CINCINNATI FINANCIAL CORPCINF

CINCINNATI FINANCIAL CORP Income Taxes Disclosure

10-KFiled Feb 23, 20265 min read
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,
20252024
Deferred tax assets:  
Unearned premiums$210 $193 
Loss and loss expense reserves168 141 
Net operating loss on international earnings13 19 
Foreign tax credits34 23 
Other62 80 
Total gross deferred tax assets487 456 
Deferred tax liabilities:  
Investment gains and other, net 1,783 1,434 
Deferred acquisition costs229 212 
Life policy reserves86 96 
Deferred international earnings77 56 
Investments56 55 
Other89 79 
Total gross deferred tax liabilities2,320 1,932 
Net deferred income tax liability$1,833 $1,476 
 
Deferred 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 assets on our U.S. domestic operations will be realized. As a result, we have no valuation allowance at December 31, 2025 and 2024, for our U.S. domestic operations.

For financial reporting purposes, income before income taxes includes the following components:
(Dollars in millions)For the years ended December 31,
202520242023
United States$2,890 $2,766 $2,195 
International90 92 81 
Total income before income taxes$2,980 $2,858 $2,276 
The provision for income taxes consists of:
(Dollars in millions)For the years ended December 31,
202520242023
Provision for income taxes:
Current – United States$296 $445 $209 
            International8 4 1 
Total current304 449 210 
Deferred – United States271 101 216 
                     International12 16 7 
Total deferred283 117 223 
Total provision for income taxes$587 $566 $433 

The differences between the 21% statutory federal income tax rate and our effective income tax rate were as follows:
(Dollars in millions)Years ended December 31,
202520242023
Tax at statutory rate:$626 21.0 %$600 21.0 %$478 21.0 %
Increase (decrease) resulting from:     
Nontaxable or nondeductible items
Tax-exempt income from municipal bonds(23)(0.8)(21)(0.7)(21)(0.9)
Dividend received exclusion(21)(0.7)(22)(0.8)(22)(1.0)
Other nontaxable or nondeductible items10 0.3 3 0.1 5 0.2 
Other(5)(0.1)6 0.2 (7)(0.3)
Provision for income taxes$587 19.7 %$566 19.8 %$433 19.0 %
 
The increase (decrease) resulting from Other in the table above includes the effect of state and local income taxes, the majority of which related to two states for the years ended December 31, 2025, 2024 and 2023.

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. We had no operating or capital loss carryforwards in the United States at December 31, 2025 and 2024. As more fully discussed below, Cincinnati Global, has operating loss carryforwards in the United Kingdom.

The One Big Beautiful Bill Act
The One Big Beautiful Bill Act (the “Tax Act”) was enacted on July 4, 2025, and makes permanent several provisions
from the 2017 Tax Cuts and Jobs Act. Applicable impacts of the Tax Act have been reflected in the tax provision
and do not have a material impact on our consolidated financial statements.

Unrecognized Tax Benefits
During the third quarter of 2024, we were notified by the IRS that the audit of tax years ended December 31, 2021 and 2020, had concluded. The statute of limitations closed in September 2025 for these two tax years. The statute of limitations is closed for tax years ended December 31, 2021, and earlier, and is open for tax years ended December 31, 2022, and later.

In addition to our IRS filings, we file income tax returns with immaterial amounts in various state jurisdictions and record these amounts in our provision for income taxes for both current and deferred taxes. The statute of limitations for state income tax purposes has closed for tax years ended December 31, 2021, and earlier.

Cincinnati Global operates in the United Kingdom and as such, is subject to tax in that jurisdiction. The statute of limitations for tax return review by His Majesty’s Revenue and Customs (HMRC) has closed for tax returns with a submission deadline ended December 31, 2023, 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 a $1 million refund in 2025, no refund in 2024 and a $2 million refund in 2023.

Income taxes paid net of refunds received consists of:
(Dollars in millions)For the years ended December 31,
202520242023
Income taxes paid net of refunds received:
United States$211 $386 $135 
International9 9 1 
Total income taxes paid net of refunds received$220 $395 $136 

Cincinnati Global
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 assets of Cincinnati Global will be realized. As a result, we had no valuation allowance at December 31, 2025, 2024 or 2023.

The following is a tabular reconciliation of the total amounts of our Cincinnati Global valuation allowance:
(Dollars in millions)Years ended December 31,
202520242023
Valuation allowance, January 1$— $— $31 
Current year operations— — (31)
Valuation allowance, December 31$— $— $— 

Cincinnati Global had no operating loss carryforwards in the United States and $50 million in the United Kingdom at December 31, 2025, and none in the United States and $78 million in the United Kingdom at December 31, 2024. These Cincinnati Global losses can only be utilized within the Cincinnati Global group in both the United States and in the United Kingdom and cannot offset the income of our domestic operations in the United States.

Historical Timeline

Fiscal YearFiled
2025Feb 23, 2026Showing above
2024Feb 24, 2025
2023Feb 26, 2024
2022Feb 23, 2023
2021Feb 24, 2022
2020Feb 25, 2021
2019Feb 25, 2020
2018Feb 22, 2019
2017Feb 23, 2018
2016Feb 24, 2017
2015Feb 26, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

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