenue recognized. We use the same assumptions used in establishing the liability for the contract. We update our acquisition cost assumptions periodically to reflect actual experience, and we evaluate our deferred acquisition costs for recoverability.Universal life contracts are long-duration contracts for which contractual provisions are not fixed, unlike whole life insurance. Universal life contracts allow policyholders to vary the amount of premium, within limits, without our consent. However, we may vary the mortality, expense charges and the interest crediting rate, within limits, used to accumulate policy values. We do not record universal life premiums as revenue. Instead we recognize as revenue the mortality charges, administration charges and surrender charges when received. Some of our universal life contracts assess administration charges in the early years of the contract that are compensation for services we will provide in the later years of the contract. These administration charges are deferred and are recognized over the period when we provide those future services. We maintain a policy reserve liability equal to the policyholder account value. There is no provision for adverse deviation. Some of our universal life policies contain no-lapse guarantee provisions. For these policies, we establish a reserve in addition to the account balance, based on expected no-lapse guarantee benefits and expected policy assessments.We capitalize acquisition costs associated with successfully acquiring universal life long-duration contracts. We charge these capitalized costs to expenses over the term of coverage of the contract in accordance with the recognition of gross profit from the contract or notional benefit base. When we charge deferred policy acquisition costs to expenses, we use assumptions based on our best estimates of long-term experience. We review and modify these assumptions on a regular basis.Separate AccountsWe have issued universal life contracts with guaranteed minimum returns, referred to as bank-owned life insurance contracts (BOLIs). A BOLI is designed so the bank is the policy owner and the policy beneficiary. We legally segregate and record as separate accounts the assets and liabilities for some of our BOLIs, based on the specific contract provisions. We guarantee minimum investment returns, account values and death benefits for our separate account BOLIs. Our other BOLIs are general account products.We carry the assets of separate account BOLIs at fair value. The liabilities on separate account BOLIs primarily are the contract holders’ claims to the related assets and are carried at an amount equal to the contract holders’ account value. AtDecember 31, 2019, the current fair value of the BOLI invested assets and cash exceeded the current fair value of the contract holders’ account value by approximately$52 million. At December 31, 2018, the current fair value of the contract holders' account value exceeded the current fair value of the BOLI invested assets and cash by approximately$3 million. If the BOLI projected fair value were to fall below the value we guaranteed, a liability would be established with a corresponding charge to the company’s earnings.Generally, investment income and investment gains and losses of the separate accounts accrue directly to the contract holder, and we do not include them in the consolidated statements of income. Revenues and expenses related to separate accounts consist of contractual fees and mortality, surrender and expense risk charges. Also, each separate account BOLI includes a negotiated capital gain and loss sharing arrangement between the company and the bank. A percentage of each separate account’s investment gain and loss representing contract fees and assessments accrues to us and is transferred from the separate account to our general account and is recognized as revenue or expense. We record as revenues separate account investment management fees in fee revenues of the consolidated statements of income. 
 
  
 
 ReinsuranceThe Cincinnati Insurance Company offers reinsurance assumed for casualty (predominantly domestic exposure), specialty and property (worldwide exposure). Treaties are written on a pro rata and excess of loss basis. We also continue to assume risk with limited exposure as a reinsurer for involuntary state pools.Written premium is recorded, net of contract specific retrocessions, on an ultimate estimate basis and primarily earned on a pro rata basis over the coverage period of the treaty. Expenses are recorded as per contract terms and deferred over the earning period of the premium.We establish known loss reserves when reported. We establish reserves for losses in excess of reported activity in the form of IBNR. Reserves are established using actuarial analysis, which includes models and methods traditionally used for the types of exposures written. We establish reserves for event specific occurrences using modeling data and company specific data when available.We enter into other reinsurance transactions to reduce risk and uncertainty by buying property casualty reinsurance and retrocessional reinsurance as well as life reinsurance. Reinsurance and retrocessional reinsurance contracts do not relieve us from our obligation to policyholders, but rather help protect our financial strength to perform that duty. All of these ceded reinsurance contracts transfer the economic risk of loss.Premiums that we cede are deferred and recorded as earned premiums on a pro rata basis over the terms of the contracts. We estimate loss amounts recoverable from our reinsurers based on the reinsurance policy terms.  Historically, our claims with reinsurers have been paid. We establish an insignificant allowance for uncollectible reinsurance.Income TaxesWe calculate deferred income tax liabilities and assets using tax rates in effect when temporary differences in the consolidated financial statement income and taxable income are expected to reverse. We recognize deferred income taxes for numerous temporary differences between our taxable income and consolidated financial statement income and other changes in shareholders’ equity. Such temporary differences relate primarily to unrealized gains and losses on investments and differences in the recognition of deferred acquisition costs, unearned premiums, insurance reserves and basis differences in the carrying value of investments held. We charge deferred income taxes associated with balances that impact other comprehensive income, such as unrealized appreciation and depreciation of fixed-maturity investments, to shareholders’ equity in accumulated other comprehensive income (AOCI). We charge deferred taxes associated with other differences to income.See Note 11, Income Taxes, for further detail on our uncertain tax positions and other income tax items. AlthoughnoInternal Revenue Service (IRS) penalties currently are accrued, if incurred, they would be recognized as a component of income tax expense.Earnings per ShareNet income per common share is based on the weighted average number of common shares outstanding during each of the respective years. We calculate net income per common share (diluted) assuming the exercise or conversion of share‐based awards using the treasury stock method. 
 
  
 
 Land, Building and EquipmentWe record land at cost, and record building and equipment at cost less accumulated depreciation. Equipment held under finance leases also is classified as property and equipment with the related lease obligations recorded as liabilities. We capitalize and amortize costs for internally developed computer software during the application development stage. These costs generally consist of external consulting, internal payroll and payroll-related costs. Our depreciation is based on estimated useful lives (ranging from three to39.5 years) using straight-line and accelerated methods. Depreciation expense was$25 millionfor2019,$31 millionfor2018and$28 millionfor2017. We review our accumulated depreciation for our building, equipment and software assets and write off fully depreciated assets for obsolesce and nonuse.We monitor land, building and equipment and software assets for potential impairments. Potential impairments may include a significant decrease in the fair values of the assets, considerable cost overruns on projects, a change in legal factors or business climate or other factors that indicate that the carrying amount may not be recoverable or useful. There werenorecorded land, building and equipment impairments for2019,2018or2017.Finance ReceivablesOur leasing subsidiary provides auto and equipment direct financing (leases and loans) to commercial and individual clients. We generally transfer ownership of the property to the client as the terms of the leases expire. Our lease contracts contain bargain purchase options. We account for these leases and loans as sales-type leases. We capitalize and amortize lease or loan origination costs over the life of the financing, using the effective interest method. These costs may include, but are not limited to finder fees, broker fees, filing fees and the cost of credit reports. We record income as other revenues over the financing term using the effective interest method in the consolidated statements of income. Finance receivables are reviewed for impairment and are insignificant to our consolidated financial position, results of operations and cash flows.Employee Benefit Pension PlanWe sponsor a defined benefit pension plan that was modified during 2008. We closed entry into the pension plan, and only participants40 yearsof age or older could elect to remain in the plan. Our pension expense is based on certain actuarial assumptions and also is composed of several components that are determined using the projected unit credit actuarial cost method. Refer to Note 13, Employee Retirement Benefits, for more information about our defined benefit pension plan.Share-Based CompensationWe grant qualified and nonqualified share-based compensation under authorized plans. The stock options generally vest on a graded scale overthree yearsfollowing the date of grant and are exercisable over10-year periods. We grant service-based restricted stock units that cliff vestthree yearsafter the date of grant as well as service-based restricted stock units that vest ratably over thethree-year vesting term. We also grant performance-based restricted stock units that vest if certain market conditions are attained. In2019, the CFC compensation committee approved share-based awards including incentive stock options, nonqualified stock options, service-based restricted and performance-based restricted stock units. See Note 17, Share-Based Associate Compensation Plans, for further details.Goodwill and Intangible AssetsWe recognize goodwill and intangible assets generated through acquisitions within other assets in the consolidated balance sheets. Goodwill arises when the fair value of consideration transferred exceeds the fair value of the net identifiable assets acquired at the acquisition date.  Goodwill and intangible assets with an indefinite life are not amortized. Intangible assets with a definite life are amortized on a straight-line basis over the estimated useful lives as follows: broker relationships,15 years; internally developed technology,five years; value of business acquired, over the remaining coverage period of the underlying insurance contracts. We test for impairments on an annual basis or more frequently if events or circumstances indicate that the asset might be impaired.The company performed its annual impairment test on goodwill and intangibles on September 30, which did not result in the recognition of an impairment loss.Subsequent EventsThere werenosubsequent events requiring adjustment to the consolidated financial statements or disclosure. 
 
  
 
 Adopted Accounting UpdatesASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial LiabilitiesIn January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01,Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities.ASU 2016-01 revised the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The company adopted this ASU on January 1, 2018, and applied it on a modified retrospective basis without prior period amounts restated. As a result of the adoption,$2.503 billionof  after-tax unrealized gains on equity securities was reclassified on January 1, 2018, from accumulated other comprehensive income to retained earnings. Results of operations were impacted as changes in fair value of equity securities are now reported in net income instead of reported in other comprehensive income. As a result of the adoption of this ASU, for the year ended December 31, 2018, the net investment loss of$402 millionin the consolidated statements of income included a decrease of$404 millionfrom the fair value change of equity securities.ASU 2016-02, Leases (Topic 842)In February 2016, the FASB issued ASU 2016-02,Leases(Topic 842). The main provision of ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. In July 2018, the FASB issued ASU 2018-10,Codification Improvements to Topic 842and ASU 2018-11,Targeted Improvements to Topic 842. ASU 2018-10 makes narrow-scope amendments to certain aspects of the new leasing standard while ASU 2018-11 provides relief from costs of implementing certain aspects of the new leasing standard.The company adopted this ASU effective January 1, 2019, and it did not have a material impact on our company's consolidated financial position, cash flows or results of operations. The company has elected the practical expedient package for carrying forward historical lease classifications, not re-evaluating for embedded leases and not reassessing initial direct costs. The company also elected additional practical expedients to not recognize short-term leases on the balance sheet and to only combine lease and nonlease components for certain asset classes. We also elected not to restate prior periods. In support of our insurance operations, the company leases real estate properties which qualify as operating leases and also leases equipment and autos which qualify as finance leases.ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt SecuritiesIn March 2017, the FASB issued ASU 2017-08,Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.ASU 2017-08 amends guidance on the amortization period of premiums on certain purchased callable debt securities. The amendments shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment to beginning retained earnings. The company adopted this ASU effective January 1, 2019, and it did not have a material impact on our company's consolidated financial position, cash flows or results of operations.ASU 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment AccountingIn June 2018, the FASB issued ASU 2018-07,Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope ofTopic 718, Compensation - Stock Compensation, which currently only includes share-based payments issued to employees, to include share-based payments issued to nonemployees for the acquisition of goods and services. The company adopted this ASU effective January 1, 2019, and it did not have a material impact on our company's consolidated financial position, cash flows or results of operations. 
 
  
 
 Pending Accounting UpdatesASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial InstrumentsIn June 2016, the FASB issued ASU 2016-13,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In addition, the FASB issued ASU 2018-19,Codification Improvements to Topic 326, ASU 2019-04,Codification Improvements to Topic 326,ASU 2019-05,Targeted Transition Reliefand ASU 2019-11,Codification Improvements to Topic 326.These ASU’s amend previous guidance on the impairment of financial instruments by adding an impairment model that allows an entity to recognize expected credit losses as an allowance rather than impairing as they are incurred. The new guidance is intended to reduce complexity of credit impairment models and result in a more timely recognition of expected credit losses. The guidance is effective for reporting periods beginning after December 15, 2019, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained earnings. These ASU's have not yet been adopted; however, they will not have a material impact on our company's consolidated financial position, cash flows or results of operations.ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration ContractsIn August 2018, the FASB issued ASU 2018-12,Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. ASU 2018-12 is intended to improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows. The ASU will simplify and improve the accounting for certain market-based options or guarantees associated with deposit or account balance contracts, simplify amortization of deferred acquisition costs while improving and expanding required disclosures. In November 2019, the FASB issued ASU 2019-09,Financial Services - Insurance (Topic 944): Effective Date. ASU 2019-09 delays the effective date of ASU 2018-12 by one year to interim and annual reporting periods beginning after December 15, 2021. These ASU's have not yet been adopted. Management is currently evaluating the impact on our company's consolidated financial position, cash flows and results of operations. 
 
 
  
 
 
 Investments
 The following table provides amortized cost, gross unrealized gains, gross unrealized losses and fair value for our fixed-maturity securities:(Dollars in millions)AmortizedcostGross unrealizedFairvalueAt December 31, 2019gainslossesFixed-maturity securities:Corporate$6,074$332$5$6,401States, municipalities and political subdivisions4,47725214,728Commercial mortgage-backed29011—301Government-sponsored enterprises137—1136United States government1022—104Foreign government28——28Total$11,108$597$7$11,698At December 31, 2018Fixed-maturity securities:Corporate$5,712$85$87$5,710States, municipalities and political subdivisions4,25184314,304Commercial mortgage-backed28732288Government-sponsored enterprises31617310United States government671167Foreign government10——10Total$10,643$174$128$10,689The net unrealized investment gains in our fixed-maturity portfolio atDecember 31, 2019, are primarily the result of the continued low interest rate environment that increased the fair value of our fixed-maturity portfolio. Our commercial mortgage-backed securities had an average rating of Aa1/AA atDecember 31, 2019and2018.The table below provides fair values and unrealized losses by investment category and by the duration of the securities’ continuous unrealized loss positions:(Dollars in millions)Less than 12 months12 months or moreTotalAt December 31, 2019FairvalueUnrealizedlossesFairvalueUnrealizedlossesFairvalueUnrealizedlossesFixed-maturity securities:Corporate$199$2$118$3$317$5States, municipalities and political subdivisions98110—1081Commercial mortgage-backed6———6—Government-sponsored enterprises26151—771United States government——4—4—Foreign government11———11—Total$340$4$183$3$523$7At December 31, 2018Fixed-maturity securities:Corporate$2,082$51$501$36$2,583$87States, municipalities and political subdivisions82318340131,16331Commercial mortgage-backed77—6421412Government-sponsored enterprises49121162607United States government——331331Total$3,031$70$1,149$58$4,180$128 
 
  
 
 Contractual maturity dates for fixed-maturity investments were:(Dollars in millions)Amortized costFairvalue% of fair valueAt December 31, 2019Maturity dates:Due in one year or less$455$4593.9%Due after one year through five years3,1803,30228.2Due after five years through ten years3,7924,01134.3Due after ten years3,6813,92633.6Total$11,108$11,698100.0%Actual maturities may differ from contractual maturities when there is a right to call or prepay obligations with or without call or prepayment penalties.AtDecember 31, 2019and2018, the company had fixed-maturity investments with a fair value of$117 millionand$112 million, respectively, on deposit with various states in compliance with regulatory requirements. In addition, cash and fixed-maturity investments deposited with third parties used as collateral to secure liabilities on behalf of insureds, cedants and other creditors had a fair value of$95 millionand$75 millionatDecember 31, 2019and2018, respectively.AtDecember 31, 2019, Apple, Inc. (Nasdaq:AAPL), an equity holding, was our largest single investment holding with a fair value of$414 million, which was5.5%of our publicly traded common equities portfolio and2.1%of the total investment portfolio.In the normal course of investing activities, the company enters into investments in limited partnerships, including private equity, real estate investments and asset-backed securities issued by third-parties. The company’s maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the company’s consolidated balance sheets and any unfunded commitments. 
 
