AIG 2015 Annual Report Download - page 295

ITEM 8 / NOTE 11. GOODWILL

295
goodwill. The estimate of a reporting unit’s fair value involves management judgment and is based on one or a combination of
approaches including discounted expected future cash flows, market-based earnings multiples of the unit’s peer companies,
external appraisals or, in the case of reporting units being considered for sale, third-party indications of fair value, if available.
We consider one or more of these estimates when determining the fair value of a reporting unit to be used in the impairment
test.
If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the carrying value of a
reporting unit exceeds its estimated fair value, goodwill associated with that reporting unit potentially is impaired. The amount
of impairment, if any, is measured as the excess of the carrying value of the goodwill over the implied fair value of the goodwill.
The implied fair value of the goodwill is measured as the excess of the fair value of the reporting unit over the amounts that
would be assigned to the reporting unit’s assets and liabilities in a hypothetical business combination. An impairment charge is
recognized in earnings to the extent of the excess of carrying value over fair value.
Goodwill was not impaired at December 31, 2015 based on the results of the goodwill impairment test.
The following table presents the changes in goodwill by reportable segment:
(in millions) Commercial Consumer Other Total
Balance at January 1, 2013:
Goodwill - gross $ 2,444 $ 2,502 $ - $ 4,946
Accumulated impairments (1,266) (2,211) - (3,477)
Net goodwill 1,178 291 - 1,469
Increase (decrease) due to:
Other 6- -6
Balance at December 31, 2013:
Goodwill - gross 2,450 2,502 - 4,952
Accumulated impairments (1,266) (2,211) - (3,477)
Net goodwill 1,184 291 - 1,475
Increase (decrease) due to:
Acquisition -28 -28
Other (49) - - (49)
Balance at December 31, 2014:
Goodwill - gross 2,401 2,530 - 4,931
Accumulated impairments (1,266) (2,211) - (3,477)
Net goodwill 1,135 319 - 1,454
Increase (decrease) due to:
Acquisition 96 82 30 208
Other (50) 1 -(49)
Balance at December 31, 2015:
Goodwill - gross 2,447 2,613 30 5,090
Accumulated impairments (1,266) (2,211) -(3,477)
Net goodwill $1,181 $402 $ 30 $1,613
12. INSURANCE LIABILITIES
Liability for Unpaid Losses and Loss Adjustment Expenses
The liability for unpaid losses and loss adjustment expenses represents the accumulation of estimates of unpaid claims,
including estimates for claims incurred but not reported and claim adjustments expenses, less applicable discount for future
investment income. We continually review and update the methods used to determine loss reserve estimates and to establish
the resulting reserves. Any adjustments resulting from this review are reflected currently in pre-tax income. Because these