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Acquisitions, Dispositions and Goodwill

9 Months Ended

Sep. 30, 2013

(5) Goodwill

The goodwill balances by reportable segment and the changes in goodwill are shown in the table below.

	U.S. Property		Professional		Accident		U.S. Surety
	& Casualty		Liability		& Health		& Credit		International		Total

Balance at beginning of year	$	223,000	$	314,089	$	144,113	$	79,700	$	124,958	$	885,860
Earnout and other		0		9,010		0		0		(19)		8,991
Balance at September 30, 2013	$	223,000	$	323,099	$	144,113	$	79,700	$	124,939	$	894,851

We acquired HCC Global Financial Products (HCC Global), which underwrites our U.S. and International directors' and officers' liability business, in 2002. The purchase agreement, as amended, includes a contingency for future earnout payments. The earnout is based on HCC Global's pretax earnings on business written from the acquisition date through September 30, 2007, with no maximum amount due to the former owners. When conditions specified under the purchase agreement are met, we record a net amount owed to or due from the former owners based on our estimate, at that point in time, of how claims will ultimately be settled. This net amount will fluctuate in the future, and the ultimate total net earnout payments cannot be finally determined until all claims are settled or paid. In 2013, we increased goodwill by $9.0 million for additional earnout earned under the purchase agreement.

We conducted our 2013 goodwill impairment test as of June 30, 2013, which is consistent with the timeframe for our annual assessment in prior years. Based on our latest assessment, the fair value of each reporting unit exceeded its carrying amount.