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Acquisition (Tables)

6 Months Ended

Jun. 30, 2015

Schedule of Unaudited Pro Forma Consolidated Results of Operations

The following table presents the Company’s unaudited pro forma consolidated results of operations for the quarters and six months ended June 30, 2015 and 2014 as if the acquisition had occurred on January 1, 2014 instead of January 1, 2015.


	Pro Forma
	Quarters Ended June 30,				Six Months Ended June 30,
(Dollars in thousands except per share data)	2015		2014		2015		2014
Total Revenue	$	145,125	$	181,080	$	278,282	$	320,262
Net Income	$	11,117	$	35,108	$	23,306	$	43,361
Net Income per share	$	0.43	$	1.37	$	0.91	$	1.70

Estimated Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of the acquisition:


(Dollars in thousands)
ASSETS:
Investments	$	226,458
Cash and cash equivalents		21,360
Premiums receivables, net		25,941
Accounts receivable		17,129
Reinsurance receivables		12,723
Prepaid Reinsurance Premiums		43,506
Intangible assets		32,000
Deferred federal income taxes		1,246
Other assets		6,550

Total assets		386,913

LIABILITIES:
Unearned premiums		172,234
Unpaid losses and loss adjustment expenses		88,370
Reinsurance balances payable		13,219
Contingent commission		3,876
Other liabilities		5,685

Total liabilities		283,384

Estimated fair value of net assets acquired		103,529
Purchase price		105,843

Goodwill	$	2,314

Valuation of Intangible Assets

An identification and valuation of intangible assets was performed that resulted in the recognition of intangible assets of $32.0 million with values assigned as follows:


(Dollars in thousands) Description	Useful Life	Amount
State insurance licenses	Indefinite	$	5,000
Value of business acquired	< 1 year		25,500
Agent relationships	10 years		900
Trade name	7 - 8 years		600

		$	32,000

Fair Value, Gross Contractual Amounts Due, and Contractual Cash Flows Not Expected to be Collected of Acquired Receivables

The fair value, gross contractual amounts due, and contractual cash flows not expected to be collected of acquired receivables are as follows:


(Dollars in thousands)	Fair Value		Gross Contractual Amounts Due		Contractual cash flows not expected to be collected
Premium receivables	$	25,941	$	26,896	$	955
Accounts receivable		17,129		17,129		—
Reinsurance receivables		12,723		12,723		—

Geographical Distribution of American Reliable's Gross Premium Written

The following table sets forth the geographic distribution of American Reliable’s gross premiums written, excluding business that is ceded under a 100% quota share reinsurance agreement to American Bankers Insurance Company of Florida, for the year ended December 31, 2014:


	Year Ended December 31, 2014
(Dollars in thousands)	Amount		Percent
Texas	$	32,760		12.3	%
California		25,556		9.6
North Carolina		23,040		8.7
Arizona		17,722		6.7
Louisiana		17,522		6.6
New York		13,408		5.0
Florida		12,361		4.6
Oklahoma		9,977		3.7
Georgia		8,768		3.3
New Jersey		6,925		2.6

Subtotal		168,039		63.1
All other states		98,264		36.9

Total	$	266,303		100.0	%

Effect of Reinsurance on Premiums Written and Earned

The effect of reinsurance on premiums written and earned by American Reliable is as follows:


(Dollars in thousands)	Written			Earned
For the quarter ended June 30, 2015:
Direct business	$	64,319		$	64,033
Reinsurance assumed		24,685			23,494
Reinsurance ceded		(16,177	)		(21,609	)

Net premiums	$	72,827		$	65,918


(Dollars in thousands)	Written			Earned
For the six months ended June 30, 2015:
Direct business	$	114,155		$	125,026
Reinsurance assumed		48,060			47,193
Reinsurance ceded		(28,732	)		(42,879	)

Net premiums	$	133,483		$	129,340

Future Minimum Cash Payments under Non-Cancelable Operating Leases

At June 30, 2015, future minimum cash payments under non-cancelable operating leases related to the operations of American Reliable were as follows:


(Dollars in thousands)
July 1, 2015 to June 30, 2016	$	896
July 1, 2016 to June 30, 2017		806
July 1, 2017 to June 30, 2018		783
July 1, 2018 to June 30, 2019		358

Total	$	2,843