  
 
 The following table provides investment income and investment gains and losses:(Dollars in millions)Years ended December 31,201920182017Investment income:Interest$446$445$445Dividends201181170Other1254Total659631619Less investment expenses131210Total$646$619$609Investment gains and losses, net:Equity securities:Investment gains and losses on securities sold, net$26$9$—Unrealized gains and losses on securities still held, net1,626(404)—Gross realized gains——195Gross realized losses——(72)Other-than-temporary impairments——(3)Subtotal1,652(395)120Fixed maturities:Gross realized gains131225Gross realized losses(3)(2)—Other-than-temporary impairments(9)(5)(6)Subtotal1519Other(3)(12)9Total$1,650$(402)$148For the years endedDecember 31, 2019,2018and2017, there were no credit losses on fixed-maturity securities for which a portion of OTTI has been recognized in other comprehensive income.During2019, we other-than-temporarily impairedthreesecurities. AtDecember 31, 2019,38fixed-maturity investments with a total unrealized loss of$3 millionhad been in an unrealized loss position for 12 months or more. Of that total,nofixed-maturity investments had fair values below70%of amortized cost.During2018, we other-than-temporarily impairedonesecurity. AtDecember 31, 2018,400fixed-maturity investments with a total unrealized loss of$58 millionhad been in an unrealized loss position for 12 months or more. Of that total,nofixed-maturity investments had fair values below70%of amortized cost. During2017, we other-than-temporarily impairedsixsecurities. AtDecember 31, 2017,249fixed-maturity investments with a total unrealized loss of$18 millionhad been in an unrealized loss position for 12 months or more. Of that total,nofixed-maturity investments had fair values below70%of amortized cost. There werenoequity security investments in an unrealized loss position for 12 months or more as ofDecember 31, 2017 .
 
 
 
 
  
 
 
 Fair Value Measurements
 Fair Value HierarchyThe fair value hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within different levels of the fair value hierarchy, the lowest observable input that has a significant impact on fair value measurement is used. Our valuation techniques have not changed from those used atDecember 31, 2018, and ultimately management determines fair value. Financial instruments reported at fair value in our consolidated financial statements are categorized based upon the following characteristics or inputs to the valuation techniques:•Level 1 – Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in active markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities.•Level 2 – Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets and liabilities that are actively traded. This also includes pricing models for which the inputs are corroborated by market data.The technique used for the Level 2 fixed-maturity securities and taxable fixed maturities in separate accounts is the application of market based modeling. The inputs used for all classes of fixed-maturity securities listed in the table below include relevant market information by asset class, trade activity of like securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates, U.S. Treasury or swap curves, yield to maturity and economic events. Specific to commercial mortgage-backed securities, key inputs also include prepayment and default projections based on past performance of the underlying collateral and current market data. All of the Level 2 fixed-maturity securities are priced by a nationally recognized pricing vendor.The Level 2 nonredeemable preferred equities technique used is the application of market based modeling. The inputs used, similar to those used by the pricing vendor for our fixed-maturity securities, include relevant market information, trade activity of like securities, yield to maturity, corporate action notices and economic events. All of the Level 2 nonredeemable preferred equities are priced by a nationally recognized pricing vendor.•Level 3 – Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include the following:◦Quotes from brokers or other external sources that are not considered binding;◦Quotes from brokers or other external sources where it cannot be determined that market participants would in fact transact for the asset or liability at the quoted price; or◦Quotes from brokers or other external sources where the inputs are not deemed observable. 
 
  
 
 The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis atDecember 31, 2019and2018. We do not have any liabilities carried at fair value. There were no transfers between Level 1 and Level 2.(Dollars in millions)Quoted prices inactive markets foridentical assets(Level 1)Significantunobservable inputs(Level 3)At December 31, 2019Significant otherobservable inputs(Level 2)TotalFixed maturities, available for sale:Corporate$—$6,401$—$6,401States, municipalities and political subdivisions—4,728—4,728Commercial mortgage-backed—301—301Government-sponsored enterprises—136—136United States Government104——104Foreign government—28—28Subtotal10411,594—11,698Common equities7,518——7,518Nonredeemable preferred equities—234—234Separate accounts taxable fixed maturities—855—855Top Hat savings plan mutual funds and commonequity (included in Other assets)45——45Total$7,667$12,683$—$20,350At December 31, 2018Fixed maturities, available for sale:Corporate$—$5,709$1$5,710States, municipalities and political subdivisions—4,30044,304Commercial mortgage-backed—288—288Government-sponsored enterprises—310—310United States Government67——67Foreign government—10—10Subtotal6710,617510,689Common equities5,742——5,742Nonredeemable preferred equities—178—178Separate accounts taxable fixed maturities—791—791Top Hat savings plan mutual funds and commonequity (included in Other assets)34——34Total$5,843$11,586$5$17,434We also held Level 1 cash and cash equivalents of$767 millionand$784 millionatDecember 31, 2019and2018, respectively. Level 3 assets reported at fair value in our consolidated financial statements are not material, and therefore no further disclosures are provided. 
 
  
 
 Fair Value Disclosure for Assets and Liabilities Not Carried at Fair ValueThe disclosures below are presented to provide information about the effects of current market conditions on financial instruments that are not reported at fair value in our consolidated financial statements.The following table shows fair values of our note payable and long-term debt:(Dollars in millions)Quoted prices inactive markets for identical assets(Level 1)Significant otherobservable inputs(Level 2)Significantunobservableinputs(Level 3)TotalAt December 31, 2019Note payable$—$39$—$396.900% senior debentures, due 2028—34—346.920% senior debentures, due 2028—506—5066.125% senior notes, due 2034—512—512Total$—$1,091$—$1,091At December 31, 2018Note payable$—$32$—$326.900% senior debentures, due 2028—32—326.920% senior debentures, due 2028—471—4716.125% senior notes, due 2034—440—440Total$—$975$—$975Fair value of the note payable was determined based upon the outstanding balance atDecember 31, 2019and2018, because it is short term and tied to a variable interest rate. Fair value of the long-term debt was determined under the fair value measurements and disclosure accounting rules based on market pricing of similar debt instruments that are actively trading. We determine fair value for our debt the same way that we value corporate fixed maturities in our investment portfolio. Fair value can vary with macroeconomic conditions. Regardless of the fluctuations in fair value, the outstanding principal amount of our long-term debt is$793 millionat bothDecember 31, 2019and2018. None of the long-term debt is encumbered by rating triggers. The note payable and long-term debt were classified as Level 2 as an active market does not exist, but fair value is determined based on observable inputs.The following table shows the fair value of our life policy loans, included in other invested assets:(Dollars in millions)Quoted prices inactive markets foridentical assets(Level 1)Significant otherobservable inputs(Level 2)Significantunobservableinputs(Level 3)TotalAt December 31, 2019Life policy loans$—$—$44$44At December 31, 2018Life policy loans$—$—$40$40Outstanding principal and interest for these life policy loans totaled$32 millionand$33 millionatDecember 31, 2019and2018, respectively. To determine the fair value, we make the following significant assumptions: (1) the discount rates used to calculate the present value of expected payments are the risk-free spot rates, as nonperformance risk is minimal; and (2) the loan repayment rate by which policyholders pay off their loan balances is in line with past experience. 
 
  
 
 The following table shows fair value of our deferred annuities and structured settlements included in life policy and investment contract reserves:(Dollars in millions)Quoted prices inactive markets foridentical assets(Level 1)Significant otherobservable inputs(Level 2)Significantunobservableinputs(Level 3)TotalAt December 31, 2019Deferred annuities$—$—$770$770Structured settlements—212—212Total$—$212$770$982At December 31, 2018Deferred annuities$—$—$742$742Structured settlements—185—185Total$—$185$742$927Recorded reserves for the deferred annuities were$760 millionand$787 millionatDecember 31, 2019and2018, respectively. Recorded reserves for the structured settlements were$151 millionand$156 millionatDecember 31, 2019and2018, respectively.Fair values for deferred annuities were calculated based upon internally developed models because active markets and observable inputs do not exist. To determine the fair value, we made the following significant assumptions: (1) the discount rates used to calculate the present value of expected payments are the risk-free spot rates plus an A3 rated bond spread for financial issuers atDecember 31, 2019and2018, to account for nonperformance risk; (2) the rate of interest credited to policyholders is the portfolio net earned interest rate less a spread for expenses and profit; and (3) additional lapses occur when the credited interest rate is exceeded by an assumed competitor credited rate, which is a function of the risk-free rate of the economic scenario being modeled.Fair values for structured settlements were calculated based on internally developed models which assume the discount rates used to calculate the present value of expected payments are the risk-free spot rates plus an A3 rated bond spread for financial issuers atDecember 31, 2019and2018, to account for nonperformance risk. The structured settlements were classified as Level 2 as an active market does not exist, but fair value is based on observable inputs. 
 
 
  
 
 
 Property Casualty Loss and Loss Expenses
 We use actuarial methods, models, assumptions and judgment to estimate, as of a financial statement date, the property casualty loss and loss expense reserves required to pay for and settle all outstanding insured claims, including incurred but not reported (IBNR) claims, as of that date. The actuarial estimate is subject to review and adjustment by an inter-departmental committee that includes actuarial, claims, underwriting, loss prevention and finance management. This committee is familiar with relevant company and industry business, claims and underwriting trends, as well as general economic and legal trends that could affect future loss and loss expense payments. The amount we will actually have to pay for claims can be highly uncertain. This uncertainty, together with the size of our reserves, makes the loss and loss expense reserves our most significant estimate.Our reserving process takes into account known facts and interpretations of circumstances and factors including the type of claim, policy provisions pertaining to each claim, potential subrogation or salvage recoverable, large loss activity and trends, new business activity, judicial decisions, economic conditions, changes in law and regulation and product and underwriting changes. There have been no significant changes in methodologies and assumptions used in calculating loss and loss expense reserves for all years presented. There were no material additional premiums or return premiums accrued for as a result of prior-year effects.Our claims representatives establish case reserves when claims are reported to provide for our unpaid loss and loss expense obligation associated with individual claims.For events designated as natural catastrophes resulting in losses incurred related to direct premiums, we calculate IBNR reserves directly as a result of an estimated claim counts and estimated average dollar amount per claim for each event. Once individual case reserves are established for a catastrophe event, we reduce the IBNR reserves.Our actuarial staff uses generally accepted actuarial methods and models to derive ultimate loss and IBNR reserve estimates. The time interval between a claims occurrence and its settlement is one of the crucial attributes when estimating ultimate losses and IBNR reserves.Due to the uncertainties inherent with loss reserves, our ultimate loss experience could prove better or worse than what our carried reserves reflect. To the extent that reserves are inadequate and are required to be increased, the amount of the increase is a charge in that period, raising our loss and loss expense ratio and reducing earnings. To the extent that reserves are redundant and are required to be released, the amount of the release is a credit in that period, reducing our loss and loss expense ratio and increasing earnings.This table summarizes activity for our consolidated property casualty loss and loss expense reserves:(Dollars in millions)Years ended December 31,201920182017Gross loss and loss expense reserves, January 1$5,646$5,219$5,035Less reinsurance recoverable238187298Net loss and loss expense reserves, January 15,4085,0324,737Net loss and loss expense reserves related to acquisition of Cincinnati Global atFebruary 28, 2019246——Net incurred loss and loss expenses related to:Current accident year3,6003,3903,257Prior accident years(248)(167)(119)Total incurred3,3523,2233,138Net paid loss and loss expenses related to:Current accident year1,4621,3911,404Prior accident years1,7981,4561,439Total paid3,2602,8472,843Net loss and loss expense reserves, December 315,7465,4085,032Plus reinsurance recoverable342238187Gross loss and loss expense reserves, December 31$6,088$5,646$5,219 
 
  
 
 In2019,2018and2017, the reserve for loss and loss expense in the consolidated balance sheets also included$59 million,$61 millionand$54 million, respectively, for certain life and health loss and loss expense reserves. Additional disclosures for reserves related to these health claims are not material and therefore not provided.During2019, we experienced$248 millionof favorable development on prior accident years including$192 millionof favorable development in commercial lines,$27 millionof favorable development in personal lines and$11 millionof favorable development in excess and surplus lines. Within commercial lines, we recognized favorable development of$78 millionfor the commercial casualty line,$77 millionfor the workers' compensation line,$25 millionfor the commercial property line and$6 millionfor the commercial auto line due to reduced uncertainty of prior accident year loss and loss expense for these lines. Within personal lines, we recognized favorable reserve development of$26 millionin personal auto. We recognized unfavorable reserve development of$11 millionfor the homeowner line of business due primarily to higher-than-anticipated loss development on known claims.During2018, we experienced$167 millionof favorable development on prior accident years including$157 millionof favorable development in commercial lines,$13 millionof adverse development in personal lines,$24 millionof favorable development in excess and surplus lines and$1 millionof adverse development in our reinsurance assumed operations. We recognized favorable development of$58 millionfor the workers' compensation line and$47 millionfor both the commercial property line and commercial casualty line due to reduced uncertainty of prior accident year loss and loss expense for these lines.During2017, we experienced$119 millionof favorable development on prior accident years including$73 millionof favorable development in commercial lines,$14 millionof favorable development in personal lines,$29 millionof favorable development in excess and surplus lines and$3 millionof favorable development in our reinsurance assumed operations. We recognized favorable development of$54 millionfor the workers’ compensation line,$33 millionfor the commercial property line and$30 millionfor the other commercial lines due to reduced uncertainty of prior accident year loss and loss expense for these lines. We recognized unfavorable reserve development of$33 millionfor the commercial auto line due to higher loss cost effects in recent accident years, resulting in an increase of our reserve estimate for claims that have not yet been settled. Commercial casualty developed unfavorably by$11 milliondue to paid losses or re-estimates of case reserves at higher than expected levels.Included in our lines of business are asbestos and environmental claims. We carried$85 millionand$89 millionof net loss and loss expense reserves for asbestos and environmental claims at December 31,2019and2018, respectively. The asbestos and environmental claims amounts for each respective year constituted less than2.0%of total net loss and loss expense reserves at these year-end dates. We believe our exposure to asbestos and environmental claims is limited, largely because our reinsurance retention was$500,000or below prior to 1987. We also were predominantly a personal lines company in the 1960s and 1970s. During the 1980s and early 1990s, commercial lines grew as a percentage of our overall business and our exposure to asbestos and environmental claims grew accordingly. Over that period, we included an asbestos and environmental exclusion in almost all policies or endorsed the exclusion to the policies. We have no exposure to asbestos and environmental claims with our recent acquisition of Cincinnati Global. We continue to monitor our claims for evidence of material exposure to other mass tort classes but have found no such credible evidence to date. 
 
