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Acquisition | 6 Months Ended
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Jun. 30, 2022
Business Combinations [Abstract] |
Acquisition | (14) Acquisition On July 1, 2021, the Company acquired an 80% interest, as described in the next paragraph, in the operating subsidiaries of Etelequote Bermuda, including e-TeleQuote, a Florida corporation that is a senior health insurance distributor of Medicare-related insurance policies in all 50 states and Puerto Rico (the “Acquisition”). The Company’s subsidiary, Primerica Health, purchased from the shareholders of Etelequote Bermuda (the “selling shareholders”) 100% of the issued and outstanding capital stock of e-TeleQuote and its subsidiaries for consideration of (i) approximately $350 million in cash, (ii) replacement of e-TeleQuote’s debt as of the closing date of $146 million with intercompany funding provided by the Parent Company, (iii) a $15 million Majority Shareholder Note and (iv) common shares of Primerica Health constituting 20% of the total issued and outstanding shares of capital stock of Primerica Health that were issued to Etelequote Bermuda’s minority shareholders, most of which include or are beneficially owned by e-TeleQuote’s management (“Noncontrolling Equity Holders”). The cash consideration provided was subsequently reduced by $3.9 million as a result of the final purchase price agreed upon with the sellers following finalization of the closing statement. Effective July 1, 2022, the Parent Company acquired the remaining 20% interest held by the Noncontrolling Equity Holders. Refer to Note 15 (Subsequent Events) for further details. The following table presents the preliminary purchase price allocation recorded in the Company’s consolidated balance sheet as of the acquisition date, adjustments made during the measurement period ended June 30, 2022, and the final purchase price allocation:
|  | Preliminary Purchase Price Adjustment |  |  | 2021 Measurement Period Adjustments |  |  | 2022 Measurement Period Adjustments |  |  | Final Acquisition Date Purchase Price Allocation |
|  | (In thousands) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalent |  |  | 1,080 |  |  |  | - |  |  |  | - |  |  |  | 1,080 |
Accounts receivables |  |  | 692 |  |  |  | (389 | ) |  |  | - |  |  |  | 303 |
Renewal commissions receivable |  |  | 199,575 |  |  |  | (46,128 | ) |  |  | (11,863 | ) |  |  | 141,584 |
Other assets |  |  | 15,705 |  |  |  | - |  |  |  | - |  |  |  | 15,705 |
Intangible assets |  |  | 162,000 |  |  |  | (6,000 | ) |  |  | - |  |  |  | 156,000 |
Goodwill |  |  | 224,180 |  |  |  | 30,973 |  |  |  | 8,553 |  |  |  | 263,706 |
Total assets |  |  | 603,232 |  |  |  | (21,544 | ) |  |  | (3,310 | ) |  |  | 578,378 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  |  | 8,785 |  |  |  | (4,195 | ) | (1) |  | - |  |  |  | 4,590 |
Deferred tax liability |  |  | 65,425 |  |  |  | (13,482 | ) |  |  | (3,310 | ) |  |  | 48,633 |
Other liabilities |  |  | 10,046 |  |  |  | - |  |  |  | - |  |  |  | 10,046 |
Total liabilities |  |  | 84,256 |  |  |  | (17,677 | ) |  |  | (3,310 | ) |  |  | 63,269 |
Net assets acquired |  |  | 518,976 |  |  |  | (3,867 | ) |  |  | - |  |  |  | 515,109 |
Temporary Stockholders' Equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Redeemable noncontrolling interests |  |  | 8,437 |  |  |  | - |  |  |  | - |  |  |  | 8,437 |
Total temporary stockholders' equity |  |  | 8,437 |  |  |  |  |  |  |  |  |  |  |  | 8,437 |
(1) | The Company also recognized an adjustment during the measurement period to reclassify certain amounts from a payable to a reduction in the renewal commissions receivable.
The Company’s estimate of the purchase consideration was adjusted during the measurement period to reflect the final purchase price agreed upon with the sellers. The final purchase price reduced the purchase consideration as the Company received a cash reimbursement of $3.9 million, which resulted in a corresponding reduction to goodwill. Renewal commissions receivable from the acquired business was recognized in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”) as the Company adopted Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires contract assets arising from revenue contracts with customers to be accounted for in accordance with ASC 606 instead of at fair value. During the measurement period, the Company made two adjustments to renewal commissions receivable as of the acquisition date. The adjustments, which were booked in 2021 and 2022 resulted from the Company’s reassessment of the estimates made by e-TeleQuote for the variable consideration expected for approved policies as of the acquisition date. The reassessment of estimates involved the implementation of an enhanced algorithmic model for processing historical lapse data and forecasting future policy duration curves. In addition, the Company revised the estimate for renewal commission rate escalation assumptions in accordance with its accounting policy for determining constraints of variable consideration. As a result, the Company recognized a purchase price allocation adjustment to decrease renewal commissions receivable and deferred tax liability with a corresponding increase to goodwill. Intangible assets identified in the acquisition of the business are capitalized separately from goodwill if the fair value can be measured reliably on initial recognition (transaction date). The primary intangible assets identified were customer relationships with health insurance carriers of $153.0 million with an estimated useful life of 15 years. The Company will amortize the intangible assets acquired on a straight-line basis over their estimated useful lives. During the measurement period, the Company revised long-term growth rates used in the cash flow projections that support the intangibles valuation. As a result, the Company recognized a purchase price allocation adjustment to decrease intangible assets and deferred tax liability with a corresponding increase to goodwill. Goodwill is calculated as the difference between the acquisition date fair value of the total consideration transferred and the aggregate values assigned to the assets acquired and liabilities assumed. The amount of goodwill calculated as of the acquisition date determined by the final purchase price allocation was $263.7 million. As discussed in Note 1 (Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies) of our consolidated financial statements within our 2021 Annual Report, the Company recognized a non-cash goodwill impairment charge of $76.0 million at December 31, 2021. The goodwill created in the acquisition is not deductible for tax purposes and there was no impact to income taxes from the goodwill impairment charge recorded. As of June 30, 2022, goodwill recognized by the Company from the acquisition was $187.7 million. Goodwill will be tested for impairment in conjunction with the Company’s annual impairment assessment on July 1, 2022 during our fiscal third quarter. For the three and six months ended June 30, 2022, transaction costs related to the e-TeleQuote acquisition included within Other operating expenses in the unaudited condensed consolidated statements of income were $0.1 million and $1.0 million, respectively. The following unaudited pro forma consolidated financial information combines the unaudited results of the Company for the three and six months ended June 30, 2021 and the unaudited results of e-TeleQuote for the three and six months ended June 30, 2021, and assumes that the e-TeleQuote acquisition, which closed on July 1, 2021, was completed on January 1, 2021 (the first day of fiscal 2021). The pro forma consolidated financial information has been calculated after applying adjustments for amortization expense of acquired intangible assets and the consequential tax effect. These pro forma results have been prepared for comparative purpose only and do not purport to be indicative of the operating results of the Company that would have been achieved had the e-TeleQuote acquisition actually taken place on January 1, 2021. In addition, these results are not intended to project future results and do not reflect events that may occur including, but not limited to, revenue enhancements, cost savings or operating synergies that the Company may achieve as a result of the Acquisition.
|  | Three months ended June 30, 2021 |  |  | Six months ended June 30, 2021 |
|  | (in thousands) |
Revenue |  | $ | 682,190 |  |  | $ | 1,357,658 |
Net income (loss) |  |  | 121,680 |  |  |  | 218,041 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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