Deferred Policy Acquisition Costs and Deferred Sales Inducements

12 Months Ended

Dec. 31, 2013

Deferred Policy Acquisition Costs and Deferred Sales Inducements [Abstract]

Deferred Policy Acquisition Costs and Deferred Sales Inducements

Policy acquisition costs deferred and amortized are as follows:



	December 31,
	2013			2012			2011
	(Dollars in thousands)
Balance at beginning of year	$	1,709,799		$	1,683,857		$	1,747,760
Costs deferred during the year:
Commissions	420,378			399,001			463,889
Policy issue costs	5,422			4,410			14,945
Amortization	(365,468		)	(164,919		)	(143,478		)
Effect of net unrealized gains/losses	656,521			(212,550		)	(399,259		)
Balance at end of year	$	2,426,652		$	1,709,799		$	1,683,857

Sales inducements deferred and amortized are as follows:



	December 31,
	2013			2012			2011
	(Dollars in thousands)
Balance at beginning of year	$	1,292,341		$	1,242,787		$	1,227,328
Costs deferred during the year	337,787			306,659			385,123
Amortization	(253,113		)	(87,157		)	(71,781		)
Effect of net unrealized gains/losses	498,865			(169,948		)	(297,883		)
Balance at end of year	$	1,875,880		$	1,292,341		$	1,242,787

We periodically revise the key assumptions used in the calculation of amortization of deferred policy acquisition costs and deferred sales inducements retrospectively through an unlocking process when estimates of current or future gross profits/margins (including the impact of realized investment gains and losses) to be realized from a group of products are revised. The unlocking adjustment in 2013 decreased amortization of deferred policy acquisition costs by $18.5 million and amortization of deferred sales inducements by $11.1 million and included the impact of account balance true ups and adjustment to future period assumptions for surrenders and certain expenses. The unlocking adjustment in 2012 increased amortization of deferred policy acquisition costs by $3.7 million and decreased amortization for deferred sales inducements by $0.2 million. The unlocking adjustment in 2011 decreased amortization of deferred policy acquisition costs by $9.1 million and amortization for deferred sales inducements by $5.0 million.