Deferred Acquisition Costs

3 Months Ended

Mar. 31, 2013

DEFERRED ACQUISITION COSTS

Expenses directly related to successfully acquiring insurance policies – primarily commissions, premium taxes and underwriting costs – are deferred and amortized over the terms of the policies. We update our acquisition cost assumptions periodically to reflect actual experience, and we evaluate the costs for recoverability. The table below shows the deferred policy acquisition costs and asset reconciliation.



(In millions)	Three months ended March 31,
	2013			2012
Deferred policy acquisition costs asset at beginning of period	$	470		$	477
Capitalized deferred policy acquisition costs	198			170
Amortized deferred policy acquisition costs	(179		)	(156		)
Amortized shadow deferred policy acquisition costs	2			(8		)
Deferred policy acquisition costs asset at end of period	$	491		$	483

No premium deficiencies were recorded in the condensed consolidated statements of income, as the sum of the anticipated loss and loss adjustment expenses, policyholder dividends and unamortized deferred acquisition expenses did not exceed the related unearned premiums and anticipated investment income.

- Definition

Disclosure of accounting policy for capitalizing costs incurred to write or acquire insurance contracts, the basis for and methodology for capitalizing such costs, the accounting for such deferred acquisition costs (DAC) when modifications or internal replacements of related insurance contracts occur and the effect on results of operations, and the methodology and amount of amortization. This disclosure addresses the nature, type, and amount of capitalized costs incurred to write or acquire insurance contracts.

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