6. Deferred Policy Acquisition Costs

Incremental direct costs of insurance contract acquisition as well as certain costs that vary with and are directly related to acquisition activities (underwriting, policy issuance and processing, medical and inspection and sales force contract selling) for the successful acquisition of new and renewal insurance policies, universal life, and annuity contracts are capitalized in the period they are incurred. Maintenance costs and acquisition costs that are not deferrable are charged to operating expenses as incurred.

For our long-duration insurance products, universal life, and annuity contracts, deferred policy acquisition costs are amortized on a constant level basis over the expected life of the contracts using groupings and assumptions consistent with those used in computing policyholder liabilities. For each of our long-duration insurance products, the Company selects the number of policies inforce measure as a basis for amortization that will result in a constant level amortization pattern for the expected life of the contract. If the Company’s actual contract terminations differ from our expectation, the amortization pattern is adjusted on a prospective basis.

Some of the Company’s products have renewal commissions resulting in new deferred policy acquisition cost capitalizations in the years following the initial capitalization. The new capitalizations are added to the existing deferred policy acquisition cost balance when incurred and amortized over the remaining life of the insurance products impacted.

The Company reviews and updates actuarial experience assumptions (such as mortality, surrenders, lapse, and premium persistency) serving as inputs to the models that establish the expected life for deferred policy acquisition costs and other actuarial balances during the third quarter of each year, or more frequently if evidence suggests assumptions should be revised. The Company makes model refinements as necessary, and any changes resulting from these assumption updates are applied prospectively.

The disaggregated amounts of net deferred policy acquisition costs (amount capitalized less amount amortized) allocated to the Company’s life and annuity lines of business that reconcile to the total amounts reported in the consolidated statements of operations for the years ended December 31, 2025 and 2024 are summarized as follows:

The balances and changes in deferred policy acquisition costs (deferral and amortization) allocated to the Company’s life and annuity lines of business that reconcile to the total amounts reported in the consolidated statement of financial position and consolidated statement of operations as of and for the years ended December 31, 2025 and 2024 are summarized as follows: