3.	Business Combinations

During 2014, we acquired substantially all of the net assets of the following firms in exchange for our common stock and/or cash. These acquisitions have been accounted for using the acquisition method for recording business combinations (in millions except share data):


Name and Effective Date of Acquisition	Common Shares Issued			Common Share Value		Cash Paid		Accrued Liability		Escrow Deposited		Recorded Earnout Payable		Total Recorded Purchase Price		Maximum Potential Earnout Payable
		(000s	)
Benefit Development Group, Inc. February 1, 2014		46		$	2.0	$	0.7	$	—	$	0.1	$	0.6	$	3.4	$	2.0
Kent, Kent & Tingle February 1, 2014		229			9.1		3.5		—		1.4		3.5		17.5		7.8
L&R Benefits, LLC March 1, 2014		115			5.3		1.8		—		0.1		1.0		8.2		6.0
Spataro Insurance Agency, Inc. March 1, 2014		47			2.0		—		—		0.2		0.4		2.6		0.6
Tudor Risk Services, LLC March 1, 2014		—			—		2.1		—		0.2		0.1		2.4		1.3
American Wholesalers Underwriting Ltd April 1, 2014		133			6.0		5.7		—		0.5		—		12.2		—
Mike Henry Insurance Brokers Limited April 1, 2014		—			—		9.6		—		1.7		4.2		15.5		5.0
Oval Group of Companies (OGC) April 1, 2014		—			—		338.4		—		11.8		—		350.2		—
Heritage Insurance Management Limited (HIM) May 1, 2014		—			—		33.9		—		3.8		—		37.7		—
MGA Insurance Group (MGA) May 1, 2014		547			25.1		26.8		—		2.5		11.9		66.3		20.0
Shilling Limited May 1, 2014		198			8.9		1.7		—		1.2		1.0		12.8		8.4
Sunderland Insurance Services, Inc. May 1, 2014		204			9.2		2.4		—		0.6		—		12.2		—
Plus Companies, Inc. June 1, 2014		221			9.3		3.4		—		0.8		—		13.5		—
Tri-State General Insurance Agency, Inc. June 1, 2014		47			2.2		0.6		—		0.1		—		2.9		—
Crombie/OAMPS (CO) June 16, 2014		—			—		993.1		—		—		—		993.1		—
Foundation Strategies, Inc. July 1, 2014		46			2.0		0.7		—		0.1		0.4		3.2		3.0
Insurance Point, LLC July 1, 2014		255			11.2		3.9		—		0.5		2.6		18.2		24.4
		(000s	)
Trip Mate, Inc. July 1, 2014		209		$	8.4	$	3.9	$	—	$	1.0	$	3.7	$	17.0	$	12.5
Noraxis Capital Corporation (NCC) July 2, 2014		—			—		413.3		—		1.9		—		415.2		—
Cowles & Connell August 1, 2014		331			14.8		4.2		—		0.8		—		19.8		—
Denman Consulting Services August 1, 2014		40			1.7		0.6		—		0.1		0.3		2.7		1.6
Minvielle & Chastanet Insurance Brokers August 8, 2014		—			—		5.0		—		—		3.0		8.0		5.0
Baker Tilly Financial Management Limited August 29, 2014		185			8.7		2.3		—		0.7		4.7		16.4		5.4
Benfield Group September 1, 2014		82			3.8		1.1		—		0.1		0.9		5.9		3.5
Everett James, Inc. September 1, 2014		52			2.4		0.7		—		0.1		0.8		4.0		4.0
Hagedorn & Company September 1, 2014		281			11.5		—		—		1.3		—		12.8		—
Parmia Pty Ltd. September 1, 2014		—			—		1.7		—		—		1.2		2.9		1.2
Bennett and Shade Company October 1, 2014		35			1.5		0.5		—		0.2		—		2.2		—
Insurance Associates, Inc. October 1, 2014		169			7.2		—		—		0.8		1.1		9.1		3.0
Forker Company October 31, 2014		24			1.1		0.3		—		0.1		1.6		3.1		2.2
Discovery Benefit Solutions, Inc. November 1, 2014		115			5.4		—		—		0.1		1.4		6.9		4.5
Miller-Harrison Insurance Services November 1, 2014		38			1.8		—		—		—		0.6		2.4		1.0
SGB-NIA Insurance Brokers (SGB) November 1, 2014		449			18.7		7.2		—		2.9		4.2		33.0		5.2
Titan Group LLC November 1, 2014		49			2.4		—		—		0.1		0.4		2.9		2.0
Instrat Insurance Brokers December 1, 2014		—			—		16.2		—		—		9.5		25.7		9.5
O’Gorman & Young Incorporated (OGY) December 1, 2014		554			23.8		—		—		2.7		6.4		32.9		12.5
		(000s	)
Independent Benefit Services, Inc. (IBS) December 1, 2014		395		$	17.8	$	6.2	$	—	$	0.8	$	1.3	$	26.1	$	14.3
Affinity Marketing Group December 1, 2014		72			3.1		—		—		0.3		2.2		5.6		5.2
Blue Holdings Group of Companies December 5, 2014		227			10.9		4.5		—		1.7		1.2		18.3		6.6
Twenty-one other acquisitions completed in 2014		344			14.8		18.5		—		1.1		10.3		44.7		21.1

