Deferred Acquisition Costs

12 Months Ended

Dec. 31, 2011

The expenses associated with issuing 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 our deferred acquisition costs for recoverability. The table below shows the deferred policy acquisition costs and asset reconciliation, including the amortized deferred policy acquisition costs.

	Years ended December 31,
(In millions)	2011			2010			2009
Deferred policy acquisition costs asset at January 1	$	488		$	481		$	509
Capitalized deferred policy acquisition costs		718			676			650
Amortized deferred policy acquisition costs		(685	)		(653	)		(638	)
Amortized shadow deferred policy acquisition costs		(11	)		(16	)		(40	)
Deferred policy acquisition costs asset at December 31	$	510		$	488		$	481

There were no premium deficiencies 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.

- 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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