  
 
 The following table provides a reconciliation of the property casualty incurred losses and allocated loss adjustment expenses (ALAE) development and paid losses and ALAE development information atDecember 31, 2019.(Dollars in millions)Cumulative incurred lossesand ALAEas reported within the triangles,net of reinsuranceCumulative paid losses and ALAE as reported within the triangles,net of reinsuranceLiabilities for loss and ALAE for accident years not presented in the triangles, net of reinsuranceTotal liabilities for loss and ALAE, net of reinsuranceReinsurance recoverable on unpaid lossesTotal liabilities for gross loss and loss expense reservesCommercial casualty$4,910$2,863$88$2,135$30$2,165Workers' compensation2,0611,43329592364987Commercial auto2,2001,566156495654Commercial property2,7392,46913283111394Personal auto1,9331,659628033313Homeowner1,7791,621216021181Excess and surplus65833313268334Other lines771Total liabilities for loss and ALAE reserves5,799Unallocated loss adjustment expense reserves289Gross loss and loss expense reserves$6,088For all lines of business, the claim counts reported are primarily measured by insurance coverages that are triggered when a loss occurs and a reserve is established.  For this purpose, coverages are defined as unique combinations of certain attributes such as line of business and cause of loss. Claims that are opened and closed without payment are included in the reported claim counts. Claim counts are presented on a direct basis only and do not reflect any assumed or ceded reinsurance.In the following tables, commercial casualty and workers' compensation each disclose 10 accident years of loss and ALAE reserves and cumulative number of reported claims. Commercial auto, commercial property, personal auto and homeowner each disclose five accident years of loss and ALAE reserves and cumulative number of reported claims as each of these lines have five year cumulative average annual percentage payouts of approximately95%or higher. The excess and surplus lines began operations in 2008 with earned premiums and loss and ALAE reserves being immaterial prior to 2011. Accordingly, we disclosed nine accident years of loss and ALAE reserves and cumulative number of reported claims for the excess and surplus lines, and will disclose additional accident years in subsequent annual filings, not to exceed 10 years. 
 
  
 
 Commercial CasualtyThe following table shows the commercial casualty incurred and paid losses and ALAE development by accident year. The table also shows the IBNR reserves plus expected development on reported losses and claim frequency:(Dollars in millions, reported claims in thousands)As of December 31, 2019Incurred losses and ALAE, net of reinsurance for the years ended December 31,Total of incurredbut not reportedliabilities plusexpecteddevelopment onreported lossesCumulative number ofreportedclaimsAccidentUnauditedYear20102011201220132014201520162017201820192010$495$394$378$349$347$348$349$343$341$336$11202011466404377377375380366365368111920124664144173943944043993971418201344844343141641340739131202014503496479476479465342120155335265295165087821201656357455755512021201761059757716020201865064127220201967244015Total$4,910Cumulative paid losses and ALAE, net of reinsurance2010$33$92$159$203$256$285$300$314$318$32120112793149227266298315325337201227881702322883303463642013359015923228631233720143497172287338390201538108200287362201646126228331201748122234201844148201939Total2,863All outstanding liabilities before 2010, net of reinsurance88Liabilities for loss and ALAE, net of reinsurance$2,135The following table shows the average annual percentage payout of incurred losses for the commercial casualty line of business:Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)Years12345678910Average annual percentage payout7.8%15.0%18.2%18.4%13.3%9.1%4.8%3.9%2.2%0.8% 
 
  
 
 Workers’ CompensationThe following table shows the workers’ compensation incurred and paid losses and ALAE development by accident year. The table also shows the IBNR reserves plus expected development on reported losses and claim frequency:(Dollars in millions, reported claims in thousands)As of December 31, 2019Incurred losses and ALAE, net of reinsurance for the years ended December 31,Total of incurredbut not reportedliabilities plus expecteddevelopment onreported lossesCumulative number ofreportedclaimsAccidentUnauditedYear20102011201220132014201520162017201820192010$283$274$248$242$240$239$240$237$236$237$1926201128425124624223923623122922817242012265245234220213211209208212120132642462212122082052021620201426123321420320119818192015246220208195179331720162302182061883116201721820819056152018222207651520192249013Total$2,061Cumulative paid losses and ALAE, net of reinsurance2010$67$134$164$181$192$198$202$204$207$20920116513116117718619019219519720126212114716217117517818020136111914415716416817020145611013414815716220154793115129134201646971191312017458810620184895201949Total1,433All outstanding liabilities before 2010, net of reinsurance295Liabilities for loss and ALAE, net of reinsurance$923The following table shows the average annual percentage payout of incurred losses for the workers’ compensation line of business:Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)Years12345678910Average annual percentage payout26.4%26.7%12.0%7.0%3.9%2.2%1.3%1.0%1.2%0.8% 
 
  
 
 Commercial AutoThe following table shows the commercial auto incurred and paid losses and ALAE development by accident year. The table also shows the IBNR reserves plus expected development on reported losses and claim frequency:(Dollars in millions, reported claims in thousands)As of December 31, 2019Incurred losses and ALAE, net of reinsurance for the years ended December 31,Total of incurredbut not reportedliabilities plus expecteddevelopment onreported lossesCumulative number of reported claimsAccidentUnauditedYear201520162017201820192015$374$384$394$401$400$35120164174304504637532017451441443275120184534427249201945213342Total$2,200Cumulative paid losses and ALAE, net of reinsurance2015$173$244$303$349$3752016184273350408201718726633420181842662019183Total1,566All outstanding liabilities before 2015, net of reinsurance15Liabilities for loss and ALAE, net of reinsurance$649The following table shows the average annual percentage payout of incurred losses for the commercial auto line of business. Commercial auto includes both physical damage and liability losses. A majority of the incurred losses paid after year 2 are the result of liability losses.Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)Years12345Average annual percentage payout41.4%18.4%15.5%12.1%6.3% 
 
  
 
 Commercial PropertyThe following table shows the commercial property incurred and paid losses and ALAE development by accident year. The table also shows the IBNR reserves plus expected development on reported losses and claim frequency:(Dollars in millions, reported claims in thousands)As of December 31, 2019Incurred losses and ALAE, net of reinsurance for the years ended December 31,Total of incurredbut not reportedliabilities plus expecteddevelopment onreported lossesCumulative number of reported claimsAccidentUnauditedYear201520162017201820192015$454$414$416$415$414$21720165905515415454172017587560556518201863060391820196212215Total$2,739Cumulative paid losses and ALAE, net of reinsurance2015$279$388$407$411$4112016358504528539201739552254720183865592019413Total2,469All outstanding liabilities before 2015, net of reinsurance13Liabilities for loss and ALAE, net of reinsurance$283The following table shows the average annual percentage payout of incurred losses for the commercial property line of business:Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)Years12345Average annual percentage payout66.9%26.2%4.5%1.5%0.1% 
 
  
 
 Personal AutoThe following table shows the personal auto incurred and paid losses and ALAE development by accident year. The table also shows the IBNR reserves plus expected development on reported losses and claim frequency:(Dollars in millions, reported claims in thousands)As of December 31, 2019Incurred losses and ALAE, net of reinsurance for the years ended December 31,Total of incurredbut not reportedliabilities plus expecteddevelopment onreported lossesCumulative number of reported claimsAccidentUnauditedYear201520162017201820192015$343$356$356$360$361$—1082016383384386384—1102017412394391—10920184243981811120193995496Total$1,933Cumulative paid losses and ALAE, net of reinsurance2015$229$292$325$346$3542016243316351370201725632435820182623272019250Total1,659All outstanding liabilities before 2015 net of reinsurance6Liabilities for loss and ALAE, net of reinsurance$280The following table shows the average annual percentage payout of incurred losses for the personal auto line of business. Personal auto includes both physical damage and liability losses. A majority of the incurred losses paid after year 2 are the result of liability losses.Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)Years12345Average annual percentage payout64.2%17.4%9.1%5.4%2.4% 
 
  
 
 HomeownerThe following table shows the homeowner incurred and paid losses and ALAE development by accident year. The table also shows the IBNR reserves plus expected development on reported losses and claim frequency:(Dollars in millions, reported claims in thousands)As of December 31, 2019Incurred losses and ALAE, net of reinsurance for the years ended December 31,Total of incurredbut not reportedliabilities plus expecteddevelopment onreported lossesCumulative number of reported claimsAccidentUnauditedYear201520162017201820192015$284$275$275$274$274$—242016315304303302—232017356383385126201837038662320194323920Total$1,779Cumulative paid losses and ALAE, net of reinsurance2015$203$260$269$272$2732016208283295299201727735637820182683682019303Total1,621All outstanding liabilities before 2015, net of reinsurance2Liabilities for loss and ALAE, net of reinsurance$160The following table shows the average annual percentage payout of incurred losses for the homeowner line of business:Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)Years12345Average annual percentage payout70.9%23.0%4.4%1.2%0.3% 
 
  
 
 Excess and Surplus LinesThe following table shows the excess and surplus lines incurred and paid losses and ALAE development by accident year. The table also shows the IBNR reserves plus expected development on reported losses and claim frequency:(Dollars in millions, reported claims in thousands)As of December 31, 2019Incurred losses and ALAE, net of reinsurance for the years ended December 31,Total of incurredbut not reportedliabilities plus expecteddevelopment onreported lossesCumulative number of reported claimsAccidentUnauditedYear2011201220132014201520162017201820192011$48$47$44$38$36$35$35$34$34$—120126756494037363536112013746454454241411220149582756460596220159681736765822016938784821432017104959526320181161094432019137832Total$658Cumulative paid losses and ALAE, net of reinsurance2011$8$14$23$27$30$32$34$33$332012915192529313233201371220273234372014917273743482015819294151201610213951201711234120181126201913Total333All outstanding liabilities before 2011, net of reinsurance1Liabilities for loss and ALAE, net of reinsurance$326The following table shows the average annual percentage payout of incurred losses for the excess and surplus lines insurance segment. Excess and surplus lines consist mostly of commercial casualty and commercial property coverages. A majority of the incurred losses paid after year 2 are the result of commercial casualty losses.Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)Years123456789Average annual percentage payout15.3%14.4%19.1%15.5%11.6%7.2%3.3%1.3%0.8% 
 
 
  
 
 
 Life Policy and Investment Contract Reserves
 We establish the reserves for traditional life insurance policies based on expected expenses, mortality, morbidity, withdrawal rates, timing of claim presentation and investment yields, including a provision for uncertainty. Once these assumptions are established, they generally are maintained throughout the lives of the contracts. We use both our own experience and industry experience, adjusted for historical trends, in arriving at our assumptions for expected mortality, morbidity and withdrawal rates as well as for expected expenses. We base our assumptions for expected investment income on our own experience adjusted for current and future economic conditions.We establish reserves for the company’s universal life, deferred annuity and structured settlement policies equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals. Some of our universal life policies contain no-lapse guarantee provisions. For these policies, we establish a reserve in addition to the account balance, based on expected no-lapse guarantee benefits and expected policy assessments.This table summarizes our life policy and investment contract reserves:(Dollars in millions)At December 31,20192018Life policy reserves:Ordinary/traditional life$1,226$1,149Other5048Subtotal1,2761,197Investment contract reserves:Deferred annuities760787Universal life640632Structured settlements151156Other87Subtotal1,5591,582Total life policy and investment contract reserves$2,835$2,779 
 
 
  
 
 
 Deferred Policy Acquisition Costs
 Expenses directly related to successfully acquired insurance policies – primarily commissions, premium taxes and underwriting costs – are deferred and amortized over the terms of the policies. We update our acquisition cost assumptions periodically to reflect actual experience, and we evaluate the costs for recoverability. The table below shows the deferred policy acquisition costs and asset reconciliation:(Dollars in millions)Years ended December 31,201920182017Property casualty:Deferred policy acquisition costs asset, January 1$464$438$408Capitalized deferred policy acquisition costs1,034933897Amortized deferred policy acquisition costs(986)(907)(867)Deferred policy acquisition costs asset, December 31$512$464$438Life:Deferred policy acquisition costs asset, January 1$274$232$229Capitalized deferred policy acquisition costs616051Amortized deferred policy acquisition costs(48)(39)(46)Shadow deferred policy acquisition costs(25)21(2)Deferred policy acquisition costs asset, December 31$262$274$232Consolidated:Deferred policy acquisition costs asset, January 1$738$670$637Capitalized deferred policy acquisition costs1,095993948Amortized deferred policy acquisition costs(1,034)(946)(913)Shadow deferred policy acquisition costs(25)21(2)Deferred policy acquisition costs asset, December 31$774$738$670No premium deficiencies were recorded in the consolidated statements of income in2019,2018and2017, as the sum of the anticipated loss and loss expenses, policyholder dividends and unamortized deferred acquisition expenses did not exceed the related unearned premiums and anticipated investment income. 
 
