Deferred Acquisition Costs and Deferred Sales Inducement Costs

9 Months Ended

Sep. 30, 2018

Deferred Charges, Insurers [Abstract]

Deferred acquisition costs and deferred sales inducement costs [Text Block]

Deferred Acquisition Costs and Deferred Sales Inducement Costs

In the third quarter of the year, management updated market-related inputs and implemented model changes related to the living benefit valuation. In addition, management conducted its annual review of life insurance and annuity valuation assumptions relative to current experience and management expectations including modeling changes. These aforementioned changes are collectively referred to as unlocking. The impact of unlocking to DAC in the third quarter of 2018 primarily reflected updated mortality assumptions on universal life (“UL”) and variable universal life (“VUL”) insurance products and lower surrender rate assumptions on variable annuities, partially offset by an unfavorable impact from updates to assumptions on utilization of guaranteed withdrawal benefits. The impact of unlocking to DAC in the third quarter of 2017 primarily reflected improved persistency and mortality on UL and VUL insurance products and a correction related to a variable annuity model assumption partially offset by updates to market-related inputs to the living benefit valuation.

The balances of and changes in DAC were as follows:

	2018			2017
	(in millions)
Balance at January 1	$	2,676		$	2,648
Capitalization of acquisition costs	241			220
Amortization, excluding the impact of valuation assumptions review	(213		)	(201		)
Amortization, impact of valuation assumptions review	33			12
Impact of change in net unrealized (gains) losses on securities	95			(18		)
Balance at September 30	$	2,832		$	2,661

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

	2018			2017
	(in millions)
Balance at January 1	$	276		$	302
Capitalization of sales inducement costs	2			3
Amortization, excluding the impact of valuation assumptions review	(26		)	(26		)
Amortization, impact of valuation assumptions review	—			(1		)
Impact of change in net unrealized (gains) losses on securities	16			1
Balance at September 30	$	268		$	279