Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2013

Deferred Costs [Abstract]

Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs

Expenses associated with 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. All acquisition costs reflect ASU 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts, which we retrospectively adopted on January 1, 2012.

The table below shows the deferred policy acquisition costs and asset reconciliation:

(In millions)	Years ended December 31,
	2013			2012			2011
Deferred policy acquisition costs asset, January 1	$	470		$	477		$	458
Capitalized deferred policy acquisition costs	802			734			661
Amortized deferred policy acquisition costs	(758		)	(706		)	(631		)
Amortized shadow deferred policy acquisition costs	51			(35		)	(11		)
Deferred policy acquisition costs asset, December 31	$	565		$	470		$	477

The change in amortized shadow deferred policy acquisition costs in 2013 compared to 2012 was the result of rising interest rates. No premium deficiencies were recorded in the 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.