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Business Combinations
 12 Months Ended
Dec. 31, 2012
Business Combinations [Abstract]  
Business Combinations
Business Combinations
In August 2011, Selective Insurance Company of America ("SICA") purchased the renewal rights to the commercial E&S lines business written under contract binding authority by Alterra Excess & Surplus Insurance Company (“Alterra”). Prior to our acquisition, this business generated gross premiums written of approximately $77 million in 2010. To provide a nationally-licensed platform that allows us to write this business, on December 31, 2011, the Parent purchased MUSIC, a wholly-owned E&S lines subsidiary of Montpelier Re Holdings Ltd. (“Montpelier Re”). Under the terms of the agreement, the Parent acquired all of the issued and outstanding shares of MUSIC’s common stock as of December 31, 2011 for $51.5 million, net of cash acquired.
 
The following table provides the final purchase price allocation of the assets and liabilities purchased in the MUSIC transaction:
($ in thousands)
 
 
 
 
 
 
ASSETS:
 
 

 
LIABILITIES:
 
 

Investments
 
$
48,437

 
Reserve for losses and loss expenses
 
$
58,836

Cash
 
3,436

 
Unearned premium
 
28,520

Interest and dividends due or accrued
 
54

 
Accrued salaries and benefits
 
43

Premiums receivable
 
7,073

 
Other liabilities
 
6,742

Reinsurance recoverables, net
 
43,978

 
Total Liabilities
 
$
94,141

Prepaid reinsurance premiums
 
28,520

 
 
 
 
Property, plant and equipment
 
219

 
 
 
 

Deferred federal income taxes1
 
5,613

 
 
 
 

Other assets
 
8,133

 
 
 
 
Total Assets
 
$
145,463

 
 
 
 

 1In our original purchase price allocation, we recorded a net operating loss deferred tax asset of $4.8 million, which was valued based on preliminary information that was available at December 31, 2011, the time of closing. In September 2012, final information became available and this deferred tax asset was re-valued at $4.2 million, a decrease of $0.6 million. The Consolidated Balance Sheet as of December 31, 2011, as well as this schedule, has been restated to reflect this purchase price adjustment with a corresponding increase to the re-valued covenant not to compete included in other assets.

We have entered into several reinsurance agreements with Montpelier Re as part of the acquisition of MUSIC. Together, these transactions provide protection for new losses and or loss expenses on policies written prior to the acquisition as well as any loss and loss expense reserve development on reserves established by MUSIC as of the date of the acquisition. The reinsurance recoverables under these treaties are 100% collateralized.
 
As part of the acquisition, we purchased intangible assets that amounted to approximately $7.9 million. The most significant of these items are licenses and customer lists. The $4.2 million indefinite-lived intangible asset related to the licenses is reflective of the fact that these licenses provide us the ability to write commercial and personal E&S business in 50 states and the District of Columbia. The $2.5 million finite-life intangible asset related to customer lists reflects the access that we have obtained, through the acquisition, to MUSIC’s renewal book of business. Prior to our acquisition, in 2010, MUSIC wrote approximately $48 million of contract binding authority E&S business.
 
In addition to the assets acquired and liabilities assumed that are detailed in the table above, SICA also purchased intellectual property and information technology assets from Montpelier Re valued at $3.6 million as part of the transaction.