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

As of 31 December, the DAC were as follows:

2016 USD millions	Property & Casualty Reinsurance	Life & Health Reinsurance	Corporate Solutions	Life Capital	Total
Opening balance as of 1 January	2 051	3 020	387	13	5 471
Deferred	4 629	893	571	34	6 127
Amortisation	–4 379	–312	–513	–36	–5 240
Effect of foreign currency translation	–21	–136	–1		–158
Closing balance	2 280	3 465	444	11	6 200

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2017 USD millions	Property & Casualty Reinsurance	Life & Health Reinsurance	Solutions	Life Capital	Total
Opening balance as of 1 January	2 280	3 465	444	11	6 200
Deferred	4 068	1 294	553	71	5 986
Effect of acquisitions/disposals and retrocessions		–5	2	5	2
Amortisation	–4 255	–508	–549	–67	–5 379
Effect of foreign currency translation and other changes	53	–12	4	17	62
Closing balance	2 146	4 234	454	37	6 871

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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	Life & Health Reinsurance	Life Capital			Total
2016 USD millions		Positive PVFP	Negative PVFP	Total
Opening balance as of 1 January	1 134	1 830	0	1 830	2 964
Effect of acquisitions/disposals and retrocessions			–603	–603	–603
Amortisation	–132	–198	51	–147	–279
Interest accrued on unamortised PVFP	36	130	–19	111	147
Effect of change in unrealised gains/losses		1		1	1
Effect of foreign currency translation	–72	–205	50	–155	–227
Closing balance	966	1 558	–521	1 037	2 003

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	Life & Health Reinsurance	Life Capital			Total
2017 USD millions		Positive PVFP	Negative PVFP	Total
Opening balance as of 1 January	966	1 558	–521	1 037	2 003
Amortisation	–135	–143	45	–98	–233
Interest accrued on unamortised PVFP	52	102	–17	85	137
Effect of change in unrealised gains/losses		–1		–1	–1
Effect of foreign currency translation	38	96	–51	45	83
Closing balance	921	1 612	–544	1 068	1 989

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 2016, the Group’s Business Unit Life Capital acquired Guardian Holdings Europe Limited, the holding company for operations trading under the name Guardian Financial Services (“Guardian”), and recognised negative PVFP. Upon acquisition, PVFP is calculated as the difference between the estimated fair value and established reserves, which is in line with US GAAP accounting policies and assumptions of the Group. The product mix of Guardian is weighted towards annuity business, for which the fair value of insurance and investment contract liabilities significantly exceeds the established US GAAP reserves. This excess is mainly due to differences in discount rates and risk weightings between fair value and US GAAP estimates. Overall, the excess on the annuity business outweighs the estimated future gross profits of other business and synergy expectations included in the fair value of insurance and investment contract liabilities for the business as a whole, resulting in a negative PVFP.

The subsequent measurement of negative PVFP is in alignment with the existing measurement of positive PVFP assets (please refer to Note 1).

The percentage of PVFP which is expected to be amortised in each of the next five years is 12%, 13%, 12%, 11% and 11%.