The following selected financial data is derived from our consolidated financial statements. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included under
For the year ended December 31, 2015, we reported net income of $163.2 million, or $5.72 per fully diluted share. For the year ended December 31, 2014, we reported net income of $183.2 million, or $6.27 per fully diluted share. For the year ended December 31, 2013, we reported net income of $143.2 million, or $4.67 per fully diluted share.
The increase in consolidated gross written premiums for the year ended December 31, 2015 as compared to the same period ended in 2014 was primarily the result of increased premiums in all segments with the exception of International Specialty as our property reinsurance book was adversely impacted by increased competition and declining rates. The increase in consolidated gross written premiums for the year ended December 31, 2014 as compared to the same period ended in 2013 was primarily the result of increased premiums in our Excess and Surplus Lines and Commercial Specialty segments, partially offset by a decline in our Syndicate 1200 segment as we continued to experience competition in this segment. All segments were impacted to some degree by increasing competition and, in some cases, declining rates. The increase in consolidated earned premiums for the year ended December 31, 2015 as compared to 2014 and 2013 was due to the increase in gross written premiums.
Included in consolidated net realized investment and other gains for the year ended December 31, 2015 was $33.9 million of realized gains from our equity portfolio and $16.6 million in realized gains from our other investments which are accounted for under the equity method. Partially offsetting these realized gains was $11.2 million of realized losses on our fixed maturity portfolio, primarily driven by foreign exchange losses and $11.9 million of other-than-temporary impairment losses on certain securities. Included in consolidated realized gains for the year ended December 31, 2014 was a $43.3 million pre-tax gain resulting from the sale of an investment property, $28.6 million in realized gains from our equity portfolio and $23.0 million in realized gains due to increased value of our other investments, which are accounted for under the equity method of accounting. Partially offsetting these realized gains was a $2.3 million realized loss from the recognition of other-than-temporary impairments on certain investment securities. Included in consolidated net realized investment and other gains for the year ended December 31, 2013 was $57.7 million of realized gains from our equity portfolio, $13.9 million in realized gains from our fixed maturity portfolio and $16.6 million in realized gains from our other investments which are accounted for under the equity method. Partially offsetting these realized gains was a $7.8 million realized loss from the recognition of other-than-temporary impairments on certain investment securities.
Consolidated gross reserves for loss and loss adjustment expenses were $3,123.6 million (including $102.3 million of reserves attributable to Syndicate 1200’s trade capital providers), $3,042.4 million (including $80.3 million of reserves attributable to the trade capital providers) and $3,230.3 million (including $128.6 million of reserves attributable to the trade capital providers) as of December 31, 2015, 2014 and 2013, respectively. Management has recorded its best estimate of loss reserves at each date based on current known facts and circumstances. Due to the significant uncertainties inherent in the estimation of loss reserves, there can be no assurance that future loss development, favorable or unfavorable, will not occur.
In 2011, we entered into a reinsurance transaction with a special purpose reinsurance company which provided coverage through the issuance of a catastrophe bond transaction. The reinsurance transaction provided coverage for selected events. The catastrophe bond cover expired on December 31, 2013. In accordance with generally accepted accounting principles in the United States (“GAAP”), we accounted for this cover as a derivative, and as such, presented the financial statement impact in “Other reinsurance-related expenses” in our Consolidated Statements of Income. Other reinsurance-related expenses totaled $19.2 million for the year ended December 31, 2013. As management viewed these coverages as reinsurance protection, we treated the financial statement effects of these covers as ceded premium for the purposes of calculating our loss, expense and combined ratios.
Consolidated foreign currency exchange gains were $18.3 million and $7.8 million and 1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively. The changes in the foreign currency exchange gains/losses were due to fluctuations of the U.S Dollar, on a weighted average basis, against the currencies in which we transact our business.
The increase in the loss ratio for the year ended December 31, 2015 as compared to the same period in 2014 was primarily attributable to reduced net favorable loss reserve development on prior accident years coupled with increased catastrophe losses. The decline in the loss ratio for the year ended December 31, 2014 as compared to the same period in 2013 was primarily attributable to improved current accident year losses in 2014 coupled with reduced catastrophe losses
Included in losses and loss adjustment expense for the year ended December 31, 2015 was $5.5 million in catastrophe losses from storm activity in the United States. Offsetting these current accident year losses was $32.1 million of net favorable loss reserve development on prior accident years primarily due to $30.1 million of favorable development in the general and products liability lines and $5.2 million in our commercial automobile lines. Partially offsetting this net favorable development was $3.6 million of unfavorable development in the property lines.
