Deferred Policy Acquisition Costs

12 Months Ended

Dec. 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. No premium deficiencies were recorded in the consolidated statements of income in 2023, 2022 and 2021, 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.

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, Summary of Significant Accounting Policies, for further discussion.

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


(Dollars in millions)	Years ended December 31,
	2023		2022		2021
Property casualty:
Deferred policy acquisition costs asset, January 1	$	682	$	602	$	542
Capitalized deferred policy acquisition costs	1,488		1,383		1,211
Amortized deferred policy acquisition costs	(1,421)		(1,303)		(1,151)
Deferred policy acquisition costs asset, December 31	$	749	$	682	$	602

Life:
Deferred policy acquisition costs asset, January 1	$	331	$	314	$	296
Capitalized deferred policy acquisition costs	42		44		43
Amortized deferred policy acquisition costs	(29)		(27)		(25)

Deferred policy acquisition costs asset, December 31	$	344	$	331	$	314

Consolidated:
Deferred policy acquisition costs asset, January 1	$	1,013	$	916	$	838
Capitalized deferred policy acquisition costs	1,530		1,427		1,254
Amortized deferred policy acquisition costs	(1,450)		(1,330)		(1,176)

Deferred policy acquisition costs asset, December 31	$	1,093	$	1,013	$	916

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)
Year ended December 31, 2023	Term		Whole life		Deferred annuity		Universal life		Total
Balance, beginning of period	$	228	$	43	$	7	$	53	$	331
Capitalized deferred policy acquisition costs	30		8		2		2		42
Amortized deferred policy acquisition costs	(22)		(3)		(1)		(3)		(29)
Balance, end of period	$	236	$	48	$	8	$	52	$	344

Year ended December 31, 2022
Balance, beginning of period	$	215	$	38	$	7	$	54	$	314
Capitalized deferred policy acquisition costs	34		7		1		2		44
Amortized deferred policy acquisition costs	(21)		(2)		(1)		(3)		(27)
Balance, end of period	$	228	$	43	$	7	$	53	$	331

Year ended December 31, 2021
Balance, beginning of period	$	201	$	35	$	6	$	54	$	296
Capitalized deferred policy acquisition costs	35		5		1		2		43
Amortized deferred policy acquisition costs	(21)		(2)		—		(2)		(25)
Balance, end of period	$	215	$	38	$	7	$	54	$	314