Business Acquisitions

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Business Acquisitions

In accordance with ASC Topic 805, Business Combinations, the Company accounts for acquisitions by applying the acquisition method of accounting. The acquisition method requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at fair value as of the closing date of the acquisition.

In December 2014, the Company completed the acquisition of Fortegra, and paid $211,740 for 100% ownership. Fortegra’s products include payment protection products, motor club memberships, service contracts, device and warranty services, as well as administration services to business partners, including insurance companies, retailers, dealers, insurance brokers and agents and financial services companies. The primary reason for the Company’s acquisition of Fortegra is to expand its insurance and insurance services operations.

Fortegra’s results are included in the Company’s insurance and insurance services segment. The Company did not issue shares of its common stock in connection with the acquisition of Fortegra.

Recording of the Preliminary Value of Assets Acquired and Liabilities Assumed

The consideration for the acquisition of Fortegra was funded through the Company’s cash on hand of $91,740 and borrowings of $120,000. The purchase price of Fortegra was largely determined on the basis of management’s expectations of future earnings and cash flows, resulting in the recognition of goodwill. The preliminary purchase price allocation below has been developed based on preliminary estimates of and subsequent adjustments to fair value using the historical financial statements of Fortegra as of the acquisition date. In addition, the allocation of the purchase price to intangible assets is based on preliminary fair value estimates and subject to the completion of management’s final analysis.

Management’s preliminary allocation of the purchase price to the net assets acquired resulted in the recording of intangible assets. Because valuations of acquired assets and liabilities are still in process, information may become available within the measurement period, which may or may not change these valuations and, accordingly, the purchase price allocation is subject to adjustment. The residual amount of the purchase price after preliminary allocation to net assets acquired and identifiable intangibles has been allocated to goodwill. This goodwill is included in the insurance and insurance services segment.

During 2015, the Company received the preliminary valuation study prepared by an external valuation expert for identifiable intangible assets and goodwill for the 2014 acquisition of Fortegra. Accordingly, the consolidated balance sheet at December 31, 2014, has been retrospectively adjusted to include the effect of the measurement period adjustments as required under ASC Topic 805 for the Fortegra purchase. Adjustments were recorded to the values of intangible assets and goodwill based upon completion of valuation models in the studies and the refinement of assumptions supporting those models as presented in the valuation studies.

Using this preliminary valuation study, during 2015, the Company decreased the balance of goodwill as of December 4, 2014 by $3,229 and increased other intangibles assets by $500 with corresponding decreases of $6,270 to other liabilities and accrued expenses and $105 to non-controlling interests, as shown in the table below. See Note 12—Identifiable Intangible Assets and Goodwill, for more information on the retrospective measurement period adjustments made in 2015 to Fortegra’s December 4, 2014 balances. The Fortegra acquisition determinations are preliminary, mainly due to ongoing review of the preliminary studies.

The following table presents the preliminary determination of the fair value amounts for the identifiable assets acquired, liabilities assumed, and goodwill recorded as of the acquisition date of Fortegra including the effects of the retrospective measurement period adjustments recorded in 2015, as discussed above:

	December 4, 2014
	Preliminary Fair Values
	As adjusted
Assets:
Cash and cash equivalents – unrestricted	$	24,906
Cash and cash equivalents – restricted	6,693
Investments in available for sale securities, at fair value	166,839
Notes receivable, net	17,775
Accounts and premiums receivable, net	40,762
Reinsurance receivables	258,179
Other assets	51,192
Intangible assets	115,000
Liabilities:
Debt	43,548
Unearned premiums	290,029
Policy liabilities	63,435
Deferred revenue	39,122
Deferred tax liability	38,208
Other liabilities and accrued expenses (1)	79,227
Net assets acquired	127,777
Non-controlling interests	(6,250		)
Goodwill	90,213
	$	211,740
Consideration:
Cash	$	91,740
Debt	120,000
Total consideration paid	$	211,740

⁽¹⁾ Includes $809 of unsettled liabilities associated with Fortegra’s previous discontinued operations, which is included as a component of liabilities held for sale and discontinued operations within the Company’s consolidated balance sheet.

Non-Tax Deductible Goodwill Associated with the Fortegra Acquisition

The acquisition of Fortegra is being treated as a stock purchase for tax purposes and any goodwill and identified intangible assets recorded by the Company in connection with the acquisition will not be deductible for tax purposes.