Deferred Acquisition Costs

12 Months Ended

Dec. 31, 2023

Certain costs that are directly related to the successful acquisition of new or renewal insurance business are capitalized as DAC in the period they are incurred. These costs primarily pertain to commissions and certain costs associated with policy issuance and underwriting. All other acquisition costs are expensed as incurred.

Contracts are grouped into cohorts by contract type and issue year. For traditional and limited-payment insurance contracts, contracts are grouped consistent with the groupings used in estimating the associated liability. DAC are amortized into expense on a constant level basis over the expected term of the grouped contracts. For traditional and limited-payment insurance contracts, amortization is determined based on projected in force amounts. For non-traditional contracts, amortization is determined based on projected policy counts.

The expected term used to amortize DAC is determined using best estimate assumptions, including mortality and persistency, consistent with the best estimate assumptions used to determine the reserve for future policy benefits, MRBs, and additional liabilities for applicable contracts. For amortization of DAC related to contracts without these balances, assumptions used to determine expected term are developed in a similar manner. The amortization rate is determined using all information available as of the end of the reporting period, including actual experience and any assumption updates. Annually, or as circumstances warrant, a comprehensive review of assumptions is conducted and assumptions are revised as appropriate. If assumptions are revised, the amortization rate is calculated using revised assumptions such that the effect of revised assumptions is recognized prospectively as of the beginning of that reporting period.

Unamortized DAC are written off when a contract is internally replaced and substantially changed. Substantially unchanged contracts are treated as a continuation of the replaced contract, with no change to the unamortized DAC at the time of the replacement.

The following table presents the roll-forward of the DAC (in millions). The current period amortization is based on the end of the period estimates of mortality and persistency. The amortization pattern is revised on a prospective basis at the beginning of the period based on the period’s actual experience.


	Years Ended December 31,
	2023		2022		2021(1)
Variable Annuities
Balance, beginning of period	$	12,699	$	13,364	$	13,725
Change in accounting principle	—		—		151
Deferrals of acquisition costs	394		544		779
Amortization	(1,126)		(1,209)		(1,291)
Variable Annuities balance, end of period	$	11,967	$	12,699	$	13,364

Reconciliation of total DAC
Variable Annuities balance, end of period	$	11,967	$	12,699	$	13,364
Other product lines, end of period	335		224		161
Total balance, end of period	$	12,302	$	12,923	$	13,525

(1) See Note 2 - Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for the transition to LDTI impact to the 2021 beginning of period balance for DAC.

The assumptions used in the amortization of deferred acquisition costs consist of mortality and persistency. We have undertaken a comprehensive review of the assumptions used in the amortization of deferred acquisition costs, and there was no significant impact from changes to the mortality or persistency assumptions.