Business Combinations

9 Months Ended

Sep. 30, 2011

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Business Combinations and Dispositions

Acquisitions

On January 1, 2011, the Company acquired 100% of the outstanding stock ownership of Auto Knight Motor Club, Inc. ("Auto Knight"), of Palm Springs, CA. Auto Knight provides motor club memberships, vehicle service plans and tire and wheel programs, which are offered by automobile and truck dealerships and retailers in the United States and Canada. The acquisition expands the Company's geographic reach to Canada, where Auto Knight offers its products through retailers as a subscription benefit.

On March 3, 2011, the Company acquired 100% of the outstanding stock ownership of eReinsure.com, Inc. ("eReinsure"). eReinsure provides web-hosted applications for the reinsurance market by leveraging Internet technologies in application architecture, network communication and information delivery to facilitate reinsurance transactions.

The values of certain assets and liabilities are preliminary in nature, and are subject to adjustment as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, fixed assets, deferred taxes and loss reserves. The valuations will be finalized within 12 months of the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill.

The following table presents assets acquired, liabilities assumed and goodwill recorded for acquisitions made during 2011 based on their fair values as of their respective acquisition dates:

	Auto Knight			eReinsure
ASSETS:
Cash	$	—		$	3,662
Investments	1,216			1,212
Other receivables	613			2,266
Deferred policy acquisition costs	341			—
Property and equipment	—			142
Other intangibles	—			2,115
Other assets	—			54
Net deferred tax asset	576			1,686
LIABILITIES:
Accrued expenses and accounts payable	(325		)	(2,634		)
Commissions payable	(122		)	—
Deferred revenue	(1,729		)	(750		)
Net assets acquired	570			7,753
Purchase consideration	4,750			39,281
Goodwill	$	4,180		$	31,528

None of the goodwill attributable to the 2011 acquisitions is expected to be tax deductible.

The financial results of eReinsure have been included in the Company's results beginning March 3, 2011. Revenue and net income since eReinsure's acquisition date included in the Company's consolidated statement of income for the three and nine months ended September 30, 2011 are as follows:

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2011		September 30, 2011
Revenue	$	2,473	$	5,768
Net income*	$	285	$	706
*-Transaction costs included for the respective acquisition.	$	—	$	101

The following unaudited pro forma summary presents the Company's consolidated financial information as if eReinsure had been acquired on January 1, 2010. These amounts have been calculated after applying the Company's accounting policies and adjusting the results of the acquired company to reflect the additional interest expense associated with the funding necessary to complete the acquisition and any amortization of intangibles that would have been charged to operations assuming the intangible assets would have existed on January 1, 2011 and 2010, excluding the transaction costs and the consequential tax effect.

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Revenue	$	2,473	$	3,081	$	7,223	$	7,743
Net income	$	285	$	612	$	822	$	872

On May 15, 2010, the Company purchased 100% of the stock for Continental Car Club, a Tennessee car club company, and initially recorded $11.8 million in goodwill associated with the transaction. On September 1, 2010, the Company purchased 100% of the stock of United Motor Club and initially recorded $8.5 million in goodwill associated with the transaction. The values of certain assets and liabilities were preliminary in nature, and were subject to adjustment within 12 months of the close of the acquisition as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, fixed assets, deferred taxes and loss reserves.

A change to the acquisition date value of the identifiable net assets during the measurement period (up to one year from the acquisition date) affects the amount of the purchase price allocated to goodwill. Changes to the purchase price allocation are adjusted retrospectively to the consolidated financial results. During 2011, the Company determined the final valuations for Continental Car Club and United Motor Club. The values below include measurement period adjustments recorded through the quarter ended September 30, 2011. The Company reduced the amount of goodwill associated with the Continental Car Club and United Motor Club acquisitions by $6.4 million and $3.9 million, respectively, and increased other intangibles by $6.4 million and $4.3 million, respectively, and increased deferred tax liabilities associated with United Motor Club by $0.4 million, in order to reflect the final valuation of goodwill acquired in those transactions.

The measurement period adjustment was recorded based on information obtained subsequent to the acquisitions related to tradenames, agent relationships and non-compete agreements at the acquisition date. The December 31, 2010 balances for goodwill and other intangibles assets on the Consolidated Balance Sheets have been retrospectively adjusted to include the effect of the measurement period adjustments as required under ASC 805, "Business Combinations". The following table summarizes the assets acquired and liabilities assumed as of the respective acquisition date, including the effect of the measurement period adjustments recorded during 2011, as discussed above:

	Continental Car Club			United Motor Club
ASSETS:
Cash	$	961		$	660
Other receivables	1,140			730
Deferred policy acquisition costs	10,749			7,557
Property and equipment	3			52
Other intangibles	7,482			5,750
Other assets	29			10
Net deferred tax asset	915			247
LIABILITIES:
Accrued expenses and accounts payable	(506		)	(501		)
Commissions payable	(1,052		)	(356		)
Deferred revenue	(13,204		)	(9,226		)
Net deferred tax liability	—			—
Net assets acquired	6,517			4,923
Purchase consideration	11,944			9,504
Goodwill	$	5,427		$	4,581

Dispositions

In July 2011, the Company sold its wholly owned subsidiary, CIRG, for a sales price of $1.2 million, comprised of cash and a $1.1 million secured note receivable. For the three months ended September 30, 2011, the Company recorded a $0.5 million loss on the sale of CIRG.