 
  
 
 
 Note Payable
 We haveoneline of credit through multiple commercial banks that was due to expire May 13, 2019. Effective February 4, 2019, we extended our unsecured revolving credit facility forfive years, amending the expiration to February 4, 2024, with the option oftwoone-year extensions. The borrowing capacity was increased to$300 millionfrom$225 millionwith an additional$300 millionaccordion feature. Terms and conditions are similar to the former agreement except the net worth covenant has been eliminated and the debt-to-total capital maximum shall not exceed35%. On December 6, 2019, we exercised our option to extend the term of the line of credit one year to February 4, 2025. We had no compensating balance requirements on short-term debt for either2019or2018. AtDecember 31, 2019and 2018,$39 millionand$32 millionwas drawn on the line of credit, respectively. The interest rate charged on our borrowings on this credit agreement ranged from2.59%to3.41%during2019and ranged from2.45%to4.75%during2018. In addition, we have letters of credit related to our Cincinnati Re and Cincinnati Global operations with no amounts drawn at December 31, 2019 and 2018. 
 
 
  
 
 
 Long-Term Debt and Lease Obligations
 This table summarizes the principal amounts of our long-term debt excluding unamortized discounts, none of which are encumbered by rating triggers:(Dollars in millions)Book valuePrincipal amountInterest rateYear ofissueAt December 31,At December 31,20192018201920186.900%1998Senior debentures, due 2028$27$27$28$286.920%2005Senior debentures, due 20283913913913916.125%2004Senior notes, due 2034370370374374Total$788$788$793$793The finance lease term for equipment and autos is 3 to6 yearswhile the operating lease term for real estate properties is typically5 years. Lease obligations totaled$57 millionand$46 millionin2019and2018, respectively. Included in the consolidated balance sheet lease obligations is a net$1 millionforinterest and remaining lease residual values for finance leases we expect to pay. Below are the expected lease obligations we expect to pay through years 2025 and thereafter:(Dollars in millions)Years ended December 31,202020212022202320242025 and thereafterFinance lease obligations$14$10$8$6$3$1Operating lease obligations522213Total lease obligations$19$12$10$8$4$4The following table provides lease cost and other information for the year ended December 31, 2019:(Dollars in millions)2019Lease cost:Finance lease cost$9Operating lease cost4Total lease cost$13Other information finance leases:Finance cash outflows$15Weighted average discount rate2.96%Weighted average remaining lease term in years3.65Other information operating leases:Operating cash outflows$8Weighted average discount rate3.69%Weighted average remaining lease term in years4.71 
 
  
 
 
 Shareholders’ Equity and Dividend Restrictions
 Declared cash dividends per share were$2.24,$2.12and$2.50for the years endedDecember 31, 2019,2018and2017, respectively.Our lead insurance subsidiary, The Cincinnati Insurance Company, paid dividends to the parent company of$625 millionin2019,$500 millionin2018and$465 millionin2017. State regulatory requirements restrict the dividends insurance subsidiaries can pay. Generally, the most our lead insurance subsidiary can pay without prior regulatory approval is the greater of10%of statutory capital and surplus or100%of statutory net income for the prior calendar year. Dividends exceeding these limitations may be paid only with approval of the insurance department of the domiciliary state. During2020, the total that our lead insurance subsidiary may pay in dividends is approximately$562 million.Dividend payments from Cincinnati Global to the parent company are subject to regulation by UK law. Cincinnati Global paidnodividends to the parent company in2019.Accumulated Other Comprehensive IncomeThe table below shows beginning and end of year accumulated other comprehensive income (AOCI) for investments, pension obligations, life deferred acquisition costs, life policy reserves and other.The changes from the beginning of year to the end of year are the result of changes to other comprehensive income or loss (OCI). 
 
  
 
 (Dollars in millions)201920182017BeforetaxIncometaxNetBeforetaxIncometaxNetBeforetaxIncometaxNetInvestments:AOCI, January 1$46$9$37$3,540$733$2,807$2,625$908$1,717Cumulative effect of change in accounting for equity securities as of January 1, 2018———(3,155)(652)(2,503)———Adjusted AOCI, beginning of period46937385813042,6259081,717OCI before investment gains and losses, net, recognized in net income545115430(334)(71)(263)1,054366688Investment gains and losses, net, recognized in net income(1)(1)—(5)(1)(4)(139)(49)(90)OCI544114430(339)(72)(267)915317598Adjustment to reclassify certain tax effects from AOCI———————(492)492AOCI, December 31$590$123$467$46$9$37$3,540$733$2,807Pension obligations:AOCI, January 1$(16)$(2)$(14)$(12)$(1)$(11)$(26)$(8)$(18)OCI excluding amortization recognized in net income624(5)(1)(4)1266Amortization recognized in net income1—11—1211OCI725(4)(1)(3)1477AOCI, December 31$(9)$—$(9)$(16)$(2)$(14)$(12)$(1)$(11)Life deferred acquisition costs, life policy reserves and other:AOCI, January 1$(1)$—$(1)$(10)$(2)$(8)$(9)$(3)$(6)OCI before investment gains and losses, net, recognized in net income(15)(3)(12)(3)(1)(2)853Investment gains and losses, net, recognized in net income3—31239(9)(4)(5)OCI(12)(3)(9)927(1)1(2)AOCI, December 31$(13)$(3)$(10)$(1)$—$(1)$(10)$(2)$(8)Summary of AOCI:AOCI, January 1$29$7$22$3,518$730$2,788$2,590$897$1,693Cumulative effect of change in accounting for equity securities as of January 1, 2018———(3,155)(652)(2,503)———Adjusted AOCI, beginning of period29722363782852,5908971,693Investments OCI544114430(339)(72)(267)915317598Pension obligations OCI725(4)(1)(3)1477Life deferred acquisition costs, life policy reserves and other OCI(12)(3)(9)927(1)1(2)Total OCI539113426(334)(71)(263)928325603Adjustment to reclassify certain tax effects from AOCI———————(492)492AOCI, December 31$568$120$448$29$7$22$3,518$730$2,788Investments gains and losses, net, and life deferred acquisition costs, life policy reserves and other investment gains and losses, net, are recorded in the investment gains and losses, net, line item in the consolidated statements of income. Amortization on pension obligations is recorded in the insurance losses and contract holders' benefits and underwriting, acquisition and insurance expenses line items in the consolidated statements of income. 
 
 
  
 
 
 Reinsurance
 Primary components of our property casualty reinsurance assumed operations include involuntary and voluntary assumed as well as contracts from our reinsurance assumed operations, known as Cincinnati Re. Primary components of our ceded reinsurance include a property per risk treaty, property excess treaty, casualty per occurrence treaty, casualty excess treaty, property catastrophe treaty and catastrophe bonds and retrocessions on our reinsurance assumed operations. Management’s decisions about the appropriate level of risk retention are affected by various factors, including changes in our underwriting practices, capacity to retain risks and reinsurance market conditions.The table below summarizes our consolidated property casualty insurance net written premiums, earned premiums and incurred loss and loss expenses:(Dollars in millions)Years ended December 31,201920182017Direct written premiums$5,477$5,018$4,854Assumed written premiums244173125Ceded written premiums(205)(161)(139)Net written premiums$5,516$5,030$4,840Direct earned premiums$5,340$4,931$4,752Assumed earned premiums199149132Ceded earned premiums(205)(160)(162)Earned premiums$5,334$4,920$4,722Direct incurred loss and loss expenses$3,402$3,188$2,961Assumed incurred loss and loss expenses117125113Ceded incurred loss and loss expenses(167)(90)64Incurred loss and loss expenses$3,352$3,223$3,138Our life insurance company purchases reinsurance for protection of a portion of risks that are written. Primary components of our life reinsurance program include individual mortality coverage, aggregate catastrophe and accidental death coverage in excess of certain deductibles.The table below summarizes our consolidated life insurance earned premiums and contract holders' benefits incurred:(Dollars in millions)Years ended December 31,201920182017Direct earned premiums$341$320$300Ceded earned premiums(71)(70)(68)Earned premiums$270$250$232Direct contract holders' benefits incurred$359$328$319Ceded contract holders' benefits incurred(73)(61)(67)Contract holders' benefits incurred$286$267$252The ceded benefits incurred can vary depending on the type of life insurance policy held and the year the policy was issued. 
 
 
  
 
 
 Income Taxes
 The significant components of deferred tax assets and liabilities included in the consolidated balance sheets at December 31 were as follows:(Dollars in millions)At December 31,20192018Deferred tax assets:Loss and loss expense reserves$66$60Unearned premiums113105Deferred international earnings51—Other3933Deferred tax assets before valuation allowance269198Valuation allowance for international operations41—Deferred tax assets net of valuation allowance228198Deferred tax liabilities:Investment gains and other, net995542Deferred acquisition costs139131Life policy reserves120117Investments2318Other3017Total gross deferred tax liabilities1,307825Net deferred income tax liability$1,079$627Deferred tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount recognized for tax purposes.Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods as permitted by law, we believe it is more likely than not that all of the deferred tax asset on our U.S. domestic operations will be realized. As a result, we have no valuation allowance as of December 31, 2019 and 2018 for our U.S. domestic operations. As more fully discussed below, we do carry a valuation allowance on the deferred tax assets related to Cincinnati Global, which we acquired in 2019.For financial reporting purposes, income before income taxes includes the following components:(Dollars in millions)For the years ended December 31,201920182017United States$2,440$251$730International32——Total income before income taxes$2,472$251$730 
 
  
 
 The provision (benefit) for income taxes consists of:(Dollars in millions)For the years ended December 31,201920182017Provision (benefit) for income taxes:Current – United States federal$137$11$129International(5)——Total current13211129Deferred – United States federal338(47)(444)International5——Total deferred343(47)(444)Total provision (benefit) for income taxes$475$(36)$(315)The differences between the21%and35%statutory federal income tax rate and our effective income tax rate were as follows:(Dollars in millions)Years ended December 31,201920182017Tax at statutory rate:$51921.0%$5321.0%$25635.0%Increase (decrease) resulting from:Tax-exempt income from municipal bonds(19)(0.8)(20)(8.0)(36)(4.9)Dividend received exclusion(16)(0.6)(15)(6.0)(34)(4.7)Tax accounting method changes——(50)(19.9)——Deferred tax benefit due to tax rate change————(495)(67.8)Other(9)(0.4)(4)(1.4)(6)(0.8)Provision (benefit) for income taxes$47519.2%$(36)(14.3)%$(315)(43.2)%In 2018, we received approval from the IRS to change our method of tax accounting for certain items applicable for the 2017 tax year and tax return, primarily related to the valuation of our tax basis unpaid losses. Accounting guidance does not allow recognition of the impact of certain tax accounting method changes until approved by the IRS. As a result, we recognized a$50 millionincome tax benefit in 2018 for the difference between the current21%tax rate and the 2017 tax rate of35%for the related items. This reduced our effective tax rate by19.9%for the year ended December 31, 2018.On December 22, 2017, the Tax Cuts and Jobs Act (Tax Act) was enacted and represented one of the most comprehensive changes in U.S. corporate income taxation since 1986. The Tax Act revised the U.S. corporate income tax by lowering the corporate income tax rate from a top marginal rate of35%to a flat rate of21%. In addition to lowering tax rates, changes were made to the amount of the dividends received deduction and the required proration addback for qualified dividend income and tax exempt municipal interest. The Tax Act was effective January 1, 2018. The reduction in corporate income tax rate decreased our net deferred tax liability as of December 22, 2017, by$495 million. The effect of the rate change was recorded as a one-time noncash benefit to income tax expense in our consolidated statements of income for the year ended December 31, 2017. This benefit results from re-measuring our net deferred tax liability at the newly enacted corporate income tax rate of21%(the rate at which the deferred items are expected to be reversed) versus the35%rate at which the net deferred tax benefits were previously carried. Of this$495 millionbenefit,$492 millionrelates to net unrealized gains on investments and other AOCI amounts. The remainder relates to differences in the recognition of deferred acquisition costs, unearned premiums, insurance reserves and basis differences in the carrying value of investments held. 
 
  
 
 The provision for federal income taxes is based upon the filing of a consolidated income tax return for the company and its domestic subsidiaries within the United States. As of December 31, 2019, 2018 and 2017, we have no operating loss carryforwards in the United States. The life group operating loss carryforward from our 2017 tax year was fully utilized in our 2018 tax year resulting in a tax benefit of less than one million. For the years ended December 31, 2019, 2018 and 2017, we have no capital loss carryforwards in the United States. As more fully discussed below, Cincinnati Global which we acquired in 2019, has operating loss carryforwards in the United Kingdom.Unrecognized Tax BenefitsAs of December 31,2019and 2018, we had a gross unrecognized tax benefit of$34 million.We carriednoamounts for unrecognized tax benefits for the year ended December 31, 2017. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits.(Dollars in millions)Years ended December 31,201920182017Gross unrecognized tax benefits at January 1$34$—$—Gross increase in prior year positions———Gross decrease in prior year positions———Gross increase in current year positions—34—Settlements with tax authorities———Lapse of statute of limitations———Gross unrecognized tax benefits at December 31$34$34$—The unrecognized tax benefit liability is carried in other liabilities in the consolidated balance sheets. Included in the unrecognized tax benefit liability as of December 31,2019is$34 million, if recognized, would affect the effective tax rate. Although no interest and penalties currently are accrued, if incurred, they would be recognized as a component of income tax expense. We do not expect any changes to our unrecognized tax benefit liability in the next twelve months.The statute of limitations for federal tax purposes has closed for tax years ended December 31, 2015 and earlier. In 2019, the IRS began its examination of the tax year ended December 31, 2017. At this time, no adjustments have been proposed. In addition to our IRS filings, we file income tax returns with immaterial amounts in various state jurisdictions. The statute of limitations for state income tax purposes has closed for tax years ended December 31, 2015 and earlier.Cincinnati Global operates in the United Kingdom and as such, is subject to tax in that jurisdiction. The statute of limitation for tax return review by Her Majesty’s Revenue and Customs (HMRC) has closed for tax years ended December 31, 2017 and earlier. There are currently no tax returns under review by HMRC.Income taxes paid in our consolidated statements of cash flows are shown net of refunds received. We received refunds of$94 millionin2019,nonein 2018 and$18 millionin 2017. 
 
