The Hartford 2011 Annual Report Download - page 189

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-54
8. Goodwill and Other Intangible Assets
Goodwill
Accounting Policy
Goodwill represents the excess of costs over the fair value of net assets acquired. Goodwill is not amortized but is reviewed for
impairment at least annually or more frequently if events occur or circumstances change that would indicate that a triggering event for a
potential impairment has occurred. During the fourth quarter of 2011, the Company changed the date of its annual impairment test for all
reporting units to October 31st from January 1st for Wealth Management reporting units, June 30th for Federal Trust Corporation within
Corporate, and October 1st for Property & Casualty Commercial and Consumer Markets. As a result, all reporting units performed an
impairment test on October 31, 2011 in addition to the annual impairment tests performed on January 1st or October 1st as applicable.
The change was made to be consistent across all reporting units and to more closely align the impairment testing date with the long-
range planning and forecasting process. The Company has determined that this change in accounting principle is preferable under the
circumstances and does not result in any delay, acceleration or avoidance of impairment. As it was impracticable to objectively
determine projected cash flows and related valuation estimates as of each October 31 for periods prior to October 31, 2011, without
applying information that has been learned since those periods, the Company has prospectively applied the change in the annual
goodwill impairment testing date from October 31, 2011.
The goodwill impairment test follows a two-step process. 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. If the carrying amount of the reporting unit’ s goodwill exceeds the implied
goodwill value, an impairment loss is recognized in an amount equal to that excess.
Management’ s determination of the fair value of each reporting unit incorporates multiple inputs into discounted cash flow calculations,
including assumptions that market participants would make in valuing the reporting unit. Assumptions include levels of economic
capital, future business growth, earnings projections and assets under management for certain Wealth Management reporting units and
the weighted average cost of capital used for purposes of discounting. In the case of one business unit, a market comparison approach is
used to determine fair value. 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 a reporting unit’ s fair value to
decrease.
Goodwill within Corporate is primarily attributed to the Company’ s “buy-back” of Hartford Life, Inc. in 2000 and was allocated to each
of Hartford Life’ s reporting units based on the reporting unit’ s fair value of in-force business at the buy-back date. Although this
goodwill was allocated to each reporting unit, it is held in Corporate for segment reporting.
Results
The carrying amount of goodwill allocated to reporting segments is as follows:
December 31, 2011
December 31, 2010
Gross
Accumulated
Impairments
Discontinued
Operations[1]
Carrying
Value Gross
Accumulated
Impairments
Discontinued
Operations[1]
Carrying
Value
Commercial Markets
Property & Casualty
Commercial
$
30
$
(30)
$
—
$
—
$
30
$
—
$
—
$
30
Consumer Markets
119
—
—
119
119
—
—
119
Wealth Management
Individual Life
224
––
—
224
224
––
—
224
Retirement Plans
87
—
—
87
87
—
—
87
Mutual Funds
159
—
—
159
159
—
—
159
Total Wealth
Management 470 –– — 470 470
––
— 470
Corporate
787
(355)
(15)
417
940
(355)
(153)
432
Total Goodwill
$
1,406
$
(385)
$
(15)
$
1,006
$
1,559
$
(355)
$
(153)
$
1,051
[1] Represents goodwill written off related to Federal Trust Corporation which is currently recorded in discontinued operations.