Included in losses and loss adjustment expense for the year ended December 31, 2013 was $4.1 million in catastrophe losses from storm activity in the United States. Included in losses and loss adjustment expense for the year ended December 31, 2013 was $5.0 million related to current accident year large property losses. Offsetting these current accident year losses was $43.9 million of net favorable loss reserve development on prior accident years primarily due to $55.8 million of favorable development in the general and products liability lines of business. Partially offsetting this net favorable development was $11.9 million of unfavorable development in commercial automobile lines.
The decline in the expense ratio for the year ended December 31, 2015 as compared to the same period in 2014 was primarily attributable to increased ceding commission coupled with reduced outside services costs. Partially offsetting these reductions was increased compensation and information technology costs. The decline in the expense ratio for the year ended December 31, 2014 as compared to the same period in 2013 was primarily attributable to an increase in ceding commission received coupled with a decline in agent contingent commissions. Fixed expenses were comparable between the periods.
The increase in gross written premiums for the year ended December 31, 2015 as compared to the same periods ended 2014 and 2013 was primarily attributable to increased underwriting in our surety and commercial programs units, which includes our state funds fronting program. Partially offsetting these increases was reduced underwriting in our retail business unit due to planned reductions as we exited unprofitable accounts and implemented underwriting initiatives. The decline in earned premiums was due to an increase in ceded written premiums, primarily due to the state funds fronting business.
Included in losses and loss adjustment expense for the year ended December 31, 2014 was $5.7 million in catastrophe losses for storm activity in the United States. Included in losses and loss adjustment expenses was $6.8 million in net unfavorable loss reserve development on prior accident years, primarily attributable to $19.5 million of unfavorable development in general liability due to increases in claim severity, partially offset by favorable development of $7.9 million in short-tail lines and $5.8 million in workers compensation.
Included in losses and loss adjustment expense for the year ended December 31, 2013 was $4.0 million in catastrophe losses for storm activity in the United States. Included in losses and loss adjustment expenses was $1.1 million in net unfavorable loss reserve development on prior accident years, primarily attributable to $16.2 million of unfavorable development in general liability due to increases in claim severity and $2.0 million of unfavorable development in automobile liability, offset by favorable development of $9.5 million in workers compensation and $6.8 million of favorable development in short-tail lines.
The decline in the expense ratio for the year ended December 31, 2015 as compared to the same period ended 2014 was primarily attributable to a $13.9 million favorable adjustment to the premium taxes and assessments accrual. The increase in the expense ratio for the year ended December 31, 2014 as compared to the same period in 2013 was primarily due to increased corporate and information technology costs and decreased ceding commissions earned.
The decline in the loss ratio for the year ended December 31, 2015 as compared to the same period in 2014 was primarily attributable to increased net favorable loss reserve development on prior accident years partially offset by a slight increase in catastrophe losses. The decline in the loss ratio for the year ended December 31, 2014 as compared to the same period in 2013 was primarily attributable to reduced catastrophe losses
The decline in the expense ratio for the year ended December 31, 2015 was primarily due to increased ceding commission received on our professional lines and casualty business, coupled with reduced fixed costs for our Brazil unit. The expense ratios were comparable for the years ended December 31, 2014 and 2013.
The increase in the expense ratio for the year ended December 31, 2015 as compared to the same period in 2014 was primarily attributable to increased acquisition costs resulting from higher broker expenses due to the current competitive market. The
increase in the expense ratio for the year ended December 31, 2014 as compared to the same period in 2013 was primarily attributable to a decline in ceding commission received from a quota share reinsurance contract that was terminated in 2014, coupled with increased commission expenses due to the competitive market conditions.
Fee and other income (expense), net, represents fees and profit commission derived from the management of third party capital for our underwriting syndicate at Lloyd’s, net of associated expenses. Fee and other income (expense), net, has increased due to the reduced syndicate participation maintained by Argo Group, which resulted in increased commissions for managing the business for the trade and other capital providers.