  
 
 Acquisition of Cincinnati GlobalAs more fully discussed in Note 1, Accounting Policies and Note 20, Acquisition, we closed on the acquisition of Cincinnati Global during the first quarter of 2019. As a result of this acquisition, $59 million of net deferred tax assets were acquired or established at the acquisition date with an offsetting valuation allowance of $55 million.As of December 31, 2019, Cincinnati Global had$41 millionof net deferred tax assets with an offsetting valuation allowance of$41 million.Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized. After considering all positive and negative evidence related to the Cincinnati Global operations, we believe it was appropriate to set up a valuation allowance for purposes of our opening Cincinnati Global balance sheet and is appropriate to carry a valuation allowance as of December 31, 2019.The following is a tabular reconciliation of the total amounts of our Cincinnati Global valuation allowance.(Dollars in millions)Years ended December 31,201920182017Valuation allowance at January 1$—$—$—Acquisition accounting amount55——Current year operations(14)——Valuation allowance at December 31$41$—$—As of December 31, 2019, Cincinnati Global had operating loss carryforwards of $147 million in the United Kingdom. These Cincinnati Global losses can only be utilized within the Cincinnati Global group in the United Kingdom and cannot offset the income of our CFC group domestic operations in the United States. 
 
 
  
 
 
 Net Income Per Common Share
 Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share are computed based on the weighted average number of common and dilutive potential common shares outstanding using the treasury stock method. The table shows calculations for basic and diluted earnings per share:(In millions, except per share data)Years ended December 31,201920182017Numerator:Net income—basic and diluted$1,997$287$1,045Denominator:Basic weighted-average common shares outstanding163.2163.2164.2Effect of share-based awards:Stock options1.20.81.1Nonvested shares0.70.50.7Diluted weighted-average shares165.1164.5166.0Earnings per share:Basic$12.24$1.76$6.36Diluted12.101.756.29Number of anti-dilutive share-based awards—1.30.7 The sources of dilution of our common shares are certain equity-based awards as discussed in Note 17, Share-Based Associate Compensation Plans. The above table includes the number of anti-dilutive share-based awards at year-end2019,2018and2017 . We did not include these share-based awards in the computation of net income per common share (diluted) because their exercise would have anti-dilutive effects.
 
 
  
 
 
 Employee Retirement Benefits
 We sponsor a qualified defined benefit pension plan that we closed entry into for new associates as of June 30, 2008, and only participants40years of age or older as of August 31, 2008, could elect to continue to participate. During 2008, we changed the form of retirement benefit we offer some associates to a company match on contributions to a 401(k) plan as further explained below. For participants remaining in the pension plan, we continue to fund future benefit obligations. Benefits for the defined benefit pension plan are based on years of credited service and compensation level. Contributions are based on the prescribed method defined in the Pension Protection Act. Our net periodic benefit cost is based on certain actuarial assumptions and also is composed of several components that are determined using the projected unit credit actuarial cost method. The qualified plan has been amended to allow for distribution of vested balances to terminated participants.We sponsor a defined contribution plan (401(k) plan) for eligible associates with matching company contributions totaling$19 million,$18 millionand$16 millionduring the years2019,2018and2017, respectively. Associates who are not accruing benefits under the pension plan are eligible to receive the company match of up to6%of cash compensation. Participants vest in the company match for the 401(k) plan afterthree yearsof eligible service.We maintain a supplemental executive retirement plan (SERP) with a benefit obligation of$11 millionatyear-end2019and$10 millionat year-end2018, which is included in the projected benefit obligation. The company also makes available to a select group of associates the CFC Top Hat Savings Plan, a nonqualified deferred compensation plan, which had a fair value of$45 millionand$34 millionatDecember 31, 2019and2018, respectively. Company matching contributions to the CFC Top Hat Savings Plan totaled approximately$1 millionfor the years2019,2018and2017, respectively.Defined Benefit Pension Plan AssumptionsWe evaluate our pension plan assumptions annually and update them as necessary.This is a summary of the weighted-average assumptions used to determine our benefit obligations at December 31 for the plans:Qualified Pension PlanSERP2019201820192018Discount rate3.40%4.34%3.33%4.25%Rate of compensation increase2.25-3.252.25-3.252.25-3.252.25-3.25To determine the discount rate for each plan, a theoretical settlement portfolio of high-quality rated corporate bonds was chosen to provide payments approximately matching the plan’s projected benefit payments. A single interest rate for each plan was determined resulting in a discounted value of the plan's benefit payments that equates to the market value of the selected bonds. The discount rate is reflective of current market interest rate conditions and our plan's liability characteristics. Based on this analysis, we decreased the rate from the prior year by0.94percentage points for the qualified pension plan and by0.92percentage points for the SERP. Compensation increase assumptions reflect anticipated rates of inflation, real return on wage growth and merit and promotional increases. The mortality assumption is updated annually to reflect the updated scale, but at year-end 2019 the base table was also changed to reflect the Pri-2012 tables released in2019. The RP-2014 table projected generationally with Scale MP-2018 and Scale MP-2017 were used for the years2018and2017, respectively. The updated mortality table did not have a significant impact on our consolidated financial statements as our qualified plan assumes the majority of benefits will be paid in the form of lump sums. 
 
  
 
 This is a summary of the weighted-average assumptions used to determine our net periodic benefit cost for the plans:Qualified Pension PlanSERP201920182017201920182017Discount rate4.34%3.73%4.30%4.25%3.61%4.10%Expected return on plan assets7.007.257.25n/an/an/aRate of compensation increase2.25-3.252.75-3.252.75-3.252.25-3.252.75-3.252.75-3.25The discount rate was increased by0.61percentage points for the qualified pension plan and0.64percentage points for the SERP due to market interest rate conditions at the beginning of2019. The discount rate assumptions for our benefit obligation generally track with high-quality rated corporate bond yields chosen in our theoretical settlement portfolio, and yearly adjustments reflect any changes to those bond yields. We believe the expected return on plan assets is representative of the expected long-term rate of return on these assets, which is consistent with2019expectations of interest rates and based partially on the fact that the plan’s common stock holdings pay dividends. We review historical actual return on plan assets when determining our expected long-term rate of return. Total portfolio return for2019was24.5%and for2018was negative1.7%. Our compensation increase assumptions in2019reflect anticipated rates of inflation, real return on wage growth and merit and promotional increases.Benefit obligation activity using an actuarial measurement date for our qualified pension plan and SERP at December 31 follows:(Dollars in millions)At December 31,20192018Change in projected benefit obligation:Benefit obligation, January 1$318$351Service cost811Interest cost1313Actuarial loss (gain)45(19)Benefits paid(34)(38)Projected benefit obligation, December 31$350$318Change in plan assets:Fair value of plan assets, January 1$318$345Actual return on plan assets70(4)Employer contribution—15Benefits paid(34)(38)Fair value of plan assets, December 31$354$318Funded status, December 31$4$—Accumulated benefit obligation$327$297Our funded status improved for2019primarily due to higher returns on plan assets partially offset by actuarial losses from decreases in discount rates and assumed lump sum rates. 
 
  
 
 A reconciliation follows of the funded status for our qualified plan and SERP at the end of the measurement period to the amounts recognized in the consolidated balance sheets at December 31:(Dollars in millions)At December 31,20192018Pension amounts recognized in the consolidated balance sheets:Other assets$4$—Total$4$—Pension amounts recognized in accumulated other comprehensive income:Net actuarial loss$9$16Total$9$16Below are the components of our net periodic benefit cost, as well as other changes in plan assets and benefit obligations recognized in other comprehensive income for our qualified plan and SERP at December 31:(Dollars in millions)Years ended December 31,201920182017Net periodic benefit cost:Service cost$8$11$11Non-service costs (benefit):Interest cost131314Expected return on plan assets(20)(22)(21)Amortization of actuarial loss and prior service cost112Other121Net periodic benefit cost$3$5$7Other changes in plan assets and benefit obligations recognized in othercomprehensive income:Current year actuarial (gain) loss$(5)$7$(11)Amortization of actuarial loss(2)(3)(3)Total recognized in other comprehensive (income) loss$(7)$4$(14)Total recognized in net periodic benefit cost and other comprehensive(income) loss$(4)$9$(7)The2019amount recognized in net periodic benefit cost and other comprehensive income improved from2018largely due to changes in the actuarial gain resulting from increases in discount and assumed lump sum rates. The estimated costs to be amortized from AOCI into net periodic benefit cost over the next year for our plans are$3 millionin actuarial loss and less than$1 millionin prior service cost.Service costs and non-service costs (benefit) are allocated in the same proportion primarily to underwriting, acquisition and insurance expenses line item with the remainder allocated to the insurance losses and contract holders' benefits line item on the consolidated statements of income for2019,2018and2017.Defined Benefit Pension Plan AssetsThe pension plan assets are managed to maximize total return over the long term while providing sufficient liquidity and current return to satisfy the cash flow requirements of the plan. The plan’s day-to-day investment decisions are managed by our internal investment department; however, overall investment strategies are discussed with our employee benefits committee. Our investment strategy is to weight our portfolio towards large-cap, high-quality, dividend-growing equities that we have historically favored. As our plan matures and interest rates normalize, we expect a greater allocation to fixed-income securities to better align asset and liability market risks. Our fixed-maturity bond portfolio is investment grade. The plan does not engage in derivative transactions. 
 
  
 
 Excluding cash, during2019we held approximately77%of our pension portfolio in domestic common equity investments. The remainder of the portfolio consisted of8%in states, municipalities and taxable political subdivisions fixed-maturity investments,8%in domestic corporate fixed-maturity investments and7%in United States government fixed maturity investments. Our common equity portfolio consisted of23%in the financial sector,21%in the information technology sector,13%in the healthcare sector,13%in the industrial sector, and11%in the consumer discretionary industrial sector at year-end2019. No additional sectors accounted for10%or more of our common equity portfolio balance at year-end2019.Investments in securities are valued based on the fair value hierarchy outlined in Note 3, Fair Value Measurements. The pension plan did not have any liabilities carried at fair value during the years endedDecember 31, 2019and2018. There have been no transfers between Level 1 and Level 2 for the years endedDecember 31, 2019and2018. The following table shows the fair value hierarchy for those assets measured at fair value on a recurring basis atDecember 31, 2019and2018. Excluded from the table below is cash on hand of$17 millionand$32 millionatDecember 31, 2019and2018, respectively.(Dollars in millions)Quoted prices inactive markets foridentical assets (Level 1)Significant otherobservable inputs (Level 2)Significantunobservableinputs(Level 3)TotalAt December 31, 2019Fixed maturities, available for sale:States, municipalities and political subdivisions$—$25$—$25Corporate—27—27United States Government25——25Total fixed maturities, available for sale2552—77Common equities260——260Total$285$52$—$337At December 31, 2018Fixed maturities, available for sale:States, municipalities and political subdivisions$—$29$—$29Corporate—37—37United States Government5——5Total fixed maturities, available for sale566—71Common equities215——215Total$220$66$—$286Our pension plan assets included232,113shares of the company’s common stock at bothDecember 31, 2019and2018, which had a fair value of$24 millionand$18 millionatDecember 31, 2019and2018, respectively. The defined benefit pension plan did not purchase or sell any shares of our common stock during2019and2018. The company paid less than$1 millionin2019and2018in cash dividends on our common stock to the pension plan.We estimate$9 millionof benefit payments from the SERP during2020. We expect to make the following benefit payments for our qualified plan and SERP, reflecting expected future service:(Dollars in millions)Years ended December 31,202020212022202320242025 - 2029Expected future benefit payments$31$26$25$26$28$147 
 
 
  
 
 
 Statutory Accounting Information
 Insurance companies’ statutory financial statements are presented on the basis of accounting practices prescribed or permitted by applicable state insurance departments of domicile. Insurance companies use statutory accounting practices (SAP) as recognized by various states. We have adopted the National Association of Insurance Commissioners’ (NAIC)Accounting Practices and Proceduresmanual, version effective January 1, 2001, and updates through the current year as a component of prescribed or permitted practices by laws of the state of domicile. The primary differences between SAP and GAAP include the valuation of investment gains and losses, expensing of policy acquisition costs, actuarial assumptions for life insurance reserves and deferred income taxes based on differences in statutory and taxable income.Statutory net income and capital and surplus are determined in accordance with SAP prescribed or permitted by insurance regulatory authorities for five legal entities, our lead insurance subsidiary and its four insurance  subsidiaries. Statutory capital and surplus for our insurance subsidiary, The Cincinnati Insurance Company, includes capital and surplus of its four insurance subsidiaries. All capital and surplus amounts exceed statutory risk-based capital requirements. The statutory net income and statutory capital and surplus are presented below:(Dollars in millions)Net incomeCapital and surplusYears ended December 31,At December 31,20192018201720192018The Cincinnati Insurance Company$558$626$401$5,620$4,919The Cincinnati Casualty Company131621437398The Cincinnati Indemnity Company354111102The Cincinnati Specialty Underwriters Insurance Company626958526479The Cincinnati Life Insurance Company19—12204191 
 
 Transactions With Affiliated Parties
 We paid certain officers and directors, or insurance agencies of which they are shareholders, commissions of$8 millionin2019,$7 millionin2018and$7 millionin2017, on premium volume of$48 million,$45 millionand$45 millionfor2019,2018and2017, respectively. 
 
 
  
 
 
 Commitments and Contingent Liabilities
 In the ordinary course of conducting business, the company and its subsidiaries are named as defendants in various legal proceedings. Most of these proceedings are claims litigation involving the company's insurance subsidiaries in which the company is either defending or providing indemnity for third-party claims brought against insureds or litigating first-party coverage claims. The company accounts for such activity through the establishment of unpaid loss and loss expense reserves. We believe that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, is immaterial to our consolidated financial condition, results of operations and cash flows.The company and its subsidiaries also are occasionally involved in other legal and regulatory proceedings, some of which assert claims for substantial amounts. These actions include, among others, putative class actions seeking certification of a state or national class. Such proceedings have alleged, for example, breach of an alleged duty to search national databases to ascertain unreported deaths of insureds under life insurance policies. The company's insurance subsidiaries also are occasionally parties to individual actions in which extra-contractual damages, punitive damages or penalties are sought, such as claims alleging bad faith handling of insurance claims or writing unauthorized coverage or claims alleging discrimination by former or current associates.On a quarterly basis, we review these outstanding matters. Under current accounting guidance, we establish accruals when it is probable that a loss has been incurred and we can reasonably estimate its potential exposure. The company accounts for such probable and estimable losses, if any, through the establishment of legal expense reserves. Based on our quarterly review, we believe that our accruals for probable and estimable losses are reasonable and that the amounts accrued do not have a material effect on our consolidated financial condition or results of operations. However, if any one or more of these matters results in a judgment against us or settlement for an amount that is significantly greater than the amount accrued, the resulting liability could have a material effect on the company's consolidated results of operations or cash flows. Based on our most recent review, our estimate for any other matters for which the risk of loss is not probable, but more than remote, is immaterial. 
 
