Goodwill	9 Months Ended
Sep. 30, 2014
Goodwill	(14) Goodwill During the third quarter of 2014, we completed our annual goodwill impairment analysis as of July 1, 2014. As a result of this analysis, we determined fair value was lower than book value for our life and long-term care insurance reporting units. If fair value is lower than book value, the reporting unit’s fair value is allocated to assets and liabilities as if the reporting unit had been acquired in a business combination with the amount of goodwill being established representing the “implied goodwill” amount that is recoverable. If this “implied goodwill” exceeds the reporting unit’s recorded goodwill balance, goodwill is deemed recoverable. During the third quarter of 2014, in connection with our strategic planning process and in light of new leadership within our U.S. Life Insurance Division, we revisited our prior strategy of focusing on term life insurance, given the capital-intensive nature of the product and our revised capital plan. We are in the process of transitioning to higher return permanent products, including universal life insurance, indexed universal life insurance and linked-benefit products, and expect sales growth to occur over time. Given this transition, our annual sales projections included in the determination of fair value for our life insurance reporting unit were significantly lower than sales levels expected in prior year’s goodwill testing analysis. This shift in new business mix to a relatively lower volume of sales that we expect to increase over time resulted in a decrease in new business value that caused the fair value of the life insurance reporting unit to be below its book value with the amount of implied goodwill being lower than the recorded goodwill balance. Based on the fair value of projected new business for our life insurance reporting unit, we recorded a goodwill impairment of $350 million during the third quarter of 2014, with the remaining goodwill balance of $145 million deemed recoverable based on our determination of implied goodwill. For the first half of 2014, overall market sales for the long-term care insurance industry declined approximately 30% as compared to the same period last year. During the third quarter of 2014, we introduced a new long-term care insurance product with higher premiums and lower maximum benefits, and anticipate that it will take time for this new product to gain momentum in our distribution channels. Given these trends, our annual sales projections included in our determination of fair value for our long-term care insurance reporting unit were lower than the prior year’s goodwill testing analysis. In addition, our projection of new business includes a higher expected use of reinsurance and a change related to expected claims costs that resulted in a decrease in value compared to the prior year’s goodwill testing valuation. The impact of these assumptions on our sales projections caused the fair value of our long-term care insurance reporting unit to be below its book value with the amount of implied goodwill being lower than the recorded goodwill balance. Based on the fair value of projected new business for our long-term care insurance reporting unit, we recorded a goodwill impairment of $200 million during the third quarter of 2014, with the remaining goodwill balance of $154 million deemed recoverable based on our determination of implied goodwill.

(14) Goodwill

During the third quarter of 2014, we completed our annual goodwill impairment analysis as of July 1, 2014. As a result of this analysis, we determined fair value was lower than book value for our life and long-term care insurance reporting units. If fair value is lower than book value, the reporting unit’s fair value is allocated to assets and liabilities as if the reporting unit had been acquired in a business combination with the amount of goodwill being established representing the “implied goodwill” amount that is recoverable. If this “implied goodwill” exceeds the reporting unit’s recorded goodwill balance, goodwill is deemed recoverable.

During the third quarter of 2014, in connection with our strategic planning process and in light of new leadership within our U.S. Life Insurance Division, we revisited our prior strategy of focusing on term life insurance, given the capital-intensive nature of the product and our revised capital plan. We are in the process of transitioning to higher return permanent products, including universal life insurance, indexed universal life insurance and linked-benefit products, and expect sales growth to occur over time. Given this transition, our annual sales projections included in the determination of fair value for our life insurance reporting unit were significantly lower than sales levels expected in prior year’s goodwill testing analysis. This shift in new business mix to a relatively lower volume of sales that we expect to increase over time resulted in a decrease in new business value that caused the fair value of the life insurance reporting unit to be below its book value with the amount of implied goodwill being lower than the recorded goodwill balance. Based on the fair value of projected new business for our life insurance reporting unit, we recorded a goodwill impairment of $350 million during the third quarter of 2014, with the remaining goodwill balance of $145 million deemed recoverable based on our determination of implied goodwill.

For the first half of 2014, overall market sales for the long-term care insurance industry declined approximately 30% as compared to the same period last year. During the third quarter of 2014, we introduced a new long-term care insurance product with higher premiums and lower maximum benefits, and anticipate that it will take time for this new product to gain momentum in our distribution channels. Given these trends, our annual sales projections included in our determination of fair value for our long-term care insurance reporting unit were lower than the prior year’s goodwill testing analysis. In addition, our projection of new business includes a higher expected use of reinsurance and a change related to expected claims costs that resulted in a decrease in value compared to the prior year’s goodwill testing valuation. The impact of these assumptions on our sales projections caused the fair value of our long-term care insurance reporting unit to be below its book value with the amount of implied goodwill being lower than the recorded goodwill balance. Based on the fair value of projected new business for our long-term care insurance reporting unit, we recorded a goodwill impairment of $200 million during the third quarter of 2014, with the remaining goodwill balance of $154 million deemed recoverable based on our determination of implied goodwill.