5 Deferred acquisition costs (DAC) and acquired present value of future profits (PVFP)

As of 31 December, the DAC were as follows:

2012 USD millions	Property & Casualty Reinsurance	Life & Health Reinsurance	Corporate Solutions	Admin Re^®	Group items	Total
Opening balance as of 1 January 2012	1 247	2 663	–25	34	4	3 923
Cumulative effect of adoption of ASU No. 2010-26		–35				–35
Deferred	2 119	399	542			3 060
Effect of acquisitions/disposals and retrocessions						0
Amortisation	–2 266	–367	–300	–1	–3	–2 937
Effect of foreign currency translation	3	53	2		1	59
Write-off of DAC				–31		–31
Closing balance as of 31 December 2012	1 103	2 713	219	2	2	4 039


2013 USD millions	Property & Casualty Reinsurance	Life & Health Reinsurance	Corporate Solutions	Admin Re^®	Group items	Total
Opening balance as of 1 January 2013	1 103	2 713	219	2	2	4 039
Cumulative effect of adoption of ASU No. 2010-26						0
Deferred	3 217	491	504			4 212
Effect of acquisitions/disposals and retrocessions		57				57
Amortisation	–2 710	–397	–406			–3 513
Effect of foreign currency translation	–19	–19	2	–1	–2	–39
Write-off of DAC						0
Closing balance as of 31 December 2013	1 591	2 845	319	1	0	4 756

Retroceded DAC may arise on retrocession of reinsurance portfolios, including reinsurance undertaken as part of a securitisation. The associated potential retrocession recoveries are determined by the nature of the retrocession agreements and by the terms of the securitisation.

As of 31 December, the PVFP was as follows:

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			2012			2013
USD millions	Life & Health Reinsurance	Admin Re^®	Total	Life & Health Reinsurance	Admin Re^®	Total
Opening balance as of 1 January	1 674	2 552	4 226	1 358	1 665	3 023
Effect of acquisitions/disposals and retrocessions	–206	126	–80	206	–30	176
Amortisation	–201	–244	–445	–151	–184	–335
Interest accrued on unamortised PVFP	51	140	191	35	186	221
Effect of foreign currency translation	40	56	96	3	44	47
Effect of change in unrealised gains/losses		–316	–316		405	405
Write-off of PVFP		–649	–649			0
Closing balance as of 31 December	1 358	1 665	3 023	1 451	2 086	3 537

Retroceded PVFP may arise on retrocession of reinsurance portfolios, including reinsurance undertaken as part of a securitisation. The associated potential retrocession recoveries are determined by the nature of the retrocession agreements and by the terms of the securitisation.

In 2013, based on the results of shadow loss recognition testing the shadow loss reserve was reduced by USD 308 million, net of tax, impacting PVFP and other comprehensive income. The adjustment relates to Admin Re^® business and is reflected in the “effect of change in unrealised gains/losses” in the table above. Shadow loss recognition testing considers the adequacy of contractual liabilities, net of DAC and PVFP, using current best estimates of all future cash flows discounted at current market yields. The purpose is to reflect the fact that certain amounts recorded as unrealised investment gains and losses within shareholders’ equity will ultimately accrue to policyholders and not shareholders. Shadow losses recognised can reverse up to the amount of losses recognised due to a loss recognition event.

The percentage of PVFP which is expected to be amortised in each of the next five years is 7%, 6%, 6%, 6% and 6%.