Deferred Acquisition Costs and Deferred Sales Inducement Costs

12 Months Ended

Dec. 31, 2011

Deferred Acquisition Costs and Deferred Sales Inducement Costs

Deferred Acquisition Costs and Deferred Sales Inducement Costs

9. Deferred Acquisition Costs and Deferred Sales Inducement Costs

During the third quarter of 2011, 2010 and 2009, management reviewed and updated the DAC and DSIC valuation assumptions for the Company's products. As part of its third quarter 2010 process, management extended the projection periods used for its annuity products and revised client asset value growth rates assumed for variable annuity and VUL contracts.

The balances of and changes in DAC were as follows:

	2011			2010			2009
	(in millions)
Balance at January 1	$	4,619		$	4,334		$	4,383
Capitalization of acquisition costs		492			525			620
Amortization, excluding the impact of valuation assumptions review		(567	)		(450	)		(336	)
Amortization, impact of valuation assumptions review		(51	)		323			119
Impact of change in net unrealized securities gains		(91	)		(113	)		(452	)
Balance at December 31	$	4,402		$	4,619		$	4,334

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

	2011			2010			2009
	(in millions)
Balance at January 1	$	545		$	524		$	518
Capitalization of sales inducement costs		9			35			82
Amortization, excluding the impact of valuation assumptions review		(70	)		(49	)		(19	)
Amortization, impact of valuation assumptions review		(11	)		52			9
Impact of change in net unrealized securities gains		(9	)		(17	)		(66	)
Balance at December 31	$	464		$	545		$	524

As described in Note 3, the Company adopted a new accounting standard on the recognition and presentation of other-than-temporary impairments in the first quarter of 2009. The adoption had no net impact to DAC and DSIC.