Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Other Intangible Assets disclosure

Goodwill and Other Intangible Assets disclosure [Text Block]

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following table presents the carrying amount of the Company's goodwill by segment. Each reportable segment includes goodwill associated with the Company's international business which is subject to the impact of changes in foreign currency exchange rates.

(at December 31, in millions)	2017		2016

Business Insurance(1)	$	2,585	$	2,227
Bond & Specialty Insurance		550		549
Personal Insurance		790		778
Other		26		26

Total	$	3,951	$	3,580

(1): On August 4, 2017, the Company acquired Simply Business for strategic opportunities related to the potential growth of the small commercial business market through advancements in its product and underwriting technology, including a distribution model that provides the capability to better assess and prepare for the demands of small business owners who prefer to shop, purchase and service their insurance needs online. At December 31, 2017, goodwill related to the acquisition of Simply Business was $354 million. The total amount of goodwill expected to be deductible for tax purposes related to Simply Business is $466 million, which includes certain acquisition costs and intangible assets.

Other Intangible Assets

The following tables present a summary of the Company's other intangible assets by major asset class:

(at December 31, 2017, in millions)	Gross Carrying Amount		Accumulated Amortization		Net

Subject to amortization
Customer-related	$	77	$	4	$	73
Contract-based(1)		209		167		42

Total subject to amortization		286		171		115
Not subject to amortization		227		—		227

Total	$	513	$	171	$	342

(at December 31, 2016, in millions)	Gross Carrying Amount		Accumulated Amortization		Net

Subject to amortization
Contract-based(1)	$	210	$	159	$	51

Total subject to amortization		210		159		51
Not subject to amortization		217		—		217

Total	$	427	$	159	$	268

(1): Contract-based intangible assets subject to amortization are comprised of fair value adjustments on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangible assets. Customer-related intangible assets were not material as of December 31, 2016. Fair value adjustments recorded in connection with insurance acquisitions were based on management's estimate of nominal claims and claim adjustment expense reserves and reinsurance recoverables. The method used calculated a risk adjustment to a risk-free discounted reserve that would, if reserves ran off as expected, produce results that yielded the assumed cost-of-capital on the capital supporting the loss reserves. The fair value adjustments are reported as other intangible assets on the consolidated balance sheet, and the amounts measured in accordance with the acquirer's accounting policies for insurance contracts have been reported as part of the claims and claim adjustment expense reserves and reinsurance recoverables. The intangible assets are being recognized into income over the expected payment pattern. Because the time value of money and the risk adjustment (cost of capital) components of the intangible assets run off at different rates, the amount recognized in income may be a net benefit in some periods and a net expense in other periods.

Amortization expense of intangible assets was $13 million, $11 million and $26 million for the years ended December 31, 2017, 2016 and 2015, respectively. Intangible asset amortization expense is estimated to be $15 million in 2018, $14 million in 2019, $13 million in 2020, $12 million in 2021 and $11 million in 2022.

- 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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