Deferred Policy Acquisition Costs and Deferred Sales Inducements

12 Months Ended

Dec. 31, 2014

Deferred Policy Acquisition Costs and Deferred Sales Inducements [Abstract]

Deferred Policy Acquisition Costs and Deferred Sales Inducements

Deferred Policy Acquisition Costs and Deferred Sales Inducements

Policy acquisition costs deferred and amortized are as follows:

	December 31,
	2014			2013			2012
	(Dollars in thousands)
Balance at beginning of year	$	2,426,652		$	1,709,799		$	1,683,857
Costs deferred during the year:
Commissions	421,802			420,378			399,001
Policy issue costs	5,080			5,422			4,410
Amortization	(163,578		)	(365,468		)	(164,919		)
Effect of net unrealized gains/losses	(631,400		)	656,521			(212,550		)
Balance at end of year	$	2,058,556		$	2,426,652		$	1,709,799

Sales inducements deferred and amortized are as follows:

	December 31,
	2014			2013			2012
	(Dollars in thousands)
Balance at beginning of year	$	1,875,880		$	1,292,341		$	1,242,787
Costs deferred during the year	330,079			337,787			306,659
Amortization	(131,419		)	(253,113		)	(87,157		)
Effect of net unrealized gains/losses	(487,283		)	498,865			(169,948		)
Balance at end of year	$	1,587,257		$	1,875,880		$	1,292,341

We periodically revise the key assumptions used in the calculation of amortization of deferred policy acquisition costs and deferred sales inducements retrospectively through an unlocking process when estimates of current or future gross profits/margins (including the impact of realized investment gains and losses) to be realized from a group of products are revised. The unlocking adjustment in 2014 decreased amortization of deferred policy acquisition costs by $35.5 million and amortization of deferred sales inducements by $12.6 million and included the impact of account balance true ups as of September 30, 2014 and adjustment to future period assumptions for interest margins, surrenders and certain expenses. The unlocking adjustment in 2013 decreased amortization of deferred policy acquisition costs by $18.5 million and amortization for deferred sales inducements by $11.1 million and included the impact of account balance true-ups and adjustment to future period assumptions for surrenders and certain expenses. The unlocking adjustment in 2012 increased amortization of deferred policy acquisition costs by $3.7 million and decreased amortization for deferred sales inducements by $0.2 million.