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Investment in Unconsolidated Affiliate
9 Months Ended
Sep. 30, 2017
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Unconsolidated Affiliate
Investment in Unconsolidated Affiliate
The Company owns a 49% interest in StoneRiver Group, L.P. (“StoneRiver”), which is accounted for as an equity method investment, and reports its share of StoneRiver’s net income as income from investment in unconsolidated affiliate. During the first quarter of 2017, StoneRiver recognized a gain on the sale of a business. The Company’s pre-tax share of the gain was $26 million with related tax expense of $9 million. During the first nine months of 2017, the Company received cash dividends of $44 million from StoneRiver, which were funded from recent sale transactions and recorded as reductions in the Company’s investment in StoneRiver. These dividends exceeded the Company’s investment carrying amount, resulting in the reduction of its investment balance to zero, with the excess cash dividend of $5 million recorded as income, with related tax expense of $2 million, for the three and nine months ended September 30, 2017.
During the first quarter of 2016, StoneRiver recognized a gain on the sale of a business interest in which the Company’s pre-tax share of this gain was $190 million. During the first quarter of 2016, the Company also received cash dividends of $140 million from StoneRiver, which were funded from the sale transaction and recorded as reductions in the Company’s investment in StoneRiver. In conjunction with this activity, the Company evaluated its equity method investment in StoneRiver for its ability to recover the remaining carrying amount of such investment. Utilizing a discounted cash flow analysis (level 3 of the fair value hierarchy) to arrive at a measure of the investment’s fair value, the Company recognized an impairment loss of $44 million. The Company’s pre-tax share of the gain, net of the impairment loss, was $146 million, with related tax expense of $54 million. The Company’s investment in StoneRiver was $14 million at December 31, 2016 and is reported within other long-term assets in the consolidated balance sheet.
The Company’s pre-tax share of net gains on sale transactions and income from excess cash dividends are reported within income from investment in unconsolidated affiliate, with the related tax expense reported within the income tax provision, in the consolidated statements of income. The dividends, in their entirety, represented returns on the Company’s investment and are reported in cash flows from operating activities.