XML 137 R14.htm IDEA: XBRL DOCUMENT

Goodwill

9 Months Ended

Sep. 30, 2012

7. Goodwill

The Company tests goodwill for impairment during the third quarter of each year at the reporting unit level based upon data at June 30 of that year. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. Step 1 of the goodwill impairment process requires a comparison of the fair value of a reporting unit to its carrying value. To determine the fair values for our reporting units, the Company generally applies a market multiple and/or DCF valuation approach. The market multiple valuation approach utilizes market multiples of companies with similar businesses and the projected operating earnings of the reporting unit. The DCF valuation approach requires judgments about revenues, operating earnings projections, capital market assumptions and discount rates.

Since the market multiple and DCF valuation techniques indicated that the fair value of the Retail Annuities reporting unit was below its carrying value, an actuarial appraisal, which estimates the net worth of the reporting unit, the value of existing business and the value of new business, was also performed. This appraisal also resulted in a fair value of the Retail Annuities reporting unit that was less than the carrying value, indicating a potential for goodwill impairment. The growing concern regarding an extended period of low interest rates was reflected in the fair value estimate, particularly on the returns a market buyer would assume on the fixed income portion of separate account annuity products. In addition, industry-wide inquiries by regulators on the use of affiliated captive reinsurers for off-shore entities to reinsure insurance risks may limit access to this type of capital structure. As a result, a market buyer may discount the ability to fully utilize these structures, which also affected the fair value estimate of the reporting unit. Accordingly, the Company performed Step 2 of the goodwill impairment process, which compares the implied fair value of goodwill with the carrying value of that goodwill in the reporting unit to calculate the amount of goodwill impairment. The Company determined that all of the recorded goodwill associated with the Retail Annuities reporting unit was not recoverable and recorded a non-cash charge of $1.9 billion ($1.6 billion, net of income tax) for the impairment of the entire goodwill balance in the interim condensed consolidated statements of operations and comprehensive income for both the three months and nine months ended September 30, 2012.

In addition, the Company performed its annual goodwill impairment tests of its other reporting units during the third quarter of 2012 using a market multiple and/or DCF valuation approach based upon data at June 30, 2012 and concluded that the fair values of all such reporting units were in excess of their carrying values and, therefore, goodwill was not impaired.

As anticipated, in the third quarter of 2012, the Company continued to realign certain products and businesses among its existing segments. As a result, the Company reallocated goodwill from the former segments to and among the new segments based on the relative fair value method as shown in the below table under “Goodwill Transfers.” As a result of the realignment during the third quarter, the Company performed an analysis to identify all reporting units under the revised structure. Based on a qualitative assessment performed, the Company concluded that at September 30, 2012 there were no indicators of a scenario in which it was more likely than not that any reporting units had a carrying value that exceeded fair value, and thus, no further impairment analysis was performed.

Management continues to evaluate current market conditions that may affect the estimated fair value of the reporting units to assess whether any goodwill impairment exists. Deteriorating or adverse market conditions for certain reporting units may have a significant impact on the estimated fair value of these reporting units and could result in future impairments of goodwill.

The following table presents the changes in the net carrying amount of goodwill in each of the Company’s segments, as well as Corporate & Other, and the balances at:


	December 31, 2011		Goodwill Transfers			Impairments (1)			Effect of Foreign Currency Translation and Other			September 30, 2012
	(In millions)
Retail	$	2,955	$	170		$	(1,692	)	$	—		$	1,433
Group, Voluntary & Worksite Benefits		308		(170	)		—			—			138
Corporate Benefit Funding		900		—			—			—			900
Latin America		501		—			—			30			531
Asia (2)		5,443		90			—			(50	)		5,483
EMEA		1,423		(90	)		—			(23	)		1,310
Corporate & Other (3)		405		—			(176	)		—			229

Total	$	11,935	$	—		$	(1,868	)	$	(43	)	$	10,024

(1)

At September 30, 2012, the Company’s accumulated goodwill impairment loss was $1.9 billion, of which $1.7 billion was recorded in Retail and $241 million was recorded in Corporate & Other. At December 31, 2011, the Company’s accumulated goodwill impairment loss of $65 million, recorded in Corporate & Other, was related to acquisitions by MetLife Bank and such charge was included in net investment gains (losses) for both the three months and nine months ended September 30, 2011.

(2)	Includes goodwill of $5.3 billion and $5.4 billion from the Japan operations at September 30, 2012 and December 31, 2011, respectively.

(3)

The $405 million of net goodwill in Corporate & Other at December 31, 2011, relates to goodwill acquired as a part of the 2005 Travelers acquisition. For purposes of goodwill impairment testing, the $405 million of Corporate & Other goodwill was allocated to business units of the Retail; Group, Voluntary & Worksite Benefits; and Corporate Benefit Funding segments in the amounts of $210 million, $9 million and $186 million, respectively. The Retail segment amount was further allocated within the segment to the Life & Other and the Annuities reporting units in the amounts of $34 million and $176 million, respectively. As reflected in the table, the $176 million related to the Retail Annuities reporting unit was impaired in the third quarter of 2012.