The Hartford 2008 Annual Report Download - page 109

Table of Contents
Goodwill Impairment
SFAS No. 142, “Goodwill and Other Intangible Assets,” requires that goodwill balances be reviewed for impairment at least
annually or more frequently if events occur or circumstances change that would indicate that a triggering event, as defined in
SFAS 142, has occurred. A reporting unit is defined as an operating segment or one level below an operating segment. Most
of the Company’s reporting units, for which goodwill has been allocated, are equivalent to the Company’s operating
segments as there is no discrete financial information available for the separate components of the segment or all of the
components of the segment have similar economic characteristics. The fixed and variable annuity components of Individual
Annuity have been aggregated into one reporting unit; the 401(k), 457 and 403(b) components of Retirement have been
aggregated into one reporting unit; the variable life, universal life and term life components of Individual Life have been
aggregated into one reporting unit; the private placement life insurance and institutional investment products components of
the Institutional Solutions Group have been aggregated into one reporting unit; the group disability and group life
components of Group Benefits have been aggregated into one reporting unit; the Japan, Brazil and U.K. components of
International have been aggregated into one reporting unit, and the homeowners and automobile components of Personal
Lines have been aggregated into one reporting unit. In circumstances where the components of an operating segment
constitute a business for which discrete financial information is available and segment management regularly reviews the
operating results of that component such as with Other Retail, which combined with Individual Annuity constitutes the
Retail operating segment, and Hartford Financial Products, the Company has classified those components as reporting units.
As of December 31, 2008, the Company had goodwill allocated to the following reporting units:
Segment Goodwill Goodwill in Corporate Total
Other Retail $ 159 $ 92 $ 251
Retirement Plans [1] 79 69 148
Institutional Solutions Group — 32 32
Individual Life 224 118 342
Group Benefits — 138 138
Personal Lines 119 — 119
Hartford Financial Products within Specialty
Commercial 30 — 30
Total $ 611 $ 449 $ 1,060
[1] In 2008, the Company completed three acquisitions that resulted in additional goodwill of $79 in Retirement Plans.
As of December 31, 2007, the Company had goodwill allocated to the following reporting units:
Segment Goodwill Goodwill in Corporate Total
Individual Annuity $ 422 $ 308 $ 730
Other Retail 159 92 251
Retirement Plans — 69 69
Institutional Solutions Group — 32 32
Individual Life 224 118 342
Group Benefits — 138 138
International — 15 15
Personal Lines 119 — 119
Hartford Financial Products within Specialty
Commercial 30 — 30
Total $ 954 $ 772 $ 1,726
The goodwill impairment test follows a two step process as defined in SFAS 142. In the first step, the fair value of a
reporting unit is compared to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the second
step of the impairment test is performed for purposes of measuring the impairment. In the second step, the fair value of the
reporting unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. This
allocation is similar to a purchase price allocation performed in purchase accounting. If the carrying amount of the reporting
unit goodwill exceeds the implied goodwill value, an impairment loss shall be recognized in an amount equal to that excess.
Management’s determination of the fair value of each reporting unit incorporates multiple inputs including discounted cash
flow calculations, peer company price to earnings multiples, the level of the Company’s own share price and assumptions
that market participants would make in valuing the reporting unit. Other assumptions include levels of economic capital,
future business growth, earnings projections, assets under management for Life reporting units and the weighted average
cost of capital used for purposes of discounting. Decreases in the amount of economic capital allocated to a reporting unit,
decreases in business growth, decreases in earnings projections and increases in the weighted average cost of capital will all
cause the reporting unit’s fair value to decrease.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009