Note B. Hardy

On July 2, 2012, the Company completed the previously announced acquisition of all outstanding shares of Hardy Underwriting Bermuda Limited and its subsidiaries (Hardy), a specialized Lloyd's of London (Lloyd's) underwriter. Through Lloyd's Syndicate 382, Hardy underwrites primarily short-tail exposures in marine and aviation, non-marine property, specialty lines and property treaty reinsurance. The acquisition of Hardy aligns with the Company's specialized underwriting focus and will be a key platform for expanding the Company's global business through the Lloyd's marketplace. The results of Hardy for the period from July 2, 2012 to September 30, 2012 are included in the results of our core property and casualty insurance operations as a separate segment.

For the year ended December 31, 2011, Hardy reported gross written premiums of $430 million and recorded a loss of $55 million in its group consolidated financial statements prepared in accordance with International Financial Reporting Standards.

The purchase price for Hardy was $231 million. Acquisition related expenses of $4 million were incurred during the nine months ended September 30, 2012, including investment advisory, legal and other expenses, and were recorded in the Corporate and Other Non-Core segment.

The fair value of the assets acquired and the liabilities assumed as a result of the acquisition of Hardy were as follows:



(In millions)	Acquisition Date
(In millions)	July 2, 2012
Investments:
Fixed maturity securities	$	117
Short term investments	255
Total investments	372
Cash	34
Reinsurance receivables	252
Insurance receivables	222
Accrued investment income	2
Property and equipment	4
Goodwill and other intangible assets	171
Other assets	109
Total assets acquired	$	1,166

Claim and claim adjustment expenses	$	500
Unearned premiums	249
Long term debt	30
Other liabilities	156
Total liabilities assumed	$	935

The intangible assets acquired are presented in the following table.



(In millions)	Amount		Economic Useful Life
Syndicate capacity	$	55	Indefinite
Total indefinite-lived intangible assets	55

Value of business acquired	60		1 - 4 years
Trade name	8		8 years
Distribution channel	13		15 years
Total finite-lived intangible assets	81
Total intangible assets as of the acquisition date	$	136

For the three months ended September 30, 2012, amortization expense of $18 million was included in Amortization of deferred acquisition costs and $6 million was included in Other operating expenses in the Statement of Operations for the Hardy segment. Estimated future amortization expense for these intangible assets is $19 million in the fourth quarter of 2012, $21 million in 2013, $4 million in 2014, $1 million in 2015 and $2 million in both 2016 and 2017.

The acquisition resulted in goodwill of $35 million which was recorded in the Hardy segment. The recognized goodwill is based on the Company's expected growth and profitability of Hardy. The goodwill is not deductible for tax purposes.

Lloyd's requires syndicate capital providers to provide funds at Lloyd's (FAL) which is available to Lloyd's should funds in the Lloyd's premium trust fund be insufficient to cover obligations. At September 30, 2012, the Company had a deposit of $66 million of short duration U.S. Treasury securities in a Lloyd's custody account related to the FAL. Although the Company still owns these securities, these securities are controlled by Lloyd's and are therefore restricted. Additionally, cash and securities with a carrying value of approximately $71 million were deposited by Hardy under local requirements of regulatory authorities as of September 30, 2012.