Company: L
Filing Date: 2025-02-11
Form Type: 10-K
Source: 0000060086-25-000036
Chunk: 318

Company: LOEWS CORP
Filing Date: 2025-02-11
Form: 10-K
Item: Item 3
Chunk 318
---
 Net Premium Ratio (“NPR”). The NPR is generally the ratio of the present value of benefits and expense payments to the present value of gross premiums, expected over the lifetime of the policy. As a result of the modified retrospective adoption of ASU 2018-12, CNA’s NPR calculation incorporates the original locked in discount rate and the reserve balance as of the transition date of January 1, 2021.The key cash flow assumptions used to estimate the LFPB are morbidity, persistency, anticipated future premium rate increases and expenses. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. Expense assumptions relate to claim adjudication. The practical expedient was not elected that allows locking in the expense assumption. The carried LFPB discount rate is determined using the upper-medium grade fixed income instrument yield curve. CNA has elected to update the NPR and the LFPB for actual experience on a quarterly basis. A quarterly assessment is also made as to whether evidence suggests that cash flow assumptions should be updated. Annually, in the third quarter, actuarial analysis is performed on policyholder morbidity, persistency, premium rate increase and expense experience.  This analysis, combined with judgment, informs the setting of updated cash flow assumptions used to estimate the LFPB. Actuarial analysis includes predictive modeling, actual to expected experience comparisons and trend analysis. Applicable industry research is also considered. The effect of changes in cash flow assumptions and actual variances from expected experience are recorded in the results of operations within Insurance claims and policyholders’ benefits. Quarterly, to derive the upper-medium grade fixed income instrument yield discount rate assumption, a published spot rate curve constructed from single-A rated U.S. dollar denominated corporate bonds is used. Linear interpolation to determine yield assumptions for tenors that fall between points for which observable rates are available is used.  For cash flows that are projected to occur beyond the tenor for which market-observable rates are available, CNA applies judgment  to estimate a normative rate which it grades to over 10 years. The effect of changes in discount rate assumptions are recorded in Other comprehensive income (loss). Quarterly, the updated NPR is used to derive an updated LFPB as of the beginning of the current quarter