9. Deferred Acquisition Costs and Deferred Sales Inducement Costs

The Company retrospectively adopted a new accounting standard for DAC in the first quarter of 2012. See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

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 2012 and 2011 primarily reflected the low interest rate environment and for 2012, the assumption of continued low interest rates over the near-term. As part of the 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 (subsequent to the adjustment for the new accounting standard) were as follows:

	2012			2011			2010

	(in millions)
Balance at January 1	$	2,440		$	2,556		$	2,394
Capitalization of acquisition costs		313			335			346
Amortization, excluding the impact of valuation assumptions review		(275	)		(366	)		(288	)
Amortization, impact of valuation assumptions review		(11	)		(31	)		174
Impact of change in net unrealized securities gains		(68	)		(54	)		(70	)

Balance at December 31	$	2,399		$	2,440		$	2,556

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

	2012			2011			2010

	(in millions)
Balance at January 1	$	464		$	545		$	524
Capitalization of sales inducement costs		7			9			35
Amortization, excluding the impact of valuation assumptions review		(45	)		(70	)		(49	)
Amortization, impact of valuation assumptions review		(13	)		(11	)		52
Impact of change in net unrealized securities gains		(9	)		(9	)		(17	)

Balance at December 31	$	404		$	464		$	545