The Hartford 2008 Annual Report Download - page 111

Table of Contents
However, as noted above, goodwill is reassessed at an interim date if certain circumstances occur which would cause the
entity to conclude that it was more likely than not that the carrying value of one or more of its reporting units would be in
excess of the respective reporting unit’s fair value. As a result of the sharp decline in the equity markets during the fourth
quarter of 2008 and a sharp decline in The Hartford’s share price below book value per share, the Company concluded, in
connection with the preparation of its year end financial statements, that the conditions had been met to warrant an interim
goodwill impairment test.
The Company believes one of the significant drivers in the decline of its traded per share price is the risks associated with
the death and living benefit guarantees offered with the products sold by the Individual Annuity and International reporting
units and the related U.S. GAAP and statutory requirements.
As a result of the testing performed during the fourth quarter of 2008, which included the effects of decreasing sales
outlooks and declining equity markets on future earnings, the fair value for each reporting unit continued to be in excess of
the respective reporting unit’s carrying value except for the Life Individual Annuity and International reporting units. For
both of these reporting units, the Company concluded that the fair value of the reporting unit had declined significantly, as
evidenced by the decline in the Company’s share price, due to the significant risks associated with the product suite
discussed above. As a result of the step 2 analysis, the allocation of the fair value of the Individual Annuity and International
reporting units to their respective assets and liabilities as of December 31, 2008 indicated an implied level of goodwill of $0
for both reporting units. Therefore, the Company recorded an impairment charge of $730 and $15 of goodwill which had
been allocated to the Individual Annuity and International reporting units, respectively.
The goodwill impairment charge of $745 included $323 that had resulted from the Company’s buyback of the Life
operations in 2000. The buyback goodwill was reported in Corporate but had been allocated to Life reporting units for
purposes of goodwill impairment testing, including $308 to Individual Annuity and $15 to International. This portion of the
impairment was recorded in Corporate. The remaining impairment charge of $422 was recorded in Individual Annuity and
related to the Company’s prior acquisitions of Planco, Inc. and Fortis Financial Group, Inc.
If current market conditions persist during 2009, in particular, if the Company’s share price remains below book value per
share, or if the Company’s actions to limit risk associated with its products or investments causes a significant change in any
one reporting unit’s fair value, the Company may need to reassess goodwill impairment at the end of each quarter as part of
an annual or interim impairment test. Subsequent reviews of goodwill could result in additional impairment of goodwill
during 2009.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009