		5,739		$	252.1	$	1,914.5	$	—	$	42.4	$	80.5	$	2,289.5	$	198.8

On April 1, 2014, we closed on an agreement to acquire the Oval Group of Companies (which we refer to as Oval). Under the agreement, we agreed to purchase all of the outstanding equity of Oval for net cash consideration of approximately $338.0 million. Oval was an independent commercial insurance broker operating out of 24 offices throughout the U.K., with over 1,000 employees.

On April 16, 2014, we closed on a secondary public offering of our common stock whereby 21.85 million shares of our stock were issued for net proceeds, after underwriting discounts and other expenses related to this offering, of $911.4 million. We used the net proceeds of the offering to fund acquisitions.

On June 16, 2014, we closed on an agreement to acquire the Wesfarmers Insurance Brokerage operations (which we refer to as Crombie/OAMPS). The Crombie/OAMPS transaction, includes the OAMPS businesses in Australia and the U.K., Crombie in New Zealand and the associated premium funding operations. Under the agreement, we agreed to purchase all of the outstanding shares of these three operating companies for net cash consideration of approximately $952.0 million, plus an additional $35.3 million on October 14, 2014 related to a true-up of the excess of net current assets based on the final acquisition date balance sheet over the target amount as set forth in the acquisition agreement. The Crombie/OAMPS operations have approximately 1,700 employees operating out of more than 50 offices across Australia, New Zealand and the U.K.

On July 2, 2014, we closed on an agreement to acquire Noraxis Capital Corporation (which we refer to as Noraxis), paying cash consideration of approximately $415.0 million for approximately 89% of the equity of Noraxis. The remaining equity is held by various management employees of Noraxis. Noraxis has more than 650 employees in offices across Alberta, Manitoba, New Brunswick, Nova Scotia and Ontario.

Common shares issued in connection with acquisitions are valued at closing market prices as of the effective date of the applicable acquisition. We record escrow deposits that are returned to us as a result of adjustments to net assets acquired as reductions of goodwill when the escrows are settled. The maximum potential earnout payables disclosed in the foregoing table represent the maximum amount of additional consideration that could be paid pursuant to the terms of the purchase agreement for the applicable acquisition. The amounts recorded as earnout payables, which are primarily based upon the estimated future operating results of the acquired entities over a two- to three-year period subsequent to the acquisition date, are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration in the foregoing table. We will record subsequent changes in these estimated earnout obligations, including the accretion of discount, in our consolidated statement of earnings when incurred.

The fair value of these earnout obligations is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, we estimated the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. Revenue growth rates generally ranged from 4.0% to 12.0% for our 2014 acquisitions. We estimated future payments using the earnout formula and performance targets specified in each purchase agreement and these financial projections. We then discounted these payments to present value using a risk-adjusted rate that takes into consideration market-based rates of return that reflect the ability of the acquired entity to achieve the targets. These discount rates generally ranged from 8.5% to 9.5% for our 2014 acquisitions. Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, would result in a change in the fair value of recorded earnout obligations.

During 2014, 2013 and 2012, we recognized $14.5 million, $11.9 million and $9.3 million, respectively, of expense in our consolidated statement of earnings related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions. In addition, during 2014, 2013 and 2012 we recognized $3.0 million of expense, $10.2 million and $5.9 million of income, respectively, related to net adjustments in the estimated fair value of the liability for earnout obligations in connection with revised projections of future performance for 67, 79 and 46 acquisitions, respectively. The aggregate amount of maximum earnout obligations related to acquisitions made in 2011 and subsequent years was $549.8 million as of December 31, 2014, of which $205.3 million was recorded in the consolidated balance sheet as of that date based on the estimated fair value of the expected future payments to be made. The aggregate amount of maximum earnout obligations related to acquisitions made in 2010 and subsequent years was $462.3 million as of December 31, 2013, of which $162.7 million was recorded in the consolidated balance sheet as of that date based on the estimated fair value of the expected future payments to be made.

