Deferred Policy Acquisition Costs

3 Months Ended

Mar. 31, 2023

Expenses directly related to successfully acquired 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. For property casualty, we evaluate the costs for recoverability. The adoption of ASU 2018-12 on January 1, 2023 resulted in a simplified amortization of life deferred acquisition costs and the removal of shadow deferred acquisition costs. See Note 1, Accounting Policies, for further discussion. The table below shows the deferred policy acquisition costs and asset reconciliation.


(Dollars in millions)	Three months ended March 31,
		2023		2022
Property casualty:
Deferred policy acquisition costs asset, beginning of period		$	682	$	602
Capitalized deferred policy acquisition costs		372		364
Amortized deferred policy acquisition costs		(340)		(301)
Deferred policy acquisition costs asset, end of period		$	714	$	665

Life:
Deferred policy acquisition costs asset, beginning of period		$	331	$	314
Capitalized deferred policy acquisition costs		11		12
Amortized deferred policy acquisition costs		(8)		(7)

Deferred policy acquisition costs asset, end of period		$	334	$	319

Consolidated:
Deferred policy acquisition costs asset, beginning of period		$	1,013	$	916
Capitalized deferred policy acquisition costs		383		376
Amortized deferred policy acquisition costs		(348)		(308)

Deferred policy acquisition costs asset, end of period		$	1,048	$	984

The removal of shadow deferred policy acquisition costs as a result of the adoption of ASU 2018-12 resulted in a $33 million increase, across all products, from $263 million pre-adoption at December 31, 2020, to $296 million post-adoption at January 1, 2021.

The table below shows the life deferred policy acquisition costs asset by product:


(Dollars in millions)
Three months ended March 31, 2023	Term		Whole life		Deferred annuity		Universal life		Total
Balance, beginning of period	$	228	$	43	$	7	$	53	$	331
Capitalized deferred policy acquisition costs	9		2		—		—		11
Amortized deferred policy acquisition costs	(6)		(1)		—		(1)		(8)
Balance, end of period	$	231	$	44	$	7	$	52	$	334

Three months ended March 31, 2022
Balance, beginning of period	$	215	$	38	$	7	$	54	$	314
Capitalized deferred policy acquisition costs	10		2		—		—		$	12
Amortized deferred policy acquisition costs	(5)		(1)		—		(1)		$	(7)
Balance, end of period	$	220	$	39	$	7	$	53	$	319

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