Notes to the Consolidated Financial Statements — (Continued) material change to its consolidated financial statements, although the resolution of income tax matters could impact the Company’s effective tax rate for a particular future period. A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows: Years Ended December 31, 2012 2011 2010 (In millions) Balance at January 1, .................................................................. $679 $ 810 $773 Additions for tax positions of prior years (1) .................................................. 105 30 186 Reductions for tax positions of prior years .................................................. (82) (161) (84) Additions for tax positions of current year ................................................... 32 13 13 Reductions for tax positions of current year ................................................. (9) (8) (8) Settlements with tax authorities ........................................................... (15) (5) (59) Lapses of statutes of limitations .......................................................... (2) — (11) Balance at December 31, ............................................................... $708 $ 679 $810 Unrecognized tax benefits that, if recognized would impact the effective rate ....................... $566 $ 527 $536 (1) An increase of $169 million in 2010 resulted from the acquisition of American Life. The Company classifies interest accrued related to unrecognized tax benefits in interest expense, included within other expenses, while penalties are included in income tax expense. Interest was as follows: Years Ended December 31, 2012 2011 2010 (In millions) Interest recognized in the consolidated statements of operations ....................................... $2 $ 31 $ 6 December 31, 2012 2011 (In millions) Interest included in other liabilities in the consolidated balance sheets ................................... $237 $235 The Company had no penalties for the years ended December 31, 2012, 2011 and 2010. The U.S. Treasury Department and the IRS have indicated that they intend to address through regulations the methodology to be followed in determining the dividends received deduction (“DRD”), related to variable life insurance and annuity contracts. The DRD reduces the amount of dividend income subject to tax and is a significant component of the difference between the actual tax expense and expected amount determined using the federal statutory tax rate of 35%. Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other interested parties will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any such regulations are unknown at this time. For the years ended December 31, 2012 and 2011, the Company recognized an income tax benefit of $152 million and $159 million, respectively, related to the separate account DRD. The 2012 benefit included a benefit of less than $1 million related to a true-up of the 2011 tax return. The 2011 benefit included an expense of $8 million related to a true-up of the 2010 tax return. 195 MetLife, Inc. MetLife, Inc.