the periods over which DAC is amortized for fixed and variable deferred annuity products. Analysis showed that significant volumes of advisor-distributed fixed annuities were expected to persist beyond AEFA’s 10-year DAC amortization period. As a result, the company extended the amortization period from 10 to 15 years to be more consistent with the period over which significant profits were expected and would result in a more appropriate matching of revenues and expense. Similarly, AEFA made slight increases in the amortization periods used for certain blocks of advisor-distributed variable annuities. These changes, along with revised assumptions projecting more favorable persistency and mortality rates, resulted in a decrease in DAC expense of $155 million pretax. Finally, AEFA reviewed its acquisition costs to clarify those costs that vary with and are primarily related to the acquisition of new and renewable annuity and insurance contracts, or are incremental and vary directly with the acquisition of back-end loaded mutual funds. AEFA revised the types and amounts of costs deferred, in part to reflect the impact of advisor platform changes and the effects of related reengineering. This resulted in an increase in expense of $26 million pretax recognized in the third quarter of 2002. The adjustments made to customer asset value growth rate assumptions should reduce the risk of adverse DAC adjustments going forward, while changes made to mortality and persistency assumptions and DAC amortization periods somewhat increase the risk of adverse adjustments. Overall, AEFA believes it is less exposed to the risk of adverse DAC adjustments as a result of these changes. The changes relating to the types and amounts of costs deferred will somewhat accelerate the recogni- tion of ongoing expenses, although these additional expenses should be offset to some extent as reengineering and other cost control initiatives are expected to mitigate their impact. Impact of recent market-volatility on Results of Operations Various aspects of AEFA’s business are impacted by equity market levels and other market-based events. Three areas in partic- ular involve DAC, asset management fees and structured investments. The direction and magnitude of the changes in equity markets can increase or decrease DAC expense levels and asset management fees and correspondingly affect results of opera- tions in any particular period. Similarly, the value of AEFA’s structured investment portfolio is impacted by various market fac- tors. Persistency of, or increases in, bond and loan default rates, among other factors, could result in negative adjustments to the market values of these investments in the future, which would adversely impact results of operations. See discussion of structured investments below. SELECTED STATISTICAL INFORMATION Years Ended December 31, (Millions, except where indicated) 2002 2001 2000 Life insurance inforce (billions) $ 119.0 $ 107.9 $ 98.1 Deferred annuities inforce (billions) $ 41.0 $ 41.3 $ 45.3 Assets owned, managed or administered (billions): Assets managed for institutions $ 42.3 $ 49.7 $ 55.0 Assets owned, managed or administered for individuals: Owned assets: Separate account assets 22.0 27.3 32.3 Other owned assets 51.7 44.2 41.3 Total owned assets 73.7 71.5 73.6 Managed assets 81.6 98.7 112.0 Administered assets 33.0 33.4 34.4 Total $ 230.6 $ 253.3 $ 275.0 Market appreciation (depreciation) during the period: Owned assets: Separate account assets $ (5,057) $ (5,752) $ (5,109) Other owned assets $ 898 $ 879 $ 106 Managed assets $ (16,788) $ (18,662) $ (14,467) I 46 AXP I FINANCIAL REVIEW