Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2016

2. Goodwill and Intangible Assets

On April 15, 2016, Alleghany Capital acquired an additional 50 percent of Jazwares’ outstanding equity for $162.8 million, bringing its equity ownership interest to 80 percent and, as of that date, the results of Jazwares have been included in Alleghany’s consolidated results. Prior to April 15, 2016, Jazwares was accounted for under the equity method of accounting. The $162.8 million purchase price includes $122.1 million in cash paid on April 18, 2016 and $40.7 million of potential contingent consideration based on

future profitability. In connection with the acquisition, $130.0 million, $52.4 million and $89.7 million of goodwill, indefinite-lived intangible assets and finite-lived intangible assets, respectively, were recorded. Indefinite-lived intangible assets relate to trade name and finite-lived intangible assets relate to license agreements, customer relationships and owned content.

On October 31, 2015, Alleghany Capital acquired approximately 84 percent of the equity in IPS for $106.3 million, including $89.9 million in cash paid on November 2, 2015, $12.5 million of potential contingent consideration based on future profitability and $3.9 million of estimated purchase price adjustments. In connection with the acquisition, $23.5 million, $27.9 million and $49.3 million of goodwill, indefinite-lived intangible assets and finite-lived intangible assets, respectively, were recorded. Indefinite-lived intangible assets relate to trade name, and finite-lived intangible assets relate to customer relationships, back-log and covenants not-to-compete.

The amount of goodwill and intangible assets, net of accumulated amortization expense, reported on Alleghany’s consolidated balance sheets as of December 31, 2016 and 2015 were as follows:


	December 31, 2016						December 31, 2015
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value⁽¹⁾		Gross Carrying Value		Accumulated Amortization		Net Carrying Value⁽¹⁾
	($ in millions)
Insurance Segment⁽²⁾ - Goodwill	$	49.0	$	-	$	49.0	$	49.0	$	-	$	49.0

Insurance Segment - Intangible assets:
Agency relationships		17.9		9.8		8.1		17.9		9.0		8.9
State insurance licenses		25.8		-		25.8		25.8		-		25.8
Trade name		35.5		-		35.5		35.5		-		35.5
Brokerage and reinsurance relationships		33.8		30.4		3.4		33.8		28.2		5.6
Renewal rights		24.2		24.1		0.1		24.2		24.1		0.1
Other		4.1		4.1		-		4.1		4.1		-

Total insurance segment intangibles		141.3		68.4		72.9		141.3		65.4		75.9

Total insurance segment goodwill and other intangibles	$	190.3	$	68.4	$	121.9	$	190.3	$	65.4	$	124.9

Reinsurance Segment⁽²⁾ - Intangible assets:
Value of business in-force	$	291.4	$	291.4	$	-	$	291.4	$	291.4	$	-
Loss and LAE reserves		(98.8)		(72.7)		(26.1)		(98.8)		(65.1)		(33.7)
State and foreign insurance licenses		19.0		-		19.0		19.0		-		19.0
Trade name		50.0		-		50.0		50.0		-		50.0
Renewal rights		44.0		17.8		26.2		44.0		13.5		30.5
Leases		(28.1)		(13.8)		(14.3)		(28.1)		(10.9)		(17.2)
Internally-developed software		10.0		10.0		-		10.0		10.0		-

Total reinsurance segment intangibles	$	287.5	$	232.7	$	54.8	$	287.5	$	238.9	$	48.6

Other Activities⁽²⁾⁽³⁾ - Goodwill	$	236.0	$	-	$	236.0	$	92.0	$	-	$	92.0

Other Activities⁽³⁾ - Intangible assets:
Trade name		126.6		-		126.6		38.9		-		38.9
Licence agreements		66.2		5.9		60.3		-		-		-
Other		84.0		19.9		64.1		53.0		3.6		49.4

Total other activities intangibles		276.8		25.8		251.0		91.9		3.6		88.3

Total other activities goodwill and other intangibles	$	512.8	$	25.8	$	487.0	$	183.9	$	3.6	$	180.3

Alleghany consolidated:
Goodwill	$	285.0	$	-	$	285.0	$	141.0	$	-	$	141.0
Intangible assets		705.6		326.9		378.7		520.7		307.9		212.8

Goodwill and other intangibles assets	$	990.6	$	326.9	$	663.7	$	661.7	$	307.9	$	353.8

(1)	Goodwill and intangible assets have been reduced by amounts written-down in prior periods.

(2)	See Note 13 for additional information on Alleghany’s segments of business.

(3)

Primarily represents goodwill and other intangible assets related to the acquisition of: (i) Jazwares on April 15, 2016; (ii) IPS on October 31, 2015; (iii) Bourn & Koch on April 26, 2012; and (iv) a controlling equity interest in Kentucky Trailer on August 30, 2013. Also reflects minor acquisitions made by Jazwares and Bourn & Koch in 2016 and Kentucky Trailer in 2015 and 2014.

Trade names and state and foreign insurance licenses have an indefinite useful life. The economic useful lives of significant intangible assets in the reinsurance and insurance segments are as follows: agency relationships — 15 years; brokerage and reinsurance relationships — 15 years; renewal rights — between five and 14 years; loss and LAE reserves — 15 years; leases — 10 years; and internally developed software — 2.5 years. The economic useful life of license agreements is 8 years.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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