NOTE 5. GOODWILL

Goodwill balances by business segment at December 31, 2012 and December 31, 2011 were:



DOLLARS IN MILLIONS	2012		2011
Kemper Preferred	$	49.6	$	49.6
Kemper Specialty	42.8		42.8
Life and Health Insurance	219.4		219.4
Total	$	311.8	$	311.8

The Company tests goodwill for recoverability on an annual basis at the beginning of the first quarter and, if circumstances or events indicate that the fair value of a reporting unit may have declined below its carrying value, such tests are performed at intervening interim periods. Accordingly, the Company tested goodwill associated with each of its reporting units for recoverability on January 1, 2012 and January 1, 2011. However, no goodwill was associated with, and, accordingly, no testing was required for the Kemper Direct segment. The Company principally used projections of discounted future cash flows to estimate the fair values of the reporting units tested. For each reporting unit tested, the estimated fair value exceeded the carrying value of the reporting unit, and the Company concluded that the associated goodwill was recoverable at the aforementioned dates tested.

Goodwill activity by business segment for the year ended December 31, 2010 is presented below.



DOLLARS IN MILLIONS	Balance at Beginning of Year		Write-off of Goodwill			Other			Balance at End of Year
Kemper Preferred	$	49.6	$	—		$	—		$	49.6
Kemper Specialty	42.8		—			—			42.8
Life and Health Insurance	239.4		(14.8		)	(5.2		)	219.4
Total	$	331.8	$	(14.8	)	$	(5.2	)	$	311.8

The Company tested goodwill associated with each of its reporting units for recoverability on January 1, 2010. The quoted value of Kemper’s common stock was significantly below the book value per share of the Company at September 30, 2010 and December 31, 2010. Accordingly, the Company also tested goodwill associated with each of its reporting units for recoverability at these intervening interim dates. However, no goodwill was associated with, and, accordingly, no testing was required for the Kemper Direct segment at any of the aforementioned dates in 2010. The Company principally used projections of discounted future cash flows to estimate the fair values of the reporting units tested. Except for the Company’s Reserve National reporting unit, for each reporting unit tested, the estimated fair value exceeded the carrying value of the reporting unit at January 1, 2010 and each of the aforementioned dates, and the Company concluded that the associated goodwill was recoverable at each aforementioned date tested.

NOTE 5. GOODWILL (continued)

With respect to the Company’s Reserve National reporting unit, the Company evaluated the goodwill associated with it at four different evaluation dates - January 1, 2010, March 31, 2010, June 30, 2010 and September 30, 2010. The company concluded that the associated goodwill was recoverable at each of the first three aforementioned dates tested. With respect to the September 30, 2010 test date, the Company determined that the goodwill was not recoverable and wrote off the entire $14.8 million of goodwill associated with Reserve National.