 
  
 
 
 Share-Based Associate Compensation Plans
 Fourequity compensation plans currently permit us to grant various types of equity awards. We currently grant incentive stock options, nonqualified stock options, service-based restricted stock units and performance-based restricted stock units to associates, including some with market-based performance objectives under our shareholder-approved plans. We also have a Holiday Stock Plan that permits annual awards of one share of common stock to each full-time associate for each full calendar year of service up to a maximum of10shares. One of our equity compensation plans permits us to grant stock to our outside directors as a component of their annual compensation. We used treasury shares for share-based compensation award issues or exercises during2019and2018.Share-based compensation cost after tax was$24 million,$23 millionand$17 millionfor the years endedDecember 31, 2019,2018and2017, respectively. The related income tax benefit recognized was$6 million,$5 million,and$9 millionfor the years endedDecember 31, 2019,2018and2017, respectively. Options exercised during the years endedDecember 31, 2019,2018and2017, had intrinsic value of$26 million,$15 millionand$19 million, respectively. Intrinsic value is the market price less the exercise price. Options vested during the years endedDecember 31, 2019,2018and2017, had total intrinsic value of$23 million,$6 millionand$8 million, respectively.As ofDecember 31, 2019, we had$34 millionof unrecognized total compensation cost related to nonvested stock options and restricted stock unit awards. That cost will be recognized over a weighted-average period of1.8years.Stock OptionsStock options are granted to associates at an exercise price equal to the fair value as determined by the average high and low sales price reported on the Nasdaq Global Select Market for the grant date and are exercisable over10-year periods. The stock options generally vest ratably over athree-year period. In determining the share-based compensation amounts, we estimate the fair value of each option granted on the date of grant using a binomial option-pricing model. We make the following assumptions to develop the binomial option-pricing model as follows:•Weighted-average expected term is based on historical experience of similar awards with consideration for current exercise trends.•Expected volatility is based on our stock price over a historical period that approximates the expected term.•Dividend yield is determined by dividing the annualized per share dividend by the stock price on the date of grant.•Risk-free rates are the implied yield currently available on zero-coupon U.S. Treasury issues with a remaining term approximating the expected term.The following weighted average assumptions were used in determining fair value for option grants issued:201920182017Weighted-average expected term7-8 years7-8 years8 yearsExpected volatility14.49-15.39%15.04-15.10%16.95%Dividend yield2.61%2.98%2.83%Risk-free rates2.62-2.64%2.77-2.83%2.33%Weighted-average fair value of options granted during the period$11.73$9.87$10.79 
 
  
 
 Below is a summary of option information for the year2019:(Dollars in millions, except exercise price. Shares in thousands)SharesWeighted-averageexercise priceAggregateintrinsicvalueWeighted-averageremaining contractuallifeOutstanding option shares at January 1, 20193,274$56.08Granted70485.67Exercised(493)42.57Forfeited or expired(48)63.46Outstanding option shares at December 31, 20193,43763.99$1416.13 yearsOptions exercisable at end of period2,139$55.25$1074.71 yearsCash received from the exercise of options was$11 million,$9 millionand$13 millionfor the years endedDecember 31, 2019,2018and2017, respectively. We acquired103,237,69,649and96,030shares totaling$9 million,$5 millionand$7 million, respectively, from associates in consideration for option exercises during2019,2018and2017. The weighted-average remaining contractual life for options expected to vest as ofDecember 31, 2019, was8.48 years.Under all active shareholder approved plans, a total of17.3 millionshares were authorized to be granted. AtDecember 31, 2019,8.2 millionshares remained available for future issuance under the plans. During2019, we granted15,102shares of common stock to our directors for2018board service fees.Restricted Stock UnitsService-based restricted stock units granted to associates are valued at fair value of the shares on the date of grant less the present value of the dividends that holders of restricted stock units do not receive on the shares underlying the restricted stock units during the vesting period. Service-based restricted stock units generally cliff vestthree yearsafter the date of grant. We also grant restricted stock units which vest on athreeyear ratable vesting schedule. Service-based restricted stock units vested during the year had an intrinsic value of$25 million,$24 millionand$23 millionfor the years endedDecember 31, 2019,2018and2017, respectively.We have performance-based awards that vest on the first day of March after athree-calendar-year performance period. These awards vest according to the level ofthree-year total shareholder return achieved compared with a peer group over athree-year performance period with payouts ranging from0%to200%for awards granted in2019,2018and2017.Three-year total shareholder return is calculated by using annualized total return of a stock to an investor due to capital gain appreciation plus reinvestment of all dividends.For the three-year performance period endedDecember 31, 2019, our total shareholder return exceededfiveof ourninepeers. We expect payout of these shares at the target level to occur in March of 2020. During2019, we issued20,549shares of performance-based restricted stock units at the threshold-level performance hurdle for the three-year performance period ended December 31, 2018, as our total shareholder return exceededfourofninepeers in our 2016 peer group. We issued80,666shares of performance-based restricted stock units during2018at the target-level performance hurdle for thethree-year performance period ended December 31, 2017, as our total shareholder return exceededfiveofninepeers in our 2015 peer group. Performance-based awards vested during the year had an intrinsic value of$2 million,$6 millionand$7 millionfor the years endedDecember 31, 2019,2018and2017, respectively. 
 
  
 
 These performance-based awards are valued using a Monte-Carlo valuation on the date of grant, which uses a  risk-neutral framework to model future stock price movements based upon the risk-free rate of return, the volatility of each peer and the pairwise correlations of each peer being modeled. Compensation cost is recognized regardless of whether the market-based performance objective has been satisfied. We make assumptions to develop the Monte-Carlo model as follows:•Correlation coefficients are based upon the stock price data used to calculate the historical volatilities. The correlation coefficients are used to model the way the price of each entity's stock tends to move in relation to each other.•Expected volatility is based on each company's historical volatility using daily stock price observations with the period commensurate with the performance measurement period.•Dividend yield has been modeled assuming dividends are reinvested in additional shares of the issuing entity on the ex-dividend date during the performance period.•Risk-free rates are equal to the yield, as of the measurement date, of the zero-coupon U.S. Treasury bill that is commensurate with the performance measurement period.The following assumptions were used in determining fair value for performance-based grants issued:201920182017Expected term2.86 years2.89 years2.89 yearsExpected volatility15.10-25.00%16.01-26.32%15.75-28.35%Dividend yield2.61%2.81%2.83%Risk-free rates2.48%2.22%1.44%Below is a summary of service-based and performance-based share information, assuming a target payout for performance-based shares, for the year2019:(Shares in thousands)Service-basedsharesWeighted-average grantdate fair valuePerformance-basedsharesWeighted-average grantdate fair valueNonvested at January 1, 2019813$62.31182$59.83Granted28879.575287.97Vested(293)57.40(21)70.68Forfeited or canceled(25)69.43(48)70.68Nonvested at December 31, 201978370.2716564.23 
 
 
  
 
 
 Segment Information
 We operate primarily intwoindustries, property casualty insurance and life insurance. Our chief operating decision maker regularly reviews our reporting segments to make decisions about allocating resources and assessing performance. Our reporting segments are:•Commercial lines insurance•Personal lines insurance•Excess and surplus lines insurance•Life insurance•InvestmentsWe report as Other the noninvestment operations of the parent company and its noninsurer subsidiary, CFC Investment Company. We also report as Other the underwriting results of Cincinnati Re, our reinsurance assumed operation, and Cincinnati Global, our London-based global specialty underwriter, which was acquired on February 28, 2019.Revenues come primarily from unaffiliated customers:•Allfourinsurance segments record revenues from insurance premiums earned.•Fee revenues for the commercial, personal and excess and surplus insurance segments primarily represent installment fees. Fee revenues for the life insurance segment represent separate account investment management fees.•Our investments’ revenues consist of pretax net investment income and investment gains and losses.•Other revenues are primarily finance income and earned premiums of Cincinnati Re and Cincinnati Global.Income or loss before income taxes for each segment is reported based on the nature of that business area’s operations:•Income before income taxes for the insurance segments is defined as underwriting profit or loss.◦For commercial lines, personal lines and excess and surplus lines insurance segments, we calculate underwriting profit or loss as premiums earned and fee revenue minus loss and loss expenses and underwriting expenses incurred.◦For the life insurance segment, we calculate underwriting profit or loss as premiums earned and fee revenue, minus contract holders’ benefits and expenses incurred, plus investment interest credited to contract holders.•Income before income taxes for the investments segment is net investment income plus investment gains and losses for investments of the entire company, minus investment interest credited to contract holders of the life insurance segment.•Loss before income taxes for the Other category is primarily due to interest expense from debt of the parent company, operating expenses of our headquarters and premiums earned minus loss and loss expenses and underwriting expenses of Cincinnati Re and Cincinnati Global.Identifiable assets are used by each segment in its operations. We do not separately report the identifiable assets for the commercial, personal or excess and surplus lines segments because we do not use that measure to analyze the segments. We include all investment assets, regardless of ownership, in the investments segment. 
 
  
 
 Segment information is summarized in the following table:(Dollars in millions)Years ended December 31,201920182017Revenues:Commercial lines insuranceCommercial casualty$1,102$1,075$1,072Commercial property958920903Commercial auto707664634Workers' compensation300324335Other commercial252235221Commercial lines insurance premiums3,3193,2183,165Fee revenues555Total commercial lines insurance3,3243,2233,170Personal lines insurancePersonal auto621614582Homeowner607563518Other personal176159141Personal lines insurance premiums1,4041,3361,241Fee revenues455Total personal lines insurance1,4081,3411,246Excess and surplus lines insurance278234209Fee revenues211Total excess and surplus lines insurance280235210Life insurance premiums270250232Fee revenues445Total life insurance274254237InvestmentsInvestment income, net of expenses646619609Investment gains and losses, net1,650(402)148Total investment revenue2,296217757OtherPremiums333132107Other955Total other revenue342137112Total revenues$7,924$5,407$5,732Income (loss) before income taxes:Insurance underwriting resultsCommercial lines insurance$241$151$119Personal lines insurance8(20)(32)Excess and surplus lines insurance536361Life insurance18(1)Investments2,197121664Other(28)(72)(81)Total income before income taxes$2,472$251$730December 31,December 31,Identifiable assets:20192018Property casualty insurance$3,437$3,285Life insurance1,5161,424Investments19,58316,741Other872485Total$25,408$21,935 
 
  
 
 
 Quarterly Supplementary Data
 This table includes unaudited quarterly financial information for the years endedDecember 31, 2019and2018:(Dollars in millions, except per share data)Quarter1st2nd3rd4thFull year2019Revenues$2,159$1,913$1,700$2,152$7,924Income before income taxes8675302947812,472Net income6954282486261,997Net income per common share—basic4.272.621.513.8412.24Net income per common share—diluted4.222.591.493.7912.102018Revenues$1,224$1,558$1,915$710$5,407(Loss) income before income taxes(50)264618(581)251Net (loss) income(31)217553(452)287Net (loss) income per common share—basic(0.19)1.333.40(2.78)1.76Net (loss) income per common share—diluted(0.19)1.323.38(2.78)1.75The sum of the quarterly reported per share amounts may not equal the full year as each is computed independently. Revenues including investment gains and losses, which are integral to our financial results over the long term, may cause this value to fluctuate substantially because we have substantial discretion in the timing of investment sales. Also, applicable accounting standards require us to recognize gains and losses from certain changes in fair values of securities and embedded derivatives without actual realization of those gains and losses. 
 
  
 
 
 Acquisition
 On February 28, 2019 (closing date or acquisition date), pursuant to the agreement (the SPA) for the sale and purchase of the entire issued share capital of MSP Underwriting Limited (MSP), dated October 11, 2018, by and between the company and Münchener Rückversicherungs Gesellschaft AG (Munich Re), the company acquired from Munich Re all of the issued and outstanding share capital of MSP and its subsidiaries, including the Lloyd's managing agent, Beaufort Underwriting Agency Limited for Syndicate 318 (the acquisition). MSP was rebranded as Cincinnati Global effective May 1, 2019, reflecting its new identity as a subsidiary of the company. The acquisition of Cincinnati Global reflects progress toward our long-term objective of diversifying revenue and profitability by expanding our operations geographically and by line of business.As aggregate consideration for the purchase of the share capital of Cincinnati Global and its subsidiaries, the company paid£48 million, or$64 million, in cash to Munich Re at the closing of the acquisition. The amount paid at closing was calculated as the difference between the target net asset value (NAV) set forth in the SPA and the estimated NAV of Cincinnati Global and its subsidiaries at the closing date. On August 1, 2019, the company and Munich Re agreed to an adjusted purchase price of£47 million, or$63 million, reflecting a£1 milliondecrease in the NAV of Cincinnati Global. This agreement represented the final purchase price with no further adjustments to the assets acquired and liabilities assumed.The fair value of the assets acquired, liabilities assumed and the allocation of the final purchase price on the acquisition date have been summarized in the following table:(Dollars in millions)AssetsInvestments and other invested assets$198Cash and cash equivalents64Premiums receivable45Reinsurance recoverable42Other assets23Total assets acquired$372LiabilitiesLoss and loss expense reserves$277Unearned premiums88Other liabilities24Total liabilities assumed$389Fair value of identifiable intangible assets:Syndicate capacity - indefinite lived$31Syndicate broker relationships - definite lived12Value of business acquired - definite lived4Internally developed technology - definite lived3Total fair value of identifiable intangible assets$50Total purchase price paid$63Total assets acquired (including fair value of identifiable intangible assets)422Total liabilities assumed389Fair value of net assets acquired prior to allocation of goodwill33Excess of purchase price paid over fair value of net assets acquired assigned to goodwill$30In connection with the acquisition, the company incurred immaterial transaction related expenses. 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 •information required to be disclosed in the company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and •such information is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosures. 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 Name and Age as ofPrimary Title(s) and Business ResponsibilitiesExecutiveFebruary 25, 2020Since February 2015Officer SinceRoger A. Brown, FSA, MAAA, CLU (48)Senior vice president and chief operating officer of The Cincinnati Life Insurance Company. Responsible for life insurance underwriting and operations. Vice president of Cincinnati Life actuarial department until 2016.2016Teresa C. Cracas, Esq. (54)Chief risk officer and senior vice president of The Cincinnati Insurance Company. Responsible for strategic planning and risk management, including oversight of modeling for financial analysis, property casualty reserving and pricing, as well as reinsurance assumed operations and the activities of Cincinnati Global Underwriting Ltd., a London-based, global specialty underwriter for Lloyd's Syndicate 318.2011Donald J. Doyle, Jr., CPCU, AIM (53)Senior vice president of The Cincinnati Insurance Company. Responsible for excess and surplus lines underwriting and operations.2008Sean M. Givler, CIC, CRM (44)Senior vice president of The Cincinnati Insurance Company. Responsible for standard market commercial lines underwriting and operations, including management liability and surety insurance, machinery and equipment insurance, loss control and premium audit. Until 2019, responsible for sales and marketing, including management of field underwriters and independent agency relationships. Sales manager for Alabama, Montana, Pennsylvania, Tennessee and Texas from 2011 to 2016.2017Theresa A. Hoffer (58)Senior vice president and treasurer of The Cincinnati Insurance Company since 2016. Responsible for corporate accounting and SEC reporting operations. Vice president and treasurer in corporate accounting until 2016.2017Martin F. Hollenbeck, CFA, CPCU (60)President and chief operating officer of CFC Investment Company, a commercial lease and finance subsidiary. Chief investment officer and senior vice president, assistant secretary and assistant treasurer of Cincinnati Financial Corporation. Chief investment officer and senior vice president of The Cincinnati Insurance Company. Responsible for all investment operations.2008John S. Kellington (58)Chief information officer and senior vice president of The Cincinnati Insurance Company. Responsible for enterprise strategic technology and oversight of all technology activities.2010
 