Losses and loss adjustment expenses for the year ended December 31, 2014 included $24.4 million of net unfavorable loss reserve development on prior accident years primarily driven by $13.5 million from our asbestos and environmental exposure and $10.3 million in our run-off workers compensation lines. The unfavorable development from our asbestos and environmental exposures was driven by our primary exposures and our domestic assumed programs. The unfavorable development for our workers compensation lines was the result of increasing medical costs on older claims.
Underwriting, acquisition and insurance expenses for the Run-off Lines segment consists primarily of administrative expenses. Underwriting expense for the year ended December 31, 2015 was favorably impacted by a $2.3 million reduction in the premiums and insolvency assessment accruals. Underwriting expense for the year ended December 31, 2014 was favorably impacted by a $1.1 million recovery of a policyholder dividend in the run-off risk management lines, offset by $1.8 million in higher fee and bad debt expenses. Underwriting expense for the year ended December 31, 2013 was reduced by $2.3 million received due to the settlement of a disputed assessment.
For the years ended December 31, 2015 and 2014, net cash used by investing activities was $193.6 million and $121.3 million, respectively, compared to net cash provided by investing activities of $120.8 million for the year ended December 31, 2013. The increase in cash flows used from investing activities from 2014 to 2015 was mainly the result of purchases of fixed maturities, partially offset by the inflow of cash from maturities and sales of fixed maturity investments. Included in purchases of fixed assets for the twelve months ended December 31, 2015 was $42.0 million associated with the acquisition of real estate holdings, which were purchased on our behalf by a third-party intermediary using funds held in escrow from the fourth quarter 2014 sale of the Torrance, California real estate holdings, as previously disclosed in our December 31, 2014 Form 10-K. The decrease in cash flows from investing activities from 2013 to 2014 was mainly the result of the sale of fixed maturity assets used to settle the Syndicate 1200 segment’s reinsurance payable in 2013 and fewer sales of investments in 2014. As of December 31, 2015, 2014 and 2013, $210.8 million, $258.3 million, and $351.6 million, respectively, of the investment portfolio were invested in short-term investments.
For the years ended December 31, 2015, 2014 and 2013, net cash used by financing activities was $50.0 million, $82.4 million, and $59.5 million, respectively. During 2015, 2014 and 2013, we repurchased approximately 0.6 million, 1.0 million and 1.1 million shares, respectively, of our common shares for a total cost of $29.7 million, $50.8 million and $46.5 million, respectively. We paid dividends to our shareholders totaling $22.7 million, $18.2 million and $15.8 million during the years ended December 31, 2015, 2014, and 2013, respectively. During 2014, we paid $18.0 million for the extinguishment of one of our fixed rate trust preferred securities.
In addition, our ability to receive dividends from our downstream subsidiaries is subject to the ability of each parent corporation within the corporate ownership structure to receive dividends from its respective subsidiary(ies), based upon the subsidiary’s domiciliary regulations. Argo Re is the primary direct subsidiary of Argo Group and is subject to Bermuda insurance laws. Argo
Under certain insurance programs (i.e., large deductible programs and surety bonds) and various reinsurance agreements, collateral and LOCs are held for our benefit to secure performance of insureds and reinsurers in meeting their obligations. At December 31, 2015, the amount of such collateral and LOCs held under insurance and reinsurance agreements were $680.0 million and $550.3 million, respectively. Collateral can be provided in the form of trust accounts. As we are the beneficiary of these trust accounts only to secure future performance, these amounts are not reflected in our Consolidated Balance Sheets. Collateral provided by an insured or reinsurer may exceed or fall below their total outstanding obligation.
Throughout 2015, 2014 and 2013, we had no preferred shares outstanding.
For the year ended December 31, 2015, our Board declared quarterly dividends in the aggregate amount of $0.80 per share. Cash dividends paid for the year ended December 31, 2015 totaled $22.7 million. On February 16, 2016, our Board declared a quarterly cash dividend in the amount of $0.22 on each share of common stock outstanding. The dividend will be paid on March 15, 2016 to shareholders of record at the close of business on March 1, 2016.
We invest excess cash in a variety of investment securities. As of December 31, 2015, our investment portfolio consisted of 71.1% fixed maturities, 11.3% equity securities, 12.5% other investments and 5.1% short-term investments (based on fair value) compared to 69.3% fixed maturities, 11.9% equity securities, 12.1% other investments and 6.7% short-term investments as of December 31, 2014. We classify the majority of our investment portfolio as available-for-sale; resulting in these investments being reported at fair market value with unrealized gains and losses, net of tax, being reported as a component of shareholders’ equity. At December 31, 2015, no investments were designated as trading. No issuer (excluding United States Government and United States Governmental agencies) of fixed maturity or equity securities represents more than 4.6 % of shareholders’ equity at December 31, 2015.
