CINCINNATI FINANCIAL CORPCINF
CINCINNATI FINANCIAL CORP Stock Compensation Disclosure
Share-Based Associate Compensation Plans
Four equity 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 of 10 shares. 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 during 2025 and 2024.
Share-based compensation cost after tax was $37 million, $37 million and $32 million for the years ended
December 31, 2025, 2024 and 2023, respectively. The related income tax benefit recognized was $9 million,$9 million and $8 million for the years ended December 31, 2025, 2024 and 2023, respectively. Options exercised during the years ended December 31, 2025, 2024 and 2023, had intrinsic value of $26 million, $32 million and $14 million, respectively. Intrinsic value is the market price less the exercise price. Options vested during the years ended December 31, 2025 and 2024 had total intrinsic value of $18 million and $12 million, respectively. Options vested during the year ended December 31, 2023 had no intrinsic value because the weighted average exercise price was greater than the market price on the reporting date.
As of December 31, 2025, we had $44 million of unrecognized total compensation cost related to nonvested stock options and restricted stock unit awards. That cost will be recognized over a weighted-average period of 1.7 years.
Stock Options
Stock 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 over 10-year periods. The stock options generally vest ratably over a -year period. In determining the share-based compensation amounts, we estimate the fair value of each option granted on the date of grant using the Black Scholes pricing model. We make the following assumptions to develop the Black Scholes 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:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted-average expected term | 8-9 years | 8-9 years | 8-9 years | |||||||||||||||||
| Expected volatility | 29.26-30.51% | 28.94-29.98% | 28.25-29.61% | |||||||||||||||||
| Dividend yield | 2.53% | 2.88% | 2.39% | |||||||||||||||||
| Risk-free rates | 4.57-4.61% | 4.38-4.41% | 3.98-3.99% | |||||||||||||||||
| Weighted-average fair value of options granted during the period | $43.92 | $33.05 | $38.22 | |||||||||||||||||
Below is a summary of option information for the year 2025:
| (Dollars in millions, except exercise price. Shares in thousands) | Shares | Weighted- average exercise price | Aggregate intrinsic value | Weighted-average remaining contractual life | ||||||||||||||||||||||
| Outstanding option shares at January 1, 2025 | 3,504 | $ | 98.54 | |||||||||||||||||||||||
| Granted | 382 | 137.56 | ||||||||||||||||||||||||
| Exercised | (370) | 78.91 | ||||||||||||||||||||||||
| Forfeited or expired | (56) | 96.29 | ||||||||||||||||||||||||
| Outstanding option shares at December 31, 2025 | 3,460 | 104.98 | $ | 202 | 5.22 years | |||||||||||||||||||||
| Options exercisable at end of period | 2,684 | $ | 98.85 | $ | 173 | 4.28 years | ||||||||||||||||||||
Cash received from the exercise of options was $10 million, $10 million and $9 million for the years ended December 31, 2025, 2024 and 2023, respectively. We acquired 125,845, 259,224 and 72,549 shares totaling
$19 million, $33 million and $8 million, respectively, from associates in consideration for option exercises during 2025, 2024 and 2023. The weighted-average remaining contractual life for options expected to vest as of December 31, 2025, was 8.46 years.
Under all active shareholder approved plans, a total of 19.3 million shares were authorized to be granted. At December 31, 2025, 10.5 million shares remained available for future issuance under the plans. During 2025, we granted 11,546 shares of common stock to our directors for 2024 board service fees.
Restricted Stock Units
Service-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 vest three years after the date of grant. We also grant restricted stock units which vest on a year ratable vesting schedule. Service-based restricted stock units vested during the year had an intrinsic value of $23 million, $23 million and $22 million for the years ended December 31, 2025, 2024 and 2023, respectively.
We have performance-based awards that vest on the first day of March after a -calendar-year performance period. These awards vest according to the level of -year total shareholder return achieved compared with a peer group over a -year performance period with payouts ranging from 0% to 200% for awards granted in 2025, 2024 and 2023. -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 ended December 31, 2025, our total shareholder return exceeded eight of our nine peers. We expect 200% payout of these shares to occur in March 2026. During 2025, we issued 20,543 shares of performance-based restricted stock units at threshold-level performance hurdle for the three-year performance period ended December 31, 2024, as our total shareholder return exceeded three of nine peers in our 2022 peer group. During 2024, no shares of performance-based restricted stock units were issued for the three-year performance period ended December 31, 2023, as our total shareholder return exceeded two of eight peers in our 2021 peer group. Performance-based awards vested during the year ended December 31, 2025 had an intrinsic value of $3 million.
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 is based on our current expected annual cash dividend and the valuation date stock price.
•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 remaining performance measurement period.
The following assumptions were used in determining fair value for performance-based grants issued:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Expected term | 2.87 years | 2.86 years | 2.86 years | |||||||||||||||||
| Expected volatility | 21.38-41.62% | 21.33-42.97% | 25.98-47.73% | |||||||||||||||||
| Dividend yield | 2.53% | 2.88% | 2.37% | |||||||||||||||||
| Risk-free rates | 4.22% | 4.41% | 4.32% | |||||||||||||||||
Below is a summary of service-based and performance-based share information, assuming a target payout for performance-based shares, for the year 2025:
| (Shares in thousands) | Service-based shares | Weighted- average grant date fair value | Performance-based shares | Weighted- average grant date fair value | ||||||||||||||||||||||
| Nonvested at January 1, 2025 | 498 | $ | 111.03 | 230 | $ | 133.60 | ||||||||||||||||||||
| Granted | 177 | 127.90 | 75 | 120.83 | ||||||||||||||||||||||
| Vested | (159) | 115.71 | (21) | 140.50 | ||||||||||||||||||||||
| Forfeited or canceled | (21) | 114.77 | (48) | 140.50 | ||||||||||||||||||||||
| Nonvested at December 31, 2025 | 495 | 115.41 | 236 | 127.58 | ||||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 26, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.