Deferred Acquisition Costs and Deferred Sales Inducement Costs

In the third quarter of the year, management conducts its annual review of insurance and annuity valuation assumptions relative to current experience and management expectations. To the extent that expectations change as a result of this review, management updates valuation assumptions. The impact in the third quarter of 2013 primarily reflected expected higher interest rates and changes in assumed policyholder behavior. The impact in the third quarter of 2012 and 2011 primarily reflected the low interest rate environment and for 2012, the assumption of continued low interest rates over the near-term.

The balances of and changes in DAC were as follows:



	2013			2012			2011
	(in millions)
Balance at January 1	$	2,399		$	2,440		$	2,556
Capitalization of acquisition costs	339			313			335
Amortization, excluding the impact of valuation assumptions review	(285		)	(275		)	(366		)
Amortization impact of valuation assumptions review	78			(11		)	(31		)
Impact of change in net unrealized securities losses (gains)	132			(68		)	(54		)
Balance at December 31	$	2,663		$	2,399		$	2,440

The balances of and changes in DSIC, which is included in other assets, were as follows:



	2013			2012			2011
	(in millions)
Balance at January 1	$	404		$	464		$	545
Capitalization of sales inducement costs	5			7			9
Amortization, excluding the impact of valuation assumptions review	(48		)	(45		)	(70		)
Amortization impact of valuation assumptions review	25			(13		)	(11		)
Impact of change in net unrealized securities losses (gains)	23			(9		)	(9		)
Balance at December 31	$	409		$	404		$	464