Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2015

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.

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



(Dollars in millions)	Years ended December 31,
	2015			2014			2013
Property casualty:
Deferred policy acquisition costs asset, January 1	$	379		$	366		$	337
Capitalized deferred policy acquisition costs	801			783			756
Amortized deferred policy acquisition costs	(792		)	(770		)	(727		)
Deferred policy acquisition costs asset, December 31	$	388		$	379		$	366

Life:
Deferred policy acquisition costs asset, January 1	$	199		$	199		$	133
Capitalized deferred policy acquisition costs	45			44			46
Amortized deferred policy acquisition costs	(37		)	(37		)	(31		)
Amortized shadow deferred policy acquisition costs	21			(7		)	51
Deferred policy acquisition costs asset, December 31	$	228		$	199		$	199

Consolidated:
Deferred policy acquisition costs asset, January 1	$	578		$	565		$	470
Capitalized deferred policy acquisition costs	846			827			802
Amortized deferred policy acquisition costs	(829		)	(807		)	(758		)
Amortized shadow deferred policy acquisition costs	21			(7		)	51
Deferred policy acquisition costs asset, December 31	$	616		$	578		$	565

The change in amortized shadow deferred policy acquisition costs in 2015 and 2013 compared to 2014 was the result of increasing interest rates. No premium deficiencies were recorded in the consolidated statements of income in 2015, 2014 and 2013, 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.