Goodwill and other intangible assets

9 Months Ended

Sep. 30, 2011

Goodwill and other intangible assets [Abstract]

Note 5 — Goodwill and other intangible assets

The following is a summary of our goodwill and other intangible assets for our two reportable segments Pharmacy Benefit Management (“PBM”) and EM:


	September 30, 2011							December 31, 2010
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
(in millions)	Amount		Amortization			Amount		Amount		Amortization			Amount

Goodwill
PBM⁽¹⁾	$	5,512.3	$	(107.4	)	$	5,404.9	$	5,513.1	$	(107.4	)	$	5,405.7
EM⁽¹⁾		80.5		—			80.5		80.5		—			80.5

	$	5,592.8	$	(107.4	)	$	5,485.4	$	5,593.6	$	(107.4	)	$	5,486.2


Other intangible assets
PBM
Customer contracts	$	2,018.4	$	(457.5	)	$	1,560.9	$	2,018.7	$	(346.4	)	$	1,672.3
Other⁽²⁾		96.7		(23.9	)		72.8		20.8		(5.0	)		15.8

		2,115.1		(481.4	)		1,633.7		2,039.5		(351.4	)		1,688.1


EM
Customer relationships		68.4		(37.0	)		31.4		68.4		(32.2	)		36.2
Other		0.7		—			0.7		0.7		—			0.7

		69.1		(37.0	)		32.1		69.1		(32.2	)		36.9

Total other intangible assets	$	2,184.2	$	(518.4	)	$	1,665.8	$	2,108.6	$	(383.6	)	$	1,725.0


(1)		As discussed in Note 11 — Segment Information, during the third quarter of 2011 we reorganized our FreedomFP line of business from our EM segment into our PBM segment. All amounts at December 31, 2010 have been restated for comparability.

(2)		Changes in other intangible assets are a result of the capitalization of $65.0 million of deferred financing fees related to the bridge facility during the third quarter of 2011 and the capitalization of $10.9 million of deferred financing fees related to the issuance of the 2016 Senior Notes during the second quarter of 2011 (see Note 7 — Financing).

The aggregate amount of amortization expense of other intangible assets for our continuing operations was $55.3 million and $40.1 million for the three months ended September 30, 2011 and 2010, respectively and $135.0 million and $120.1 million for the nine months ended September 30, 2011 and 2010, respectively. In accordance with applicable accounting guidance, amortization for customer contracts related to our agreement to provide PBM services to members of the affiliated health plans of WellPoint has been included as an offset to revenues in the amount of $28.5 million for the three months ended September 30, 2011 and 2010 and $85.5 million for the nine months ended September 30, 2011 and 2010. The future aggregate amount of amortization expense of other intangible assets for our continuing operations is expected to be approximately $197.8 million for 2011, $187.8 million for 2012, $159.1 million for 2013, $153.5 million for 2014 and $135.3 million for 2015. The weighted average amortization period of intangible assets subject to amortization is 14 years in total, and by major intangible class is 5 to 20 years for customer-related intangibles and nine months to 10 years for other intangible assets.

A summary of the change in the net carrying value of goodwill by business segment is shown in the following table:


(in millions)	PBM			EM		Total

Balance at December 31, 2010	$	5,405.7		$	80.5	$	5,486.2
Foreign currency translation		(0.8	)		—		(0.8	)

Balance at September 30, 2011	$	5,404.9		$	80.5	$	5,485.4

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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