11. GOODWILL

Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is tested for impairment annually or more frequently if circumstances indicate an impairment may have occurred. We assess goodwill for impairment at one level below our reportable segments. At December 31, 2015, our principal reporting units with goodwill are Commercial Insurance - Property Casualty, Consumer Insurance - Personal Insurance, and Consumer Insurance - Life. When a business is transferred from one reporting unit to another, as occurred with the transfer of a portion of the Consumer Insurance - Personal Insurance to Consumer Insurance – Life, as part of the 2014 segment changes, goodwill at the original reporting unit is allocated among reporting units based on the fair value of business transferred, relative to business retained by a reporting unit.

The impairment assessment involves an option to first assess qualitative factors to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not performed, or after assessing the totality of the events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the impairment assessment involves a two-step process in which a quantitative assessment for potential impairment is performed.

If the qualitative test is not performed or if the test indicates a potential impairment is present, we estimate the fair value of each reporting unit and compare the estimated fair value with the carrying amount of the reporting unit, including allocated 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