Goodwill and Intangible Assets

The following table presents the components of goodwill by reportable segment. Prior year amounts have been recast for consistency with the current year presentation.



(dollars in thousands)	Insurance			Reinsurance		Markel Ventures			Other⁽¹⁾			Total
January 1, 2017	$	672,763		$	122,745	$	237,767		$	108,973		$	1,142,248
Acquisitions (see note 2)	93,123			—		186,194			347,418			626,735
Foreign currency movements and other adjustments	5,935			—		1,020			1,526			8,481
December 31, 2017 ⁽²⁾	$	771,821		$	122,745	$	424,981		$	457,917		$	1,777,464
Acquisitions (see note 2)	—			—		73,174			474,901			548,075
Impairment of goodwill	—			—		—			(91,910		)	(91,910		)
Foreign currency movements and other adjustments	(1,637		)	—		(817		)	6,800			4,346
December 31, 2018 ⁽²⁾	$	770,184		$	122,745	$	497,338		$	847,708		$	2,237,975


⁽¹⁾	Amounts included in Other reflect the Company's operations that are not included in a reportable segment.


⁽²⁾	As of December 31, 2018, goodwill was net of accumulated impairment losses of $139.2 million, of which $91.9 million was in Other and $47.3 million was in Markel Ventures. As of December 31, 2017, goodwill was net of accumulated impairment losses of $47.3 million, all of which was included in Markel Ventures.

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually. The Company completes an annual test during the fourth quarter of each year based upon the results of operations through September 30. Total impairment of goodwill for the years ended December 31, 2018 and 2016 was $91.9 million and $18.7 million, respectively. There was no impairment of goodwill during 2017.

During the fourth quarter of 2018, the Company recorded a goodwill and intangible asset impairment charge at Markel CATCo Investment Management Ltd. (MCIM) totaling $179.0 million. In light of governmental inquiries into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Re Ltd. (Markel CATCo Re), an unconsolidated subsidiary managed by MCIM, and taking into consideration the departure of two senior MCIM executives and special redemption rights that are now being offered to investors in the Markel CATCo Funds, as defined in note 16, and all of which is further described in note 18, the Company concluded MCIM’s ability to maintain or raise capital has been adversely impacted. As a result, the Company performed an assessment of the recoverability of goodwill and intangible assets at the MCIM reporting unit as of December 31, 2018. As a result of the assessment, the Company reduced the carrying value of the goodwill and intangible assets of the MCIM reporting unit to zero, which resulted in a goodwill impairment charge of $91.9 million and an intangible asset impairment charge of $87.1 million, both of which were recorded to impairment of goodwill and intangible assets in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2018.

The Company estimated the fair value of the reporting unit, and resulting goodwill impairment loss, primarily using an income approach based on a discounted cash flow model. The discount rates used to determine the fair value estimates were developed based on the capital asset pricing model using market-based inputs as well as an assessment of the inherent risk in the projected cash flows. The cash flow projections used in the discounted cash flow model include management’s best estimate of future growth and margins. Significant assumptions in the discounted cash flow model used to determine the fair value of the MCIM reporting unit included the amount and timing of new investor capital being introduced, anticipated redemptions during 2019 in light of special redemption rights now being offered to investors in the Markel CATCo Funds, and other assumptions impacting the expected level of management fees to be earned by MCIM.

The MCIM intangible asset impairment of $87.1 million primarily related to intangible assets associated with MCIM’s investment management agreements with the Markel CATCo Funds. After determining that the intangible assets of MCIM were unrecoverable, the Company estimated the fair value of the intangible assets using an income approach based on an excess earnings model. In light of the special redemption rights that are now being offered to investors in the Markel CATCo Funds, the cash flows supporting the intangible assets have been adversely impacted.

During the fourth quarter of 2016, the Company recorded a goodwill impairment charge of $18.7 million to impairment of goodwill and intangible assets for one of Markel Ventures' industrial products reporting units, to reduce the carrying value of its goodwill to its implied fair value. Unfavorable market conditions, specifically declining oil prices from late 2014 through 2016 resulted in lower than expected earnings over a similar time period. The reporting unit's earnings are generally tied to infrastructure spending across global markets, a significant portion of which are influenced by the price of oil. To determine the value of the impairment loss, the Company estimated the fair value of the reporting unit primarily using an income approach based on a discounted cash flow model. While the cash flow projections, at that time, yielded positive cash flows and earnings in the long-term, they were insufficient to support the carrying value of the reporting unit due to the unfavorable impact of market conditions and recent trends on the Company's shorter-term projections. Following the impairment charge in 2016, the carrying value of the reporting unit's goodwill was reduced to zero.

The following table presents the components of intangible assets.



	December 31,
	2018					2017
(dollars in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer relationships	$	953,739	$	(204,261	)	$	941,477	$	(161,797	)
Investment management agreements	441,000		—			98,000		(14,000		)
Broker relationships	204,367		(78,559		)	184,959		(69,677		)
Trade names	193,154		(62,827		)	164,335		(59,660		)
Technology	109,208		(47,090		)	94,712		(44,489		)
Agent relationships	92,000		(10,175		)	92,000		(4,042		)
Insurance licenses	74,635		—			70,385		—
Renewal rights	21,053		(18,272		)	19,514		(17,681		)
Other	107,441		(49,217		)	111,633		(49,988		)
Total	$	2,196,597	$	(470,401	)	$	1,777,015	$	(421,334	)

During 2018, the Company recorded intangible asset impairment charges of $107.3 million, including $87.1 million related to MCIM, as described above, and $14.9 million related to one of the Markel Ventures industrial products businesses. See note 18.

Amortization of intangible assets was $115.9 million, $80.8 million and $68.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. Amortization of intangible assets is estimated to be $140.3 million for 2019, $137.2 million for 2020, $133.5 million for 2021, $130.1 million for 2022 and $128.4 million for 2023. Indefinite-lived intangible assets were $92.4 million at December 31, 2018 and $88.2 million at December 31, 2017.

For the year ended December 31, 2018, the Company acquired $608.3 million of intangible assets, of which $604.1 million is amortizable. The definite-lived intangible assets acquired are expected to be amortized over a weighted average period of 15 years. The definite-lived intangible assets acquired during 2018 include investment management relationships, customer relationships, trade names, broker relationships, technology and other intangible assets, which are expected to be amortized over a weighted average period of 16, 16, 15, 12, 6 and 5 years, respectively.