Goodwill and Intangible Assets, net

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

The Company conducts impairment testing for goodwill at least annually, or more often if events, changes or circumstances indicate that the carrying amount may not be recoverable. See Item 8, Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for further description of impairment testing.

The annuity reinsurance transaction described in Note 6 triggered the requirement to evaluate the goodwill associated with the annuity business of the Retirement segment. For the evaluation, the fair value of the Retirement segment was measured using a discounted cash flow method. The carrying value exceeded the fair value, resulting in a $28,025 thousand non-cash impairment charge during the quarter ended June 30, 2019 which represented the entire balance of the goodwill associated with the annuity business of the Retirement segment. The impairment charge was reported as Other expense in the Consolidated Statement of Operations.

The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2019 were as follows:



($ in thousands)	December 31, 2018		Impairment			Acquisitions		September 30, 2019
Property and Casualty	$	9,460	$	—		$	—	$	9,460
Supplemental ⁽¹⁾	—		—			19,286		19,286
Retirement	28,025		(28,025		)	10,087		10,087
Life	9,911		—			—		9,911
Total	$	47,396	$	(28,025	)	$	29,373	$	48,744

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⁽¹⁾	Based on preliminary purchase price allocation.

As of September 30, 2019, the outstanding amounts of definite-lived intangible assets subject to amortization are attributable to the acquisitions of BCG and NTA during 2019. The acquisition of BCG resulted in initial recognition of definite-lived intangible assets subject to amortization in the amount of $14,083 thousand and the acquisition of NTA resulted in initial recognition of definite-lived intangible assets subject to amortization in the amount of $160,313 thousand. As of September 30, 2019 the outstanding amounts of definite-lived intangible assets subject to amortization were as follows:



($ in thousands)	Useful Life (in Years)
At inception:
Value of business acquired	17 - 35	$	94,419
Value of distribution acquired	16 - 17	53,996
Value of agency relationships	14	16,981
Value of customer relationships	10	9,080
Total		174,476
Accumulated amortization:
Value of business acquired		(1,844		)
Value of distribution acquired		(973		)
Value of agency relationships		(745		)
Value of customer relationships		(1,300		)
Total		(4,862		)
Net intangible assets subject to amortization:		$	169,614

In regards to the definite-lived intangible assets in the table above, the value of business acquired intangible asset represents the present value of the expected underwriting profit within policies that were inforce on the date of acquisition. The value of distribution acquired intangible asset represents the present value of future business to be written by the existing agency force. The value of agency relationships intangible asset represents the present value of the commission overrides retained by NTA. The value of customer relationships intangible asset represents the present value of the expected profits from existing BCG customers in force at the date of acquisition. All of the aforementioned definite-lived intangible assets were valued using the income approach.

Estimated future amortization of the Company's definite-lived intangible assets were as follows:



($ in thousands)
Year Ending December 31,
2019 (excluding the nine months ended September 30, 2019)	$	3,920
2020	14,471
2021	13,396
2022	12,420
2023	11,566
2024	10,796
Thereafter	103,045
Total	$	169,614

The value of business acquired intangible asset is being amortized by product based on the present value of future premiums to be received. The value of distribution acquired intangible asset is being amortized on a straight-line basis. The value of agency relationships intangible asset in being amortized based on the present value of future premiums to be received. The value of customer relationships intangible asset is being amortized based on the present value of future profits to be received.

Indefinite-lived intangible assets (not subject to amortization) as of September 30, 2019 were as follows:



($ in thousands)
Trade names	$	8,645
State licenses	2,886
Total	$	11,531

The trade names intangible asset represents the present value of future savings accruing NTA by virtue of not having to pay royalties for the use of the trade names, valued using the relief from royalty method. The state licenses intangible asset represents the regulatory licenses held by NTA that were valued using the cost approach.