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Future Policy Benefits Reserves | Future Policy Benefits Reserves Future policy benefits reserves are associated with the Company's run-off long-term care business, included in the Life & Group segment, and relate to policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported, as well as policyholders that are not yet receiving benefits. Future policy benefits reserves are comprised of the liability for future policyholder benefits (LFPB) which is reflected as Insurance reserves: Future policy benefits on the Condensed Consolidated Balance Sheet. The determination of Future policy benefits reserves requires management to make estimates and assumptions about expected policyholder experience over the remaining life of the policy. Since policies may be in force for several decades, these assumptions are subject to significant estimation risk. As a result of this variability, the Company’s future policy benefits reserves may be subject to material increases if actual experience develops adversely to the Company’s expectations. See Note A to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2023 for further information on the long-term care reserving process. The following table summarizes balances and changes in the LFPB.
(1) As of June 30, 2024 and 2023 the re-measurement gain (loss) of $(40) million and $(34) million presented parenthetically on the Condensed Consolidated Statement of Operations is comprised of the effect of changes in cash flow assumptions and the effect of actual variances from expected experience. The following table presents earned premiums and interest expense associated with the Company’s long-term care business recognized on the Condensed Consolidated Statement of Operations.
The following table presents undiscounted expected future benefit and expense payments, and undiscounted expected future gross premiums.
Discounted expected future gross premiums at the upper-medium grade fixed income instrument yield discount rate were $3,546 million and $3,853 million as of June 30, 2024 and 2023. The weighted average effective duration of the LFPB calculated using the original locked in discount rate was 11 years and 12 years as of June 30, 2024 and 2023. The weighted average interest rates in the table below are calculated based on the rate used to discount all future cash flows.
For the three and six months ended June 30, 2024, immediate charges to net income resulting from adverse development that caused the Net Premium Ratio (NPR) to exceed 100% for certain cohorts were $24 million and $44 million. For the three and six months ended June 30, 2023, immediate charges to net income resulting from adverse development that caused the NPR to exceed 100% were $29 million and $42 million. For the three and six months ended June 30, 2024, the portion of losses recognized in a prior period due to NPR exceeding 100% for certain cohorts which, due to favorable development, was reversed through net income was $6 million and $8 million. For the three and six months ended June 30, 2023, the portion of losses recognized in a prior period due to NPR exceeding 100% which, due to favorable development, was reversed through net income was less than $1 million and $11 million.
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