Intangible Assets and Goodwill

7. Intangible Assets and Goodwill

The composition of the intangible assets is summarized as follows:


(Amounts in Thousands) As of December 31, 2011	Gross Balance		Accumulated Amortization		Net Value		Useful Life
Goodwill	$	147,654	$	—	$	147,654		Indefinite Life
Renewal rights		14,680		3,150		11,530		7 – 17 years
Covenant not to compete		7,756		4,569		3,187		3 – 9 years
Distribution networks		63,542		14,754		48,788		10 – 20 years
Software		2,305		2,028		277		20 years
Customer relationships		23,263		4,595		18,668		5 – 10 years
Trademarks		5,124		2,105		3,019		2 – 15 years
Trademarks		3,433		—		3,433		Indefinite Life
License		408		27		381		50 years
Licenses		14,340		—		14,340		Indefinite Life
Contractual use rights		98,306		37,405		60,901		Specific use
Other		2,755		317		2,438		4 years
Total	$	383,566	$	68,950	$	314,616		9 years average


(Amounts in Thousands) As of December 31, 2010	Gross Balance		Accumulated Amortization		Net Value		Useful Life
Goodwill	$	106,220	$	—	$	106,220		Indefinite Life
Renewal rights		7,780		2,373		5,407		7 – 17 years
Covenant not to compete		7,756		2,545		5,211		3 – 9 years
Distribution networks		57,817		10,138		47,679		10 – 20 years
Software		2,304		2,006		298		20 years
Customer relationships		6,395		3,439		2,956		5 – 10 years
Trademarks		3,820		1,176		2,644		2 – 15 years
Trademarks		3,433		—		3,433		Indefinite Life
License		408		16		392		50 years
Licenses		14,340		—		14,340		Indefinite Life
Contractual use rights		16,309		7,063		9,246		2 – 3 years
Total	$	226,582	$	28,756	$	197,826		12 years average

The changes in the carrying amount of goodwill by segment for the years ended December 31, 2011 and 2010 are as follows:


(Amounts in Thousands)	Small Commercial Business		Specialty Risk and Extended Warranty			Specialty Program		Total
Balance as of January 1, 2010	$	42,816	$	5,020		$	5,320	$	53,156
Goodwill additions		4,872		48,342			—		53,214
Foreign currency translation		—		(150	)		—		(150	)
Balance as of January 1, 2011	$	47,688	$	53,212		$	5,320	$	106,220
Goodwill additions		9,854		23,288			8,300		41,442
Foreign currency translation		—		(9	)		—		(9	)
Balance as of December 31, 2011	$	57,542	$	76,491		$	13,620	$	147,653

Goodwill added during 2011 resulted primarily from the acquisition of Cardinal Comp and other adjustments for deferred tax liabilities in the Small Commercial Business segment, the finalization of purchase adjustments for Warrantech in the Specialty Risk and Extended Warranty segment and contingent consideration related to a Specialty Program business. Goodwill added during 2010 resulted primarily from the acquisitions of Risk Services and Warrantech.

Goodwill and intangible assets are subject to annual impairment testing. No impairment was recorded during the years ended December 31, 2011, 2010 and 2009. Finite lived intangible assets are amortized under the straight-line method, except for renewal rights, which the Company amortizes using a 125% accelerated method, and contractual use rights, which are amortized based on actual use. Amortization expense for 2011, 2010 and 2009 was $40,194, $14,305 and $4,023, respectively. The estimated aggregate amortization expense for each of the next five years is:


(Amounts in Thousands)
2012	$	32,073
2013		30,588
2014		27,921
2015		7,638
2016		5,741

- 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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