Goodwill and other intangible assets Goodwill and other intangible assets

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets [Text Block]

Goodwill and other intangible assets

At March 31, 2016 and December 31, 2015, goodwill was $15.4 billion and $4.8 billion, respectively, and Other intangible assets were $8.0 billion and $887 million, respectively. The increase in goodwill and Other intangible assets reflects the goodwill and intangible assets recorded in connection with the Chubb Corp acquisition. The preliminary purchase price allocation to intangible assets recorded in connection with the Chubb Corp acquisition and their related useful lives are as follows:



(in millions of U.S. dollars)	Amount		Estimated useful life
Definite life
Unearned premium reserves (UPR) intangible asset	$	1,550	1 year
Agency distribution relationships and renewal rights	3,150		24 years
Internally developed technology	95		3 years
Indefinite life
Trademarks	2,800		Indefinite
Licenses	50		Indefinite
Syndicate capacity	10		Indefinite
Total identified intangible assets	$	7,655

At the date of acquisition, we recorded a deferred tax liability of $2,679 million associated with intangible assets in the table above. At March 31, 2016, the deferred tax liability balance was $2,465 million.

Additionally, in connection with the Chubb Corp acquisition, we recorded an increase to unpaid losses and loss expenses acquired as part of Chubb Corp of $715 million to adjust the carrying value of Chubb Corp's historical unpaid losses and loss expenses to fair value as of the acquisition date. The estimated fair value consists of the present value of the expected net unpaid loss and loss adjustment expenses payments adjusted for an estimated risk margin. The expected cash flows are discounted at a risk free rate. The estimated risk margin varies based on the inherent risks associated with each type of reserve. This fair value adjustment was recorded within Unpaid losses and loss expenses on the Consolidated balance sheets and will amortize through Amortization of purchased intangibles on the consolidated statements of operations over a range of 5 to 17 years, based on the estimated payout patterns of unpaid loss and loss expenses as of the acquisition date.

The following table presents, as of March 31, 2016, the expected estimated pre-tax amortization expense related to purchased intangibles as well as the amortization of the fair value adjustment to loss reserve described above:



	Associated with the Chubb Corp Acquisition
For the Year Ending December 31 (in millions of U.S. dollars)	Agency distribution relationships and renewal rights		Internally developed technology		Fair Value adjustment to Unpaid losses and loss expense			Total			Other intangible assets		Total amortization of purchased intangibles
Second quarter of 2016	$	33	$	8	$	(61	)	$	(20	)	$	21	$	1
Third quarter of 2016	33		8		(61		)	(20		)	21		1
Fourth quarter of 2016	33		8		(61		)	(20		)	21		1
2017	293		32		(160		)	165			79		244
2018	320		32		(101		)	251			70		321
2019	279		—		(62		)	217			64		281
2020	239		—		(35		)	204			58		262
2021	216		—		(20		)	196			52		248
Total	$	1,446	$	88	$	(561	)	$	973		$	386	$	1,359

As noted above, the deferred tax liability balance at March 31, 2016 was $2,465 million. The following table presents the expected reduction to the deferred tax liability, which assumed an expected 35 percent tax rate, associated with the amortization of the Chubb Corp purchased intangible assets. In addition, the table presents the expected amortization pattern of the UPR intangible asset.



	Chubb Corp acquisition
For the Year Ending December 31 (in millions of U.S. dollars)	Reduction to deferred tax liability associated with other intangibles			Amortization of UPR intangible asset to be recorded through Policy acquisition costs on the income statement
Second quarter of 2016	$	(196	)	$	518
Third quarter of 2016	(126		)	319
Fourth quarter of 2016	(65		)	143
2017	(114		)	—
2018	(123		)	—
2019	(98		)	—
2020	(84		)	—
2021	(75		)	—
Total	$	(881	)	$	980

The following table presents a roll-forward of Goodwill by segment:



(in millions of U.S. dollars)	North America Commercial P&C Insurance		North America Personal P&C Insurance		North America Agricultural Insurance		Overseas General Insurance		Global Reinsurance		Life Insurance		Chubb Consolidated
Balance at December 31, 2015	$	1,203	$	196	$	134	$	2,078	$	365	$	820	$	4,796
Acquisition of Chubb Corp	5,667		2,025		—		2,753		—		—		10,445
Foreign exchange revaluation and other	40		13		—		109		—		1		163
Balance at March 31, 2016	$	6,910	$	2,234	$	134	$	4,940	$	365	$	821	$	15,404

- 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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