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ITEM 8 / NOTE 10. DEFERRED POLICY ACQUISITION COSTS.....................................................................................................................................................................................Included in the above table is the VOBA, an intangible asset recorded during purchase accounting, which isamortized in a manner similar to DAC. Amortization of VOBA was $53 million, $34 million and $90 million in 2012,2011 and 2010, respectively, while the unamortized balance was $339 million, $430 million and $488 million atDecember 31, 2012, 2011 and 2010, respectively. The percentage of the unamortized balance of VOBA atDecember 31, 2012 expected to be amortized in 2013 through 2017 by year is: 8.3 percent, 7.3 percent, 6.9 percent,6.0 percent and 6.4 percent, respectively, with 65.0 percent being amortized after five years. These projections arebased on current estimates for investment, persistency, mortality and morbidity assumptions. The DAC amortizationcharged to income includes the increase or decrease of amortization related to Net realized capital gains (losses),primarily in the retirement services business of AIG Life and Retirement. In 2012, 2011 and 2010, amortizationexpense (increased) decreased by $119 million, $274 million and $114 million, respectively.As we operate in various global markets, the estimated gross profits used to amortize DAC, VOBA and SIA aresubject to differing market returns and interest rate environments in any single period. The combination of marketreturns and interest rates may lead to acceleration of amortization in some products and regions and simultaneousdeceleration of amortization in other products and regions.DAC, VOBA and SIA for insurance-oriented, investment-oriented and retirement services products are reviewed forrecoverability, which involves estimating the future profitability of current business. This review involves significantmanagement judgment. If actual future profitability is substantially lower than estimated, AIG’s DAC, VOBA and SIAmay be subject to an impairment charge and AIG’s results of operations could be significantly affected in futureperiods...................................................................................................................................................................................................................................272 AIG 2012 Form 10-K