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Acquisition (Tables) | 9 Months Ended
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Sep. 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 nine months ended September 30, 2015 and 2014 as if the acquisition had occurred on January 1, 2014 instead of January 1, 2015.
|  | Pro Forma |
|  | Quarters Ended September 30, |  |  | Nine Months Ended September 30, |
(Dollars in thousands except per share data) |  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Total Revenue |  | $ | 124,060 |  |  | $ | 141,902 |  |  | $ | 402,347 |  |  | $ | 462,164 |
Net Income (Loss) |  | $ | (3,746 | ) |  | $ | 13,782 |  |  | $ | 19,560 |  |  | $ | 57,224 |
Net Income (Loss) per share (diluted) |  | $ | ( 0.15 | ) |  | $ | 0.54 |  |  | $ | 0.76 |  |  | $ | 2.24 |
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 |  |  | 11,311 |  |  |  | 11,311 |  |  |  | — |
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 September 30, 2015: |  |  |  |  |  |  |  |
Direct business |  | $ | 65,824 |  |  | $ | 57,825 |
Reinsurance assumed |  |  | 21,525 |  |  |  | 22,927 |
Reinsurance ceded |  |  | 24,047 |  |  |  | 18,620 |
Net premiums |  | $ | 63,302 |  |  | $ | 62,132 |
(Dollars in thousands) |  | Written |  |  | Earned |
For the nine months ended September 30, 2015: |  |  |  |  |  |  |  |
Direct business |  | $ | 179,979 |  |  | $ | 182,851 |
Reinsurance assumed |  |  | 69,585 |  |  |  | 70,120 |
Reinsurance ceded |  |  | 52,779 |  |  |  | 61,499 |
Net premiums |  | $ | 196,785 |  |  | $ | 191,472 |
Future Minimum Cash Payments under Non-Cancelable Operating Leases | At September 30, 2015, future minimum cash payments under non-cancelable operating leases related to the operations of American Reliable were as follows:
(Dollars in thousands) |  |  |
October 1, 2015 to September 30, 2016 |  | $ | 1,032 |
October 1, 2016 to September 30, 2017 |  |  | 941 |
October 1, 2017 to September 30, 2018 |  |  | 937 |
October 1, 2018 to September 30, 2019 |  |  | 143 |
Total |  | $ | 3,053 |
American Reliable Insurance Company |
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 as of September 30, 2015 compared to June 30, 2015 along with changes in estimates made during the quarter.
|  | As of |  |  |  |
(Dollars in thousands) |  | September 30, 2015 |  |  | June 30, 2015 |  |  | Change |
ASSETS: |  |  |  |  |  |  |  |  |  |  |  |
Investments |  | $ | 226,458 |  |  | $ | 226,458 |  |  | $ | — |
Cash and cash equivalents |  |  | 21,360 |  |  |  | 21,360 |  |  |  | — |
Premiums receivables, net |  |  | 25,941 |  |  |  | 25,941 |  |  |  | — |
Accounts receivable |  |  | 11,311 |  |  |  | 17,129 |  |  |  | (5,818 | )
Reinsurance receivables |  |  | 13,842 |  |  |  | 12,723 |  |  |  | 1,119 |
Prepaid reinsurance premiums |  |  | 43,506 |  |  |  | 43,506 |  |  |  | — |
Intangible assets |  |  | 32,000 |  |  |  | 32,000 |  |  |  | — |
Deferred federal income taxes |  |  | 1,139 |  |  |  | 1,246 |  |  |  | (107 | )
Other assets |  |  | 6,550 |  |  |  | 6,550 |  |  |  | — |
Total assets |  |  | 382,107 |  |  |  | 386,913 |  |  |  | (4,806 | )
LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |
Unearned premiums |  |  | 172,234 |  |  |  | 172,234 |  |  |  | — |
Unpaid losses and loss adjustment expenses |  |  | 89,489 |  |  |  | 88,370 |  |  |  | 1,119 |
Reinsurance balances payable |  |  | 13,219 |  |  |  | 13,219 |  |  |  | — |
Contingent commissions |  |  | 3,876 |  |  |  | 3,876 |  |  |  | — |
Other liabilities |  |  | 5,608 |  |  |  | 5,685 |  |  |  | (77 | )
Total liabilities |  |  | 284,426 |  |  |  | 283,384 |  |  |  | 1,042 |
Estimated fair value of net assets acquired |  |  | 97,681 |  |  |  | 103,529 |  |  |  | (5,848 | )
Purchase price |  |  | 99,797 |  |  |  | 105,843 |  |  |  | 6,046 |
Goodwill |  | $ | 2,116 |  |  | $ | 2,314 |  |  | $ | (198 | )
Intangible assets | The following table presents details of the Company’s intangible assets arising from the American Reliable acquisition as of September 30, 2015:
(Dollars in thousands) Description |  | Useful Life |  | Cost |  |  | Accumulated Amortization |  |  | Net Value |
State insurance licenses |  | Indefinite |  | $ | 5,000 |  |  | $ | — |  |  | $ | 5,000 |
Value of business acquired |  | < 1 year |  |  | 25,500 |  |  |  | 22,823 |  |  |  | 2,677 |
Agent relationships |  | 10 years |  |  | 900 |  |  |  | 67 |  |  |  | 833 |
Trade name |  | 7 - 8 years |  |  | 600 |  |  |  | 64 |  |  |  | 536 |
|  |  |  | $ | 32,000 |  |  | $ | 22,954 |  |  | $ | 9,046 |
Expected Amortization Expense | The Company expects that amortization expense for the next five years related to the American Reliable acquisition will be as follows:
(Dollars in thousands) |  |  |
October 1, 2015 to September 30, 2016 |  | $ | 2,853 |
October 1, 2016 to September 30, 2017 |  |  | 176 |
October 1, 2017 to September 30, 2018 |  |  | 176 |
October 1, 2018 to September 30, 2019 |  |  | 176 |
October 1, 2019 to September 30, 2020 |  |  | 176 |

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