29. Goodwill

Goodwill31 December 201431 December 2013
Lietuvos Draudimas AB 360,018 -
Link4 236,813 -
Codan Branch 112,319 -
AAS Balta 38,258 -
Health care companies 29,580 -
Other 8,675 8,519
Goodwill, total 785,663 8,519

Changes in goodwill1 January – 31 December 20141 January – 31 December 2013
Gross value of goodwill – opening balance 20,123 20,451
Changes in the period: 772,572 -328
- acquisition of Lietuvos Draudimas AB 357,119 -
- acquisition of Link4 236,813 -
- acquisition of Codan Branch 110,399 -
- acquisition of AAS Balta 37,348 -
- acquisition of other entities 29,651 -
- exchange differences 1,242 -328
Gross value of goodwill – closing balance 792,695 20,123
Impairment losses – opening balance -11,604 -11,977
Changes in impairment losses due to exchange differences 4,572 373
Impairment losses – closing balance -7,032 -11,604
Net value of goodwill – closing balance 785,663 8,519

Impairment test

Impairment test is the comparison of carrying amounts (including goodwill) and recoverable amounts of CGUs. CGUs are particular entities or their foreign branches which are subject to separate internal monitoring. An impairment test regarding goodwill and intangible assets with indefinite period of use was prepared as at 31 December 2014. The recoverable amount of PZU Lietuva was determined based on the selling price less the costs to sell (EUR 54,000 thousand; additional information on the sale is presented in Note 59.9.1). The recoverable amount of other CGUs was determined based on value in use, using the discounted cash flow method based on financial projections not exceeding 5 years. The adopted discount rates have been determined in accordance with the CAPM model. Risk-free rates have been determined based on the yield of 10-year government bonds offered by the country where the CGU has it registered seat; the beta ratio has been based on ratios of similar listed entities. Market premiums range between 5.5 and 6.0%. In the case of insurance companies, the projected cash flows include the need to maintain an adequate level of own funds (for branches that do not manage investments, assets under management at the level of the PZU were allocated pro forma). Terminal growth rates were adopted depending on the assumed long-term development prospects and the expected growth of the insurance market.

CGUDiscount rateTerminal growth rate
Lietuvos Draudimas AB 6.6% 3.7%
AAS Balta 6.3% 3.8%
Codan branch 5.5% 3.5%
Link4 7.8% 2.5%
Health care companies 7.2% 3.0%

As a result of the test, there was no reason for impairment losses recognition. The table below shows the surplus of the recoverable amounts over the carrying amounts and the maximum discount rates and minimum terminal growth rate, at the level of which the carrying amount of a CGU equals its recoverable amount.

CGUSurplus (in PLN ’000)Marginal value of discount rateMarginal value of terminal growth rate
Lietuvos Draudimas AB 676,160 8.9% 0.9%
AAS Balta 602,798 13.7% -7.7%
Codan branch 442,738 12.9% -7.2%
Link4 220,411 9.7% -0.7%
Health care companies 18,555 9.2% - 9.3% 0.1% - 0.5%