 
  
 
 Name and Age as ofPrimary Title(s) and Business ResponsibilitiesExecutiveFebruary 25, 2020Since February 2015Officer SinceLisa A. Love, Esq. (60)Senior vice president, general counsel and corporate secretary of Cincinnati Financial Corporation and The Cincinnati Insurance Company. Responsible for corporate legal, governance and compliance activities, including oversight of regulatory and compliance, shareholder services, corporate communications, government relations, litigation and contract administration.2011Martin J. Mullen, CPCU (64)Chief claims officer and senior vice president of The Cincinnati Insurance Company. Responsible for oversight of all headquarters and field claims operations, including special investigations and claims administration.2008Michael J. Sewell, CPA (56)Chief financial officer, principal accounting officer and senior vice president of Cincinnati Financial Corporation and The Cincinnati Insurance Company, and treasurer of Cincinnati Financial Corporation. Responsible for oversight of all accounting, finance, financial reporting, purchasing, investor relations, administrative services and facilities maintenance and security.2011Stephen M. Spray (53)Chief insurance officer and senior vice president of The Cincinnati Insurance Company. Responsible for executive oversight of commercial and personal standard market and excess and surplus lines property and casualty insurance sales, marketing, underwriting, related field services, relationships with independent agents and ceded reinsurance programs. Until 2019, responsible for commercial lines underwriting and operations. Responsible for sales and marketing, including management of field underwriters and independent agency relationships until 2016.2012William H. Van Den Heuvel (53)Senior vice president of The Cincinnati Insurance Company. Responsible for all aspects of personal lines operations, including underwriting, insurance regulatory filings, product management and risk management.2014
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 200
 
 
 
 
 
 
 
 
 
 
  
 
 Schedule ICincinnati Financial Corporation and SubsidiariesSummary of Investments - Other Than Investments in Related Parties(Dollars in millions)At December 31, 2019Type of investmentCost oramortized costFairvalueBalance sheetFixed maturities:States, municipalities and political subdivisions:The Cincinnati Insurance Company$3,320$3,515$3,515The Cincinnati Casualty Company199210210The Cincinnati Indemnity Company464848The Cincinnati Life Insurance Company348360360The Cincinnati Specialty Underwriters Insurance Company525556556CSU Producer Resources Inc.111Cincinnati Financial Corporation383838Total4,4774,7284,728United States government:The Cincinnati Insurance Company656767The Cincinnati Casualty Company111The Cincinnati Indemnity Company111Cincinnati Global Underwriting Ltd.353535Total102104104Government-sponsored enterprises:The Cincinnati Life Insurance Company122121121Cincinnati Global Underwriting Ltd.555Cincinnati Financial Corporation101010Total137136136Foreign government:The Cincinnati Insurance Company101010Cincinnati Global Underwriting Ltd.181818Total282828All other corporate bonds:The Cincinnati Insurance Company2,9563,0953,095The Cincinnati Casualty Company107112112The Cincinnati Indemnity Company333434The Cincinnati Specialty Underwriters Insurance Company175186186The Cincinnati Life Insurance Company3,0333,2153,215CSU Producer Resources Inc.111Cincinnati Global Underwriting Ltd.585858Cincinnati Financial Corporation111Total6,3646,7026,702Total fixed maturities$11,108$11,698$11,698 
 
  
 
 Schedule I (continued)Cincinnati Financial Corporation and SubsidiariesSummary of Investments - Other Than Investments in Related Parties(Dollars in millions)At December 31, 2019Type of investmentCost oramortized costFairvalueBalance sheetEquity securities:Common equities:The Cincinnati Insurance Company$1,763$4,063$4,063The Cincinnati Casualty Company58141141The Cincinnati Indemnity Company173333The Cincinnati Specialty Underwriters Insurance Company90184184CSU Producer Resources Inc.172929Cincinnati Financial Corporation1,4263,0683,068Total3,3717,5187,518Nonredeemable preferred equities:The Cincinnati Insurance Company197218218The Cincinnati Life Insurance Company121515Cincinnati Financial Corporation111Total210234234Total equity securities$3,581$7,752$7,752Other invested assets:Policy loans:The Cincinnati Life Insurance Company$32—$32Deposits at Lloyd's:Cincinnati Global Underwriting Ltd.97—97Cincinnati Financial Corporation67—67Private equity:The Cincinnati Insurance Company (1)37—37The Cincinnati Life Insurance Company (1)3—3Cincinnati Financial Corporation (1)31—31Real estate:The Cincinnati Insurance Company (1)8—8The Cincinnati Life Insurance Company (1)16—16Cincinnati Financial Corporation (1)5—5Total other invested assets$296—$296Total investments$14,985—$19,746 
 
 
 
  
 
 Schedule IICincinnati Financial Corporation (parent company only)Condensed Balance Sheets(Dollars in millions)At December 31,20192018AssetsInvestmentsFixed maturities, at fair value (amortized cost: 2019—$49; 2018—$35)$49$35Equity securities, at fair value (cost: 2019—$1,427; 2018—$1,282)3,0692,234Other invested assets10336Total investments3,2212,305Cash and cash equivalents197209Equity in net assets of subsidiaries7,4246,152Investment income receivable76Land, building and equipment, net, for company use (accumulated depreciation:    2019—$129; 2018—$121)141137Income tax receivable21Other assets6148Due from subsidiaries107106Total assets$11,160$8,964LiabilitiesDividends declared but unpaid$91$86Deferred federal income tax345198Long-term debt788788Other liabilities7259Total liabilities1,2961,131Shareholders' EquityCommon stock397397Paid-in capital1,3061,281Retained earnings9,2577,625Accumulated other comprehensive income44822Treasury stock at cost(1,544)(1,492)Total shareholders' equity9,8647,833Total liabilities and shareholders' equity$11,160$8,964This condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes included in Part II, Item 8. 
 
  
 
 Schedule II (continued)Cincinnati Financial Corporation (parent company only)Condensed Statements of Income and Comprehensive Income(Dollars in millions)Years ended December 31,201920182017RevenuesInvestment income, net of expenses$75$65$62Investment gains and losses, net728(108)28Other revenue151515Total revenues818(28)105ExpensesInterest expense525252Other expenses373128Total expenses898380Income (Loss) Before Income Taxes and Earnings of Subsidiaries729(111)25Provision (Benefit) for Income Taxes146(31)(161)Net Income (Loss) Before Earnings of Subsidiaries583(80)186Increase in equity of subsidiaries1,414367859Net Income$1,997$287$1,045Other Comprehensive Income (Loss), Net of TaxesChange in unrealized gain (loss) on securities—(2)235Amortization of pension actuarial gains (losses) and prior service costs5(3)7Other Comprehensive Income (Loss), Net of Taxes Before Other Comprehensive Incomeof Subsidiaries5(5)242Other comprehensive income (loss) of subsidiaries421(258)361Other comprehensive income (loss)426(263)603Comprehensive Income$2,423$24$1,648This condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes included in Part II, Item 8. 
 
  
 
 Schedule II (continued)Cincinnati Financial Corporation (parent company only)Condensed Statements of Cash Flows(Dollars in millions)Years ended December 31,201920182017Cash Flows From Operating ActivitiesNet income$1,997$287$1,045Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization1077Investment gains and losses, net(720)114(28)Dividends from subsidiaries625500465Changes in:Increase in equity of subsidiaries(1,414)(367)(859)Investment income receivable(1)2—Current federal income taxes(1)14(5)Deferred income tax146(35)(150)Other assets4(17)(20)Other liabilities4315Intercompany receivable for operations201913Net cash provided by operating activities670527483Cash Flows From Investing ActivitiesSale of fixed maturities31—Call or maturity of fixed maturities211914Sale of equity securities122131230Purchase of fixed maturities(39)(17)(2)Purchase of equity securities(237)(177)(293)Investment in buildings and equipment(13)(12)(3)Cash paid for acquisition(63)——Change in other invested assets, net(67)(11)—Net cash used in investing activities(273)(66)(54)Cash Flows From Financing ActivitiesPayment of cash dividends to shareholders(355)(336)(400)Shares acquired - share repurchase authorization(67)(125)(92)Proceeds from stock options exercised11913Other211Net cash used in financing activities(409)(451)(478)Net change in cash and cash equivalents(12)10(49)Cash and cash equivalents at beginning of year209199248Cash and cash equivalents at end of year$197$209$199 This condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes included in Part II, Item 8.
 
 
 
  
 
 Schedule IIICincinnati Financial Corporation and SubsidiariesSupplementary Insurance Information(Dollars in millions)Years ended December 31,201920182017Deferred policy acquisition costs:Commercial lines insurance$311$291$284Personal lines insurance130126121Excess and surplus lines insurance252117Other462616Total property casualty insurance512464438Life insurance262274232Total$774$738$670Gross future policy benefits, losses, claims and expense losses:Commercial lines insurance$4,569$4,466$4,236Personal lines insurance687679587Excess and surplus lines insurance351298264Other481203132Total property casualty insurance6,0885,6465,219Life insurance2,8592,8022,753Total (1)$8,947$8,448$7,972Gross unearned premiums:Commercial lines insurance$1,665$1,576$1,548Personal lines insurance757725683Excess and surplus lines insurance152123105Other2139167Total property casualty insurance2,7872,5152,403Life insurance111Total (1)$2,788$2,516$2,404Other policy claims and benefits payable:Commercial lines insurance$—$—$—Personal lines insurance———Excess and surplus lines insurance———Other———Total property casualty insurance———Life insurance353830Total (1)$35$38$30Earned premiums:Commercial lines insurance$3,319$3,218$3,165Personal lines insurance1,4041,3361,241Excess and surplus lines insurance278234209Other333132107Total property casualty insurance5,3344,9204,722Life insurance270250232Total$5,604$5,170$4,954 
 
  
 
 Schedule III (continued)Cincinnati Financial Corporation and SubsidiariesSupplementary Insurance Information(Dollars in millions)Years ended December 31,201920182017Investment income, net of expenses:Commercial lines insurance$—$—$—Personal lines insurance———Excess and surplus lines insurance———Other———Total property casualty insurance (2)419401392Life insurance152153155Total$571$554$547Benefits, claims losses and settlement expenses:Commercial lines insurance$2,030$2,049$2,042Personal lines insurance985972918Excess and surplus lines insurance14210486Other1959892Total property casualty insurance3,3523,2233,138Life insurance286267252Total$3,638$3,490$3,390Amortization of deferred policy acquisition costs:Commercial lines insurance$631$608$590Personal lines insurance251242225Excess and surplus lines insurance473935Other571817Total property casualty insurance986907867Life insurance483946Total (3)$1,034$946$913Underwriting, acquisition and insurance expenses:Commercial lines insurance$422$415$419Personal lines insurance164147135Excess and surplus lines insurance382928Other422418Total property casualty insurance666615600Life insurance383633Total (3)$704$651$633Net written premiums:Commercial lines insurance$3,410$3,245$3,202Personal lines insurance1,4351,3781,294Excess and surplus lines insurance303249219Other368158125Total property casualty insurance5,5165,0304,840Accident health insurance233Total$5,518$5,033$4,843Notes to Schedule III:(1) The sum of gross future policy benefits, losses, claims and expense losses, gross unearned premium and other policy claims and benefits payable is equal to the sum of Loss and loss expense reserves, Life policy reserves and investment contract reserves and Unearned premiums reported in the company’s consolidated balance sheets.(2) This segment information is not regularly allocated to segments and reviewed by company management in making decisions about resources to be allocated to the segments or to assess their performance.(3) The sum of amortization of deferred policy acquisition costs and other underwriting and insurance expenses is equal to Underwriting, acquisition and insurance expenses in the consolidated statements of income. 
 
