On October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes business to K2 Insurance Services (“K2”) and American Family Mutual Insurance Company (“American Family”). Pursuant to the tripartite transaction, the Company received $28.0 million in cash in October 2021. The Company also retained the American Reliable 50-state licensed operating unit, $65 million of net capital supporting the business, and a related $42 million unearned premium reserve. The Company currently leases office space in Scottsdale, Arizona. As part of this sale, K2 is subleasing approximately one third of the Scottsdale, Arizona office space. Currently, the Company intends to exercise the early termination clause in their Scottsdale, Arizona lease. If the Company exercises the early termination clause, it will receive $1.6 million in sublease payments from K2. If it does not exercise the early termination clause, it will receive $2.4 million in sublease payments from K2 between October 2021 and November 2029.

To facilitate the transaction, American Reliable retained the specialty residential property business in Florida and Louisiana and also retained business that was previously placed in runoff. American Reliable commenced the non-renewal of manufactured home insurance in Florida beginning on March 11, 2022, for policies expiring on or after July 10, 2022. American Reliable and United National non-renewed manufactured home and dwelling insurance in Louisiana beginning on or about January 31, 2022, for policies renewing on or after March 7, 2022. American Family assumed 100% of the risks for all policies covered under the renewal rights agreement which are written or renewed after October 26, 2021, except for policies covering properties in the state of Florida. The Company also retained risk for business previously placed in runoff and policies in Louisiana.

The gross proceeds from this sale of $28.0 million are included in other income on the Company’s consolidated statements of operations. Legal expenses and merger and acquisition fees related to the sale were $2.4 million for the year ended December 31, 2021. In addition, the Company recorded an impairment of goodwill, intangible assets, software, and lease costs in the amount of $1.1 million, $0.2 million, $2.0 million, and $1.5 million, respectively, for the year ended December 31, 2021. The Company also recorded an additional impairment of lease cost in the amount of $0.6 million for the year ended December 31, 2022. The impairments and expenses related to sale are included on the Company’s consolidated statements of operations as follows:


	Years Ended December 31,
(Dollars in thousands)	2022		2021		2020
Acquisition costs and other underwriting expenses	$	644	$	—	$	—
Corporate and other operating expenses		—		7,202		—
Total impairments and expenses related to sale	$	644	$	7,202	$	—

See Note 9 for additional information on the impairment of goodwill and intangible assets and Note 15 for additional information on impairment of leases.

In addition, effective November 30, 2021, the Company and American Family reached an agreement where American Family agreed to reinsure 100% of the Company’s unearned premium reserves of the same types as the policies comprising the manufactured and dwelling homes business lines noted above that were in force as of November 30, 2021. The approximate amount of the unearned premium reserves at November 30, 2021 was $33.8 million. The Company received a 40% ceding commission which included a provision for a 4% claims administration fee to be paid by the Company directly to K2 Claims.

On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company for $30.0 million. The Company retained the unearned premium reserves for business written prior to August 8, 2022.

The gross proceeds from this sale of $30.0 million are included in other income on the Company’s consolidated statements of operations. In addition, the Company also recorded an impairment of goodwill, intangible assets, software, and lease costs in the amount of $0.6 million, $5.1 million, $0.5 million, and $0.5 million, respectively, for the year ended December 31, 2022. Legal expenses and merger and acquisition fees related to the sale were $2.5 million for the year ended December 31, 2022. The impairments and expenses related to sale are included on the Company’s consolidated statements of operations as follows:


	Years Ended December 31,
(Dollars in thousands)	2022		2021		2020
Acquisition costs and other underwriting expenses	$	1,034	$	—	$	—
Corporate and other operating expenses		8,142		—		—
Total impairments and expenses related to sale	$	9,176	$	—	$	—

See Note 9 for additional information on the impairment of goodwill and intangible assets and Note 15 for additional information on impairment of leases.

In conjunction with this sale, Everett Cash Mutual Insurance Company also acquired the Company’s wholly-owned subsidiary, American Reliable Insurance Company, on December 31, 2022 for an amount equal to book value, which was $10.0 million, at the time of closing.