Our insurance and reinsurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and fund operating expenses. During the year ended December 31, 2015, cash flow provided by operations was $282.6 million. Based on current premium volumes and other measures of capital deployed in our business, we determined we had excess
The discussion of transactions with related parties is included in Note 22, “Transactions with Related Parties” in the Notes to the Consolidated Financial Statements, included in Item 8, “Financial Statements and Supplementary Data” beginning on page.
We have committed to invest up to a total of $413.5 million in a series of hedge funds, private equity and long only funds, of which $323.3 million was funded and included in Other invested assets in our consolidated balance sheet. As of December 31, 2015, we have a remaining obligation to the private equity partnerships to invest up to an additional $90.2 million, which can be called at any time. We have not recorded this commitment in our consolidated financial statements. The investment will be recorded at such time as the capital partnership requires the additional investment. Additionally, we have not recorded the liabilities for our operating leases in our consolidated financial statements.
Other than as described in the immediately preceding paragraph, we have not entered into any off-balance sheet arrangements, as defined by Item 303(a)(4) of Regulation S-K at December 31, 2015.
Our estimated contractual obligations and commitments as of December 31, 2015 were as follows:
The relevant factors and methodologies used to estimate loss reserves vary significantly by product line due to differences in loss exposure and claim complexity. Much of our business is underwritten on an occurrence basis, meaning that there may be a significant time lag between the event that gives rise to a claim and the date on which the claim is reported to us, which can also result in additional time being required to resolve the claim. During these time lags, which can span several years for complex claims, new facts and information specific to the claim become known to us, and general econometric and societal trends including inflation continue to change, requiring us to refine our loss reserve estimates on a regular basis. We apply a strict regimen to assure that review of these facts and trends occurs on a timely basis so that this information can be factored into our estimate of future liabilities. However, due to the number and potential magnitude of these variables, actual paid losses in future periods may differ materially from our estimates as reflected in current reserves. These differences can be favorable or unfavorable. More precise estimation of loss reserves is also hindered by the effects of growth in a line of business and uncertainty as to how new business performs over time. In addition to reserving for known claim events, we also establish loss reserves for IBNR. Loss reserves for IBNR are set using our actuarial estimates for events that have occurred as of the balance sheet date but have yet been reported to us. Estimation of IBNR loss reserves is subject to significant uncertainty.
We use a variety of actuarial techniques and methods to determine loss reserves for all lines of business. Each such method has its own set of assumptions and outputs, and each has strengths and weaknesses in different areas. Since no single estimation method is superior to another method in all situations, the methods and assumptions used to project loss reserves will vary by line of business. We use what we believe to be the most appropriate set of actuarial methods and assumptions for each product line grouping. While the loss projection methods may vary by product line, the general approach for calculating IBNR remains the same: ultimate losses are forecasted first, and that amount is reduced by the amount of cumulative paid claims and case reserves.
When we initially establish IBNR reserves at the beginning of an accident year for each line of business, we use the expected loss ratio method. This method is based upon our analyses of historical loss ratios incorporating adjustments for pricing changes, anticipated loss ratio trends, changes in reinsurance structure and any other factors that may impact loss ratio expectations. At the end of each quarter, we review the loss ratio selections and the emerged loss experience to determine if deviating from the loss ratio method is appropriate. In general, we continue to use the loss ratio method until the end of the accident year, at which time we begin to assign weight to the paid and incurred BF methods depending on the line of business being evaluated. The BF methods compute IBNR through a blend of the expected loss ratio method and traditional loss development methods. The BF methods estimate IBNR for an accident year as the product of expected losses (earned premium multiplied by an expected loss ratio) plus an expected percentage of unreported losses. The expected percentage of unreported losses is derived from age-to-ultimate loss development factors that result from our analyses of loss development triangles. As accident years mature to the point at which the reported loss experience is more credible, we assign increasing weight to the paid and incurred loss development methods.
Each business segment is analyzed individually, with development characteristics for each short-tail and long-tail line of business identified and applied accordingly. In comparing loss reserve methods and assumptions used at December 31, 2015 as compared with methods and assumptions used at December 31, 2014, management has not changed or adjusted methodologies or assumptions in any significant manner.
