Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2012

Deferred Policy Acquisition Costs [Abstract]

6. 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,
		2012		2011		2010
Deferred policy acquisition costs asset at January 1	$	477	$	458	$	454
Capitalized deferred policy acquisition costs		734		661		627
Amortized deferred policy acquisition costs		(706)		(631)		(607)
Amortized shadow deferred policy acquisition costs		(35)		(11)		(16)
Deferred policy acquisition costs asset at December 31	$	470	$	477	$	458

No premium deficiencies were recorded in the consolidated statements of comprehensive 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.

+ References+ Details