The following is a summary of the estimated fair values of the net assets acquired at the date of each acquisition made in 2014 (in millions):


	OGC		HIM		MGA		CO		NCC		SGB		OGY		IBS		Fifty-Two Other Acquisitions		Total
Cash	$	23.1	$	2.9	$	0.2	$	26.6	$	10.1	$	—	$	—	$	—	$	5.8	$	68.7
Other current assets		129.6		4.9		8.9		695.5		73.0		0.7		2.8		0.5		59.2		975.1
Fixed assets		2.1		0.3		0.8		17.1		4.9		0.1		0.2		—		4.3		29.8
Noncurrent assets		—		—		—		7.0		3.5		0.1		—		—		4.9		15.5
Goodwill		245.7		14.8		27.0		619.6		314.9		14.9		25.8		12.7		172.9		1,448.3
Expiration lists		129.9		20.3		33.2		325.3		178.6		17.8		18.7		13.1		159.0		895.9
Non-compete agreements		1.0		1.3		0.3		4.2		2.6		0.1		0.3		0.2		1.9		11.9
Trade names		0.6		—		—		4.2		2.2		—		—		—		2.4		9.4

Total assets acquired		532.0		44.5		70.4		1,699.5		589.8		33.7		47.8		26.5		410.4		3,454.6

Current liabilities		129.5		6.8		4.1		490.0		72.5		0.7		4.1		0.4		63.0		771.1
Noncurrent liabilities		52.3		—		—		216.4		102.1		—		10.8		—		12.4		394.0

Total liabilities assumed		181.8		6.8		4.1		706.4		174.6		0.7		14.9		0.4		75.4		1,165.1

Total net assets acquired	$	350.2	$	37.7	$	66.3	$	993.1	$	415.2	$	33.0	$	32.9	$	26.1	$	335.0	$	2,289.5

Among other things, these acquisitions allow us to expand into desirable geographic locations, further extend our presence in the retail and wholesale insurance brokerage services and risk management industries and increase the volume of general services currently provided. The excess of the purchase price over the estimated fair value of the tangible net assets acquired at the acquisition date was allocated to goodwill, expiration lists, non-compete agreements and trade names in the amounts of $1,448.3 million, $895.9 million, $11.9 million and $9.4 million, respectively, within the brokerage segment.

Provisional estimates of fair value are established at the time of the acquisition and are subsequently reviewed within the first year of operations subsequent to the acquisition date to determine the necessity for adjustments. The fair value of the tangible assets and liabilities for each applicable acquisition at the acquisition date approximated their carrying values. The fair value of expiration lists was established using the excess earnings method, which is an income approach based on estimated financial projections developed by management for each acquired entity using market participant assumptions. Revenue growth and attrition rates generally ranged from 2.0% to 3.0% and 5.0% to 11.5% for our 2014 acquisitions, respectively, for which a valuation was performed. We estimate the fair value as the present value of the benefits anticipated from ownership of the subject customer list in excess of returns required on the investment in contributory assets necessary to realize those benefits. The rate used to discount the net benefits was based on a risk-adjusted rate that takes into consideration market-based rates of return and reflects the risk of the asset relative to the acquired business. These discount rates generally ranged from 10.5% to 15.0% for our 2014 acquisitions, for which a valuation was performed. The fair value of non-compete agreements was established using the profit differential method, which is an income approach based on estimated financial projections developed by management for the acquired company using market participant assumptions and various non-compete scenarios.

Of the $895.9 million of expiration lists, $11.9 million of non-compete agreements and $9.4 million of trade names related to the 2014 acquisitions, $679.3 million, $9.9 million and $7.1 million, respectively, is not expected to be deductible for income tax purposes. Accordingly, we recorded a deferred tax liability of $173.9 million, and a corresponding amount of goodwill, in 2014 related to the nondeductible amortizable intangible assets.

Our consolidated financial statements for the year ended December 31, 2014 include the operations of the acquired entities from their respective acquisition dates. The following is a summary of the unaudited pro forma historical results, as if these entities had been acquired at January 1, 2013 (in millions, except per share data):


	Year Ended December 31,
	2014		2013
Total revenues	$	4,984.2	$	3,968.1
Net earnings		316.1		298.4
Basic earnings per share		1.94		1.91
Diluted earnings per share		1.93		1.89

The unaudited pro forma results above have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had these acquisitions occurred at January 1, 2013, nor are they necessarily indicative of future operating results. Annualized revenues of entities acquired in 2014 totaled approximately $761.2 million. Total revenues and net earnings recorded in our consolidated statement of earnings for 2014 related to the 2014 acquisitions in the aggregate were $413.0 million and $37.8 million, respectively.

4.	Other Current Assets

Major classes of other current assets consist of the following (in millions):


	December 31,
	2014		2013
Premium finance advances and loans	$	232.6	$	2.3
Accrued supplemental, direct bill and other receivables		156.3		69.0
Refined coal production related receivables		103.5		56.6
Deferred income taxes - current		102.2		84.9
Prepaid expenses		72.1		48.5

Total other current assets	$	666.7	$	261.3

The premium finance loans represent short-term loans which we make to many of our brokerage related clients and other non-brokerage clients to finance their premiums paid to insurance carriers. These premium finance loans are primarily generated by the Crombie/OAMPS operations which were acquired on June 16, 2014. Financing receivables are carried at amortized cost. Given that these receivables are collateralized, carry a fairly rapid delinquency period of only seven days post payment date, and that contractually the underlying insurance policies will be cancelled within one month of the payment due date, there historically has not been any risk of receiving payment and therefore we do not maintain any significant allowance for losses against this balance.