Our Syndicate 1200 segment loss reserves are analyzed quarterly by internal staff at Syndicate 1200. Additionally, we employ an independent actuary to conduct a detailed review of loss reserves annually. Management’s estimate of reserves is based on the internal study. The external study is completed to support the actuarial opinion for Lloyd’s reporting.
We use several approaches and actuarial techniques to project gross and net loss reserves. For property lines of business, we review our loss reserves considering the underlying claims. We use paid and incurred loss development as our primary methods for determining ultimate losses. Additionally, we consider expected loss ratios, pricing trends and any other variations in the business underwritten, including changes in underlying terms and conditions. Catastrophic claim liabilities and other large losses are inherently more volatile than attritional losses; therefore, we use other loss forecasting methodologies. For known catastrophic claims, we initially rely on industry estimates and information from third-party modeling software to determine our exposure. As catastrophic events mature, specific claim information we receive is used to refine our initial loss estimate. After approximately four to six months from the date of the catastrophic event, our reported losses relative to the event are assigned significant credibility. However, it may be several years before ultimate loss amounts are fully known as disputes over policy coverage or the relevant law governing a claim cause uncertainty in the estimation of outcomes. The observed large loss patterns are subsequently adjusted by changes in underlying exposures and risk characteristics.
For the long-tail lines underwritten by Syndicate 1200, such as professional indemnity and general liability, it may be several years before claims are fully advised and settled. The large time lag involved for reporting and settling claims introduces a large amount of uncertainty into the loss estimation process. Loss experience is not deemed fully credible for several years. Until the time that an underwriting year of account is closed, we use an expected loss ratio method to determine ultimate losses, supplemented by paid and incurred BF loss development methods, to the extent that the reported loss data matures and is considered credible.
Because commercial multiple peril lines involve both short-tail and long-tail coverage, we give weight to different methodologies in deriving estimated loss reserves based on the coverage being evaluated. In general, paid and incurred loss development methods are used to forecast property losses. For liability losses, due to the Claims and Book of Business risk factors described in the General Liability section above, we use several loss reserving methods to capture the development characteristics associated with these lines of business. Paid and incurred loss development, paid and incurred BF methods and a loss frequency/severity method are used in deriving estimated loss reserves.
Concurrently, underwriting teams employ a market share approach as well as perform a thorough contract by contract analysis to identify potential changes to the expected loss estimates including IBNR by contract. The results of this initial process are updated when additional information is available. This information comes in the form of publicly available announcements, informal contact with brokers and/or clients, submission data and formal claim notices. As catastrophic events mature and reporting loss methods become more credible, usually six to twelve months after the event, more credibility can be assigned to actuarial methods implementing historical patterns. In evaluating the loss estimates for catastrophic events, we use internal databases to establish projected reporting and payment patterns. Industry patterns from the Reinsurance Association of America (“RAA”), an insurance industry organization, are also employed.
Similar to general liability, commercial multiple peril reserves are affected by reported loss development pattern assumptions. Recorded gross reserves for commercial multiple peril business were $193.6 million as of December 31, 2015. If the development patterns underlying our net reserves for this line of business change by 10%, the estimated net reserve could change by $10.0 million, in either direction.
Recorded gross reserves for workers compensation were $575.9 million as of December 31, 2015. The two most important assumptions for workers compensation reserves are loss development factors and loss cost trends, particularly medical cost inflation. Loss development patterns are dependent on medical cost inflation. Approximately 60% of the workers compensation net reserves are related to future medical costs. A review of National Council on Compensation Insurance data suggests that the annual growth in industry medical claim costs has varied from -2% to +13% since 1991. Across the entire reserve base, a 1% change in calendar year medical inflation could change the estimated net reserve by $20.0 million, in either direction.
