Business Acquisitions and Dispositions

Acquisition in 2013

On February 1, 2013, the Company acquired 100% of the outstanding stock of RICC, from subsidiaries of the Kemper Corporation ("Kemper") for $4.8 million. RICC is a property/casualty insurance company domiciled and licensed in California, which the Company intends to use for geographic expansion in the Payment Protection business. RICC had, at the time of purchase, no policies in force. All remaining claim liabilities for previously issued policies are fully reinsured by Kemper's subsidiary, Trinity Universal Insurance Company.

Acquisitions in 2012

On December 31, 2012, the Company acquired a 62.4% ownership interest in Digital Leash, LLC, d/b/a ProtectCELL for $20.0 million, which amount is deemed a Series A Contribution under the provisions of the related agreements. ProtectCELL provides membership plans for the protection of mobile wireless devices and other benefits including data management and identity theft protection. ProtectCELL is one of the leaders in mobile device protection plans and will spearhead Fortegra's efforts to expand its warranty and service contract business in the mobile and wireless device space. ProtectCELL's results will be included in the Company's Payment Protection segment. As part of the acquisition, the Company also has an option, commencing after 2014, to acquire the remaining 37.6% ownership interest in ProtectCELL, at a price based on a sliding scale multiple of ProtectCELL's trailing twelve-month EBITDA, less the Series A Contributions, multiplied by 37.6%. The option has no expiration, though the owners of the non-controlling interest have the right to defer the option commencement date for one year under certain conditions. The option must be exercised with respect to not less than all of the non-controlling interest, and is accounted for as an embedded derivative within the value of non-controlling interest.

On December 31, 2012, the Company acquired 100% of the outstanding stock ownership of 4Warranty Corporation, a leading warranty and extended service contract administrator with extensive expertise in furniture, electronics, appliance, lawn and garden, and fitness equipment. 4Warranty complements the Company's rapidly expanding warranty business. 4Warranty's results will be included in the Company's Payment Protection segment.

On April 24, 2012, the Company acquired a 100% ownership interest in MHA & Associates LLC ("MHA"), for $0.3 million, obtaining the renewal rights of the business and hiring the prior owner to maintain and increase the block of business.

The following table presents the allocation of purchase price recorded for the 2013 acquisition of RICC and the 2012 acquisitions of ProtectCELL and 4Warranty. The ProtectCELL and 4Warranty determinations are preliminary, mainly due to ongoing studies being conducted by external valuation experts to assist the Company in its determination of the fair values of intangible assets, deferred revenues, non-controlling interest and goodwill, and the related impact on deferred taxes, whereas all other amounts are considered final. The ProtectCELL value of deferred acquisition costs as of the acquisition date has been reclassified to deferred revenue to present our preliminary estimate of the fair value of our ongoing performance obligation at the time of acquisition as reflected in the Consolidated Balance Sheet as of December 31, 2012.



	2012						2013
	Acquisitions						Acquisition
	4Warranty			ProtectCELL			RICC
Assets:
Cash and cash equivalents	$	703		$	350		$	1,893
Restricted cash	72			7,438			—
Investments	—			—			2,488
Short-term investments	—			252			—
Accrued investment income	—			—			38
Notes receivable, net	—			6,341			—
Other receivables	199			2,312			—
Reinsurance receivables	—			—			200
Property and equipment, net	61			674			—
Other intangible assets, net	1,900			27,815			375
Other assets	—			1,470			10
Liabilities:
Unpaid claims	—			(176		)	(200		)
Accrued expenses, accounts payable and other liabilities	(221		)	(2,644		)	(9		)
Deferred revenue	(1,260		)	(25,564		)	—
Income taxes payable	(296		)	—			—
Deferred income taxes, net	(266		)	—			—
Net assets acquired	892			18,268			4,795
Non-controlling interest	—			(10,000		)	—
Purchase consideration ⁽¹⁾	3,616			20,000			4,795
Goodwill	$	2,724		$	11,732		$	—

⁽¹⁾ - The purchase consideration for the 4Warranty acquisition includes $0.3 million of contingent consideration and $0.5 million of working capital and hold back reserves, which estimates are unchanged in the current period and are expected to be paid out based on the agreed terms of the Stock Purchase Agreement.