Acquisition

9 Months Ended

Sep. 30, 2022

Acquisition

Kelvin Re Limited

On June 1, 2022 (the "Kelvin Acquisition Date"), the Company completed its acquisition of Kelvin Re Limited (“Kelvin”) by acquiring all of the issued and outstanding ordinary shares in Kelvin from CS IRIS A Fund Limited (the "Kelvin Acquisition"). Kelvin is a general reinsurance company incorporated and domiciled in Guernsey whose principal activity was the provision of property and natural catastrophe reinsurance business. In December 2020, Kelvin ceased underwriting new business and has been operating as a run-off entity. Cowen acquired Kelvin to manage the outstanding reinsurance claims arising from its existing portfolio. (See Note 18).

In accordance with US GAAP and SEC Regulation S-X Rule 11-01(d), the Kelvin Acquisition is accounted for as an asset acquisition because the assets and liabilities of Kelvin do not meet the definition of a business, and accordingly the assets and liabilities acquired as part of the Kelvin Acquisition were measured based on their cost allocated to assets on a relative fair value basis, which included transaction costs of $1.6 million.

The aggregate purchase price of the Kelvin Acquisition after transaction costs is $221.0 million. The purchase price was paid in cash by Kelvin on behalf of Cowen. The results of Kelvin are integrated within the Company's insurance business as of the Kelvin Acquisition Date, which is reported in the Company’s Operating Company segment.

The table below summarizes the net tangible and intangible assets acquired and liabilities assumed as of June 1, 2022:


	(dollars in thousands)
Cash and cash equivalents	$	92,589
Cash collateral pledged	316,049
Premiums receivable from cedants	58,904
Claims recoverable from reinsurers	52,526
Insurance and reinsurance assets	111,430
Other assets	94
Premiums and other costs payable to reinsurers	(5,400)
Claims liabilities	(292,026)
Insurance and reinsurance liabilities	(297,426)
Accounts payable, accrued expenses and other liabilities	(1,711)
Total net assets acquired	$	221,025

Malta Holdings Ltd.

On February 26, 2021 (the "Malta Acquisition Date"), the Company, through its indirect wholly owned subsidiary, Cowen Malta Holdings Ltd. (“Malta Holdings”), completed the acquisition of all of the outstanding equity interest of Axeria Insurance Limited (the “Malta Acquisition”), an insurance company organized under the laws of Malta whose principal business activity is to provide insurance coverage to third parties (see Note 18). Axeria Insurance Limited was renamed Cowen Insurance Company Ltd (“Cowen Insurance Co”) upon acquisition. The Malta Acquisition was completed for a combination of cash and deferred consideration. In the aggregate, the purchase price, assets acquired, and liabilities assumed were not significant and near-term impact to the Company and its consolidated results of operations and cash flows is not expected to be significant.

The aggregate estimated purchase price of the Malta Acquisition was $12.7 million. On the Malta Acquisition Date, the Company paid upfront consideration of $12.5 million, with additional deferred consideration of $0.2 million which was paid during the second quarter of 2021.

The Malta Acquisition was accounted for under the acquisition method of accounting in accordance with US GAAP. As such, the results of operations of the business acquired is included in the accompanying condensed consolidated statements of operations since the date of the Malta Acquisition and the assets acquired, liabilities assumed recorded at their fair values within their respective line items on the accompanying condensed consolidated statement of financial condition. The Company has recognized a bargain purchase gain of $5.2 million related to the Malta Acquisition and is shown net of associated tax of $1.3 million in the condensed consolidated statement of operations. The bargain purchase gain is primarily driven by the recognition of the customer relationships intangible asset and a contractual discount on the closing equity balance at the Malta

Acquisition Date. Additionally, following the Malta Acquisition, the business acquired is included in the Cowen Investment Management reporting unit within the Operating Company segment.

The table below summarizes the purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as of February 26, 2021:


	(dollars in thousands)
Cash	$	14,844
Securities owned, at fair value	1,571
Fixed assets	30
Intangible assets	4,794
Other assets	12,828
Compensation payable	(17)
Other liabilities	(16,099)
Total net identifiable assets acquired and liabilities assumed	17,951
Bargain purchase gain	(5,216)
Total estimated purchase price	$	12,735

As of the Malta Acquisition Date, the estimated fair value of the Company's intangible assets, which are primarily broker relationships, was $4.6 million and had a weighted average useful life of 10 years. The licenses of $0.2 million has indefinite life. Amortization expense for the three months ended September 30, 2022 and 2021 was $0.1 million, respectively. Amortization expense for the nine months ended September 30, 2022 and 2021 was $0.3 million, respectively.

As of September 30, 2022, the estimated amortization expense related to these intangible assets in future periods is as follows:


	(dollars in thousands)
2022	$	114
2023	458
2024	458
2025	458
2026	458
Thereafter	2,124
	$	4,070

In addition to the purchase price consideration, for the nine months ended September 30, 2021, the Company had incurred acquisition-related expenses of $0.2 million, including financial advisory, legal and valuation services, which are included in professional, advisory and other fees in the accompanying condensed consolidated statements of operations.