Recorded gross reserves for commercial auto liability were $135.6 million as of December 31, 2015. A key assumption for commercial lines auto liability is the annual loss cost trend, particularly the severity trend component of loss costs. A 3% change in assumed annual severity is within the range of our historical experience and which management considers possible. A 3% change in assumed annual severity could change the estimated net reserve by $20.0 million, in either direction.
increase in the number of insureds seeking bankruptcy protection as a result of asbestos-related liabilities. Plaintiffs and insureds have sought to use bankruptcy proceedings, including “pre-packaged” bankruptcies, to accelerate the funding and amount of loss payments by insurers. In addition, some policyholders continue to assert new classes of claims for coverage to which an aggregate limit of liability may not apply. Further uncertainties include insolvencies of other insurers and reinsurers, delays in the reporting of new claims by insurers and reinsurers and unanticipated issues influencing our ability to recover reinsurance for asbestos and environmental claims. Management believes these issues are not likely to be resolved in the near future.
from third-party pricing services, where available. For securities where we are unable to obtain fair values from a pricing service or broker, fair values are estimated using information obtained from investment advisors. Management performed several processes to ascertain the reasonableness of investment values included in our consolidated financial statements at December 31, 2015, including i) obtaining and reviewing internal control reports for our accounting service providers that obtain fair values from third-party pricing services, ii) discussing with our investment managers their process for reviewing and validating pricing obtained from outside services and obtained values for all securities from our investment managers and iii) comparing the security pricing received from the investment managers with the prices used in our consolidated financial statements and obtained additional information for variances that exceeded a certain threshold. As of December 31, 2015, investments classified as available-for-sale for which we did not receive a fair value from a pricing service or broker accounted for less than 1% of our investment portfolio. The actual value at which such securities could be sold or settled with a willing buyer or seller may differ from such estimated fair values depending on a number of factors including, but not limited to, current and future economic conditions, the quantity sold or settled, the presence of an active market and the availability of a willing buyer or seller. Our investments in hedge and private equity funds and other private equity direct investments are accounted for under the equity method of accounting, with changes in the value of investments recognized in realized gains or losses during the period. We also have two small private equity investments accounted for at cost.
We regularly monitor the difference between the estimated fair values of our investments and their cost or book values to identify underperforming investments and whether declines in value are temporary in nature or “other-than-temporary.” If a decline in the value of a particular investment is believed to be temporary, the decline is recorded as an unrealized loss, net of tax, in other comprehensive income as a separate component of shareholders’ equity. If the decline is believed to be “other-than-temporary,” the carrying value of the investment is written down and recorded as a realized loss in our Consolidated Statements of Income. We evaluate our investments for impairment. For fixed maturities securities, the evaluation for a credit loss is generally based on the present value of expected cash flows of the security as compared to the amortized book value. For mortgage-backed securities, frequency and severity inputs are used in projecting future cash flows of the securities. Loss frequency is measured as the credit default rate, which includes such factors as loan-to-value ratios and credit scores of borrowers. Loss severity includes such factors as trends in overall housing prices and house prices that are obtained at foreclosure. For equity securities, the length of time and the amount of decline in fair value are the principal factors in determining other-than-temporary impairment. For the years ended December 31, 2015 and 2014, we recorded $11.9 million and $2.3 million, respectively, of realized losses due to the recognition of other-than-temporary impairments.
For additional information regarding our deferred tax assets and liabilities, please see Note 14 “Income Taxes” in the Notes to the Consolidated Financial Statements, included in Item 8, “Financial Statements and Supplementary Data” beginning on page.
At December 31, 2015, we had goodwill of $152.2 million assigned to the following reporting units: Excess and Surplus lines - $76.4 million, Commercial Specialty - $47.1 million and Syndicate 1200 - $28.7 million. Additionally, at December 31, 2015, we had intangible assets totaling $73.3 million, including indefinite-lived intangible assets of $60.5 million in the Syndicate 1200 segment. Due to the nature of the Syndicate 1200 segment’s business, for purposes of the annual impairment evaluation, we have aggregated the fair values between the indefinite-lived intangible asset and goodwill.
For purposes of evaluating goodwill for impairment, we determined that our reporting units are the same as our business segments because all components of each segment are similar and none of the components were determined to be separate reporting units. Additionally, each business segment has discrete financial information available that is regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated and to assess performance. We allocated the assets, including goodwill, and liabilities of our reporting units consistent with our business segment reporting and prior periods. No material changes in the accounting methodology used to evaluate goodwill were made during 2015.
While we believe the estimates and assumptions are reasonable in determining the fair value of reporting units, it is possible a material change could occur. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, we may be required to perform Step 2 in future periods and impairment of goodwill and/or indefinite-lived assets could result. We cannot predict
future events that might impact the fair value of reporting units and goodwill impairment. Such events include, but are not limited to, increased competition in insurance markets and global economic changes.