 
  
 
 Schedule IVCincinnati Financial Corporation and SubsidiariesReinsurance(Dollars in millions)Years ended December 31,201920182017Gross amounts:Life insurance in force$108,130$104,726$99,888Earned premiumsCommercial lines insurance$3,421$3,314$3,258Personal lines insurance1,4461,3721,275Excess and surplus lines insurance292245219Other181——Total property casualty insurance5,3404,9314,752Life insurance341320300Total$5,681$5,251$5,052Ceded amounts to other companies:Life insurance in force$38,146$38,584$38,711Earned premiumsCommercial lines insurance$109$104$99Personal lines insurance433735Excess and surplus lines insurance141110Other39818Total property casualty insurance205160162Life insurance717068Total$276$230$230Assumed amounts from other companies:Life insurance in force$—$—$—Earned premiumsCommercial lines insurance$7$8$6Personal lines insurance111Excess and surplus lines insurance———Other191140125Total property casualty insurance199149132Life insurance———Total$199$149$132Net amounts:Life insurance in force$69,984$66,142$61,177Earned premiumsCommercial lines insurance$3,319$3,218$3,165Personal lines insurance1,4041,3361,241Excess and surplus lines insurance278234209Other333132107Total property casualty insurance5,3344,9204,722Life insurance270250232Total$5,604$5,170$4,954Percentage of amounts assumed to net:Life insurance in force—%—%—%Earned premiumsCommercial lines insurance0.2%0.3%0.2%Personal lines insurance0.10.10.1Excess and surplus lines insurance———Other57.4106.1116.1Total property casualty insurance3.73.02.8Life insurance———Total3.62.92.7 
 
 
  
 
 Schedule VCincinnati Financial Corporation and SubsidiariesValuation and Qualifying Accounts(Dollars in millions)At December 31,201920182017Allowance for doubtful receivables:Beginning balance, January 1$6$6$5Additions charged to costs and expenses866Deductions(6)(6)(5)Ending balance, December 31$8$6$6Deferred tax valuation allowance:Beginning balance, January 1$—$—$—Additions charged to costs and expenses55——Deductions(14)——Ending balance, December 3141——Total valuation and qualifying accounts$49$6$6 
 
 
  
 
 Schedule VICincinnati Financial Corporation and SubsidiariesSupplementary Information Concerning Property Casualty Insurance Operations(Dollars in millions)Years ended December 31,201920182017Deferred policy acquisition costs:Commercial lines insurance$311$291$284Personal lines insurance130126121Excess and surplus lines insurance252117Other462616Total$512$464$438Reserves for unpaid claims and claim adjustment expenses:Commercial lines insurance$4,569$4,466$4,236Personal lines insurance687679587Excess and surplus lines insurance351298264Other481203132Total$6,088$5,646$5,219Reserve discount deducted$—$—$—Gross unearned premiums:Commercial lines insurance$1,665$1,576$1,548Personal lines insurance757725683Excess and surplus lines insurance152123105Other2139167Total$2,787$2,515$2,403Earned premiums:Commercial lines insurance$3,319$3,218$3,165Personal lines insurance1,4041,3361,241Excess and surplus lines insurance278234209Other333132107Total$5,334$4,920$4,722Investment income, net of expenses:Commercial lines insurance$—$—$—Personal lines insurance———Excess and surplus lines insurance———Other———Total (1)$419$401$392Note to Schedule VI:(1) This segment information is not regularly allocated to segments and not reviewed by company management in making decisions about resources to be allocated to the segments or to assess their performance. 
 
  
 
 Schedule VI (continued)Cincinnati Financial Corporation and SubsidiariesSupplementary Information Concerning Property Casualty Insurance Operations(Dollars in millions)Years ended December 31,201920182017Loss and loss expenses incurred related to current accident year:Commercial lines insurance$2,222$2,206$2,115Personal lines insurance1,012960932Excess and surplus lines insurance153128115Other2139695Total$3,600$3,390$3,257Loss and loss expenses incurred related to prior accident years:Commercial lines insurance$(192)$(157)$(73)Personal lines insurance(27)13(14)Excess and surplus lines insurance(11)(24)(29)Other(18)1(3)Total$(248)$(167)$(119)Amortization of deferred policy acquisition costs:Commercial lines insurance$631$608$590Personal lines insurance251242225Excess and surplus lines insurance473935Other571817Total$986$907$867Paid loss and loss expenses:Commercial lines insurance$2,023$1,816$1,866Personal lines insurance966913898Excess and surplus lines insurance907461Other1814418Total$3,260$2,847$2,843Net written premiums:Commercial lines insurance$3,410$3,245$3,202Personal lines insurance1,4351,3781,294Excess and surplus lines insurance303249219Other368158125Total$5,516$5,030$4,840 
 
 
 
 
  
 
 
 
 Exhibit No.Exhibit Description3.1Amended and Restated Articles of Incorporation of Cincinnati Financial Corporation (incorporated by reference to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, Exhibit 3.1)3.2Amended and Restated Code of Regulations of Cincinnati Financial Corporation, as of May 5, 2018 (incorporated by reference to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, Exhibit 3.2)4.1Indenture with The Bank of New York Trust Company (incorporated by reference to the company’s Current Report on Form 8-K dated November 2, 2004, filed with respect to the issuance of the company’s 6.125% Senior Notes due November 1, 2034)4.2Supplemental Indenture with The Bank of New York Trust Company (incorporated by reference to the company’s Current Report on Form 8-K dated November 2, 2004, filed with respect to the issuance of the company’s 6.125% Senior Notes due November 1, 2034)4.3Second Supplemental Indenture with The Bank of New York Trust Company (incorporated by reference to the company’s Current Report on Form 8-K dated May 9, 2005, filed with respect to the completion of the company’s exchange offer and rescission offer for its 6.90% senior debentures due 2028)4.4Form of 6.125% Exchange Note Due 2034 (included in Exhibit 4.2)4.5Form of 6.92% Debentures Due 2028 (included in Exhibit 4.3)4.6Indenture with the First National Bank of Chicago (subsequently assigned to The Bank of New York Trust Company) (incorporated by reference to the company’s registration statement on Form S-3 filed on May 20, 1998 (File No. 333-51677))4.7Form of 6.90% Debentures Due 2028 (included in Exhibit 4.6)4.8Description of Registered Securities10.1Cincinnati Financial Corporation Nonemployee Director Stock Plan of 2018 (incorporated by reference to the company’s definitive Proxy Statement dated March 21, 2018)10.2Cincinnati Financial Corporation Stock Option Plan No. VII (incorporated by reference to the company’s definitive Proxy Statement dated March 8, 2002) (File No. 000-04604)10.3Cincinnati Financial Corporation Annual Incentive Compensation Plan of 2009, as amended January 31, 2014 (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated February 3, 2014)10.4Cincinnati Financial Corporation 2006 Stock Compensation Plan (incorporated by reference to the company’s definitive Proxy Statement dated March 30, 2006)10.5Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to the company’s definitive Proxy Statement dated March 16, 2012)10.6Cincinnati Financial Corporation 2016 Stock Compensation Plan (incorporated by reference to the company’s Definitive Proxy Statement dated March 16, 2016, Appendix B)10.7First Amendment of Cincinnati Financial Corporation 2016 Stock Compensation Plan (incorporated by reference to Exhibit 99.1 filed with the Company’s current report on Form 8-K dated April 11, 2016)10.8Amended and Restated Cincinnati Financial Corporation Supplemental Retirement Plan dated January 1, 2009 (incorporated by reference to Exhibit 10.7 filed with the company’s Annual Report on Form 10-K dated February 27, 2013)10.9Form of Incentive Stock Option Agreement for Stock Option Plan VII (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated October 20, 2006)10.10Form of Nonqualified Stock Option Agreement for Stock Option Plan VII (incorporated by reference to Exhibit 10.2 filed with the company’s Current Report on Form 8-K dated October 20, 2006)10.11Form of Incentive Stock Option Agreement for the 2006 Stock Compensation Plan (incorporated by reference to Exhibit 10.3 filed with the company’s Current Report on Form 8-K dated October 20, 2006)10.12Form of Nonqualified Stock Option Agreement for the 2006 Stock Compensation Plan (incorporated by reference to Exhibit 10.4 filed with the company’s Current Report on Form 8-K dated October 20, 2006)10.13Form of Incentive Stock Option Agreement for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated February 21, 2013)
 
 
  
 
 Exhibit No.Exhibit Description10.14Form of Nonqualified Stock Option Agreement for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.2 filed with the company’s Current Report on Form 8-K dated February 21, 2013)10.15Form of Restricted Stock Unit Agreement (service based) for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.3 filed with the company’s Current Report on Form 8-K dated February 21, 2013)10.16Form of Restricted Stock Unit Agreement (service based/ratable) for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated February 13, 2015)10.17Form of Restricted Stock Unit Agreement (performance based) for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.4 filed with the company’s Current Report on Form 8-K dated February 21, 2013)10.18Form of Incentive Compensation Agreement for the Cincinnati Financial Corporation Incentive Compensation Plan of 2009 (as amended January 31, 2014) (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.19Form of Incentive Stock Option Agreement for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.2 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.20Form of Nonqualified Stock Option Agreement for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.3 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.21Form of Restricted Stock Unit Agreement (service based/cliff) for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.4 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.22Form of Restricted Stock Unit Agreement (service based/ratable) for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.5 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.23Form of Restricted Stock Unit Agreement (performance-based) for the Cincinnati Financial Corporation 2012 Stock Compensation Plan (incorporated by reference to Exhibit 10.6 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.24Form of Incentive Stock Option Agreement for the Cincinnati Financial Corporation 2016 Stock Compensation Plan (incorporated by reference to Exhibit 10.7 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.25Form of Nonqualified Stock Option Agreement for the Cincinnati Financial Corporation 2016 Stock Compensation Plan (incorporated by reference to Exhibit 10.8 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.26Form of Restricted Stock Unit Agreement (service based/cliff) for the Cincinnati Financial Corporation 2016 Stock Compensation Plan (incorporated by reference to Exhibit 10.9 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.27Form of Restricted Stock Unit Agreement (service based/ratable) for the Cincinnati Financial Corporation 2016 Stock Compensation Plan (incorporated by reference to Exhibit 10.10 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.28Form of Restricted Stock Unit Agreement (performance based) for the Cincinnati Financial Corporation 2016 Stock Compensation Plan (incorporated by reference to Exhibit 10.11 filed with the company’s Current Report on Form 8-K dated January 30, 2017)10.29Amended and Restated Cincinnati Financial Corporation Top Hat Savings Plan dated January 1, 2018 (incorporated by reference to Exhibit 10.31 filed with the company's Form 10-K dated February 23, 2018)10.30Cincinnati Financial Corporation Executive Deferred Compensation Agreement by and between the Cincinnati Financial Corporation and Michael J. Sewell, dated as of October 25, 2011 (incorporated by reference to Exhibit 10.2 filed with the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011)10.31Amended and Restated Credit Agreement by and among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A. as Administrative Agent, PNC Capital Markets LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A., as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A., as Documentation Agents, dated May 13, 2014 (incorporated by reference to the company’s Current Report on Form 8-K dated May 13, 2014, Exhibit 10.1)
 
 
  
 
 Exhibit No.Exhibit Description10.32First Amendment of the Amended and Restated Credit Agreement by and among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A. as Administrative Agent, PNC Capital Markets LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A., as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A., as Documentation Agents, dated February 8, 2016 (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated February 8, 2016)10.33Second Amendment of the Amended and Restated Credit Agreement by and among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A., as Administrative Agent, PNC Capital Markets, LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A. as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A. as Documentation Agents, dated March 31, 2016 (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated April 4, 2016)10.34Third Amendment of the Amended and Restated Credit Agreement by and among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A., as Administrative Agent, PNC Capital Markets, LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A. as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A. as Documentation Agents, dated February 4, 2019 (incorporated by reference to Exhibit 10.1 filed with the company's Current Report on Form 8-K dated February 6, 2019)10.35Fourth Amendment of the Amended and Restated Credit Agreement by and among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A., as Administrative Agent, PNC Capital Markets, LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A. as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A. as Documentation Agents, dated February 26, 2019 (incorporated by reference to Exhibit 10.6 filed with the company’s Current Report on Form 8-K dated February 28, 2019)10.36Limited Consent to Credit Agreement, dated December 6, 2019, among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A., Fifth Third Bank, N.A., The Huntington National Bank, U.S. Bank, N.A., and Branch Banking and Trust Company (incorporated by reference to Exhibit 10.6 filed with the company’s Current Report on Form 8-K, dated December 6, 2019)10.37Reimbursement Agreement for Letters of Credit by and between Bank of Nova Scotia and The Cincinnati Insurance Company, dated October 15, 2018 (incorporated by reference to Exhibit 10.1 filed with the company's Current Report on Form 8-K dated October 17, 2018)10.38Letter of Credit Facility Agreement by and between Cincinnati Financial Corporation, as Borrower, and The Bank of Nova Scotia, as Bank, dated February 25, 2019 (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated February 28, 2019)10.39Amendment Letter No. 1 to the Letter of Credit Facility Agreement, dated November 4, 2019 (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K, dated November 5, 2019)11Statement re: Computation of per share earnings for the years ended December 31, 2019, 2018, and 2017, contained in Part II, Item 8, Note 12, to the Consolidated Financial Statements14Cincinnati Financial Corporation Code of Ethics for Senior Financial Officers (incorporated by reference to the company’s definitive Proxy Statement dated March 18, 2004 (File No. 000-04604))21Cincinnati Financial Corporation subsidiaries contained in Part I, Item 1, of this report23Consent of Independent Registered Public Accounting Firm31ACertification pursuant to Section 302 of the Sarbanes Oxley Act of 2002 – Chief Executive Officer31BCertification pursuant to Section 302 of the Sarbanes Oxley Act of 2002 – Chief Financial Officer32Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002101.INSThe instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 SignatureTitleDate/S/ Kenneth W. StecherChairman of the BoardFebruary 25, 2020Kenneth W. Stecher/S/ Steven J. JohnstonPresident, Chief Executive Officer and DirectorFebruary 25, 2020Steven J. Johnston/S/ Michael J. SewellChief Financial Officer, Senior Vice President and TreasurerFebruary 25, 2020Michael J. Sewell/S/ Thomas J. AaronDirectorFebruary 25, 2020Thomas J. Aaron/S/ William F. BahlDirectorFebruary 25, 2020William F. Bahl/S/ Gregory T. BierDirectorFebruary 25, 2020Gregory T. Bier/S/ Dirk J. DebbinkDirectorFebruary 25, 2020Dirk J. Debbink/S/ Linda W. Clement-HolmesDirectorFebruary 25, 2020Linda W. Clement-Holmes/S/ Kenneth C. LichtendahlDirectorFebruary 25, 2020Kenneth C. Lichtendahl/S/ W. Rodney McMullenDirectorFebruary 25, 2020W. Rodney McMullen/S/ David P. OsbornDirectorFebruary 25, 2020David P. Osborn/S/ Jill P. Meyer PrattDirectorFebruary 25, 2020Jill P. Meyer Pratt/S/ Gretchen W. PriceDirectorFebruary 25, 2020Gretchen W. Price/S/ Thomas R. SchiffDirectorFebruary 25, 2020Thomas R. Schiff/S/ Douglas S. SkidmoreDirectorFebruary 25, 2020Douglas S. Skidmore/S/ John F. Steele, Jr.DirectorFebruary 25, 2020John F. Steele, Jr./S/ Larry R. WebbDirectorFebruary 25, 2020Larry R. Webb