Unrecognized compensation costs related to non-vested awards

  
NOTE 17 – Share-Based Associate Compensation PlansFour 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 2021 and 2020.  
Share-based compensation cost after tax was $26 million, $25 million and $24 million for the years ended December 31, 2021, 2020 and 2019, respectively. The related income tax benefit recognized was $6 million for each of the years ended December 31, 2021, 2020 and 2019. Options exercised during the years ended December 31, 2021, 2020 and 2019, had intrinsic value of $24 million, $15 million and $26 million, respectively. Intrinsic value is the market price less the exercise price. Options vested during the years ended December 31, 2021, 2020 and 2019, had total intrinsic value of $15 million, $7 million and $23 million, respectively. As of December 31, 2021, we had $35 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 1.8 years. 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 over 10-year periods. The stock options generally vest ratably over a three-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:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   |  | 2021 |  | 2020 |  | 2019 |
| Weighted-average expected term |  |  7-9 years |  | 7-8 years |  | 7-8 years |
| Expected volatility |  | 25.56-27.81% |  | 16.89-17.13% |  | 14.49-15.39% |
| Dividend yield |  | 2.62% |  | 2.15% |  | 2.61% |
| Risk-free rates |  | 0.97-1.26% |  | 1.40-1.41% |  | 2.62-2.64% |
| Weighted-average fair value of options granted during the period |  | $19.64 |  | $15.45 |  | $11.73 |
|  |  |  |  |  |  |  |

 Cincinnati Financial Corporation - 2021 10-K - Page 169
