Business combinations

American International Group, Inc. (“AIG”)

On January 21, 2018, the Company entered into a definitive agreement and plan of merger with AIG. Refer to Note 27, “Subsequent Events,” for further details.

CRS

On May 1, 2017, Western World, a wholly–owned subsidiary of the Company acquired all of the outstanding capital stock of CRS for an aggregate purchase price of $185,576 in cash. CRS is a primary crop insurance managing general agent (“MGA”) based in Decatur, Illinois with 1,170 agents across 36 states. CRS does not have insurance licenses of its own, but acts solely as an MGA in that it can produce business for any properly licensed entity on a commission basis. Concurrent with closing of the transaction, Stratford, a wholly–owned subsidiary of Western World, was granted the required licenses to write crop insurance in the United States and executed several agreements to transfer the related agriculture book of business to Stratford.

The CRS acquisition was undertaken to expand the Company’s presence in U.S. primary specialty lines.

For segmental reporting purposes, the results of CRS’ operations, including the related agricultural book of business have been included within the Insurance segment in the Consolidated Financial Statements from the date of acquisition.

On closing, the Company recorded intangible assets totaling $63,921 for Distribution Channels, Trade Name and Technology. Distribution Channels and Trade Name were estimated to have finite useful economic lives of ten years on acquisition and are being amortized on a straight line basis over such period. Technology was estimated to have a finite useful economic life of two years on acquisition and is being amortized on a straight line basis over such a period.

The purchase price was allocated to the acquired assets and liabilities of CRS based on estimated fair values on May 1, 2017, the date the transaction closed, as detailed below. The Company recognized goodwill of $30,943 primarily attributable to CRS’ assembled workforce and synergies expected to result upon the integration of CRS and its related book of business into the Company’s operations. The estimates of fair values for tangible assets acquired and liabilities assumed were determined by management based on various market and income analyses. The Company estimated the fair values of intangible assets acquired based on variations of the income and cost approaches. Significant judgment was required to arrive at these estimates of fair value and changes to assumptions used could have led to materially different results.

The purchase of CRS was a taxable transaction and as such, goodwill and intangibles recorded at closing will be deductible for income tax purposes. The Company has recognized and recorded a deferred tax asset of $6,443 which results from the excess of tax-deductible goodwill over book value goodwill as recognized in the purchase price allocation.

The fair value of net assets acquired, including GAAP adjustments, are summarized as follows:



Total purchase price			$	185,576
Assets acquired
Cash and cash equivalents	$	1,653
Premiums receivable	537,383
Prepaid reinsurance premiums	227,157
Other assets	184,216
Tangible assets acquired			950,409
Intangible asset - Distribution channels	$	52,898
Intangible asset - Trade name	9,568
Intangible asset - Technology	1,455
Intangible assets acquired			63,921
Deferred tax arising on Goodwill			6,443
Liabilities acquired
Reinsurance balances payable	294,201
Unearned premiums	406,649
Net loss reserves	42,575
Other liabilities	122,715
Liabilities acquired			866,140
Excess purchase price (goodwill) at acquisition			$	30,943
Measurement period adjustments ^(a)			1,872
Excess purchase price (goodwill) at December 31, 2017			$	32,815


(a)	During the year ended December 31, 2017, the Company recorded tax related measurement period adjustments of $1,872.

The Company also incurred transaction expenses related to the CRS acquisition of $4,427. Transaction expenses included legal, financial advisory and audit related services.

For details on the intangible assets acquired, refer to Note 6, “Goodwill and other intangible assets.”

Operating results of CRS have been included in the Consolidated Financial Statements from the May 1, 2017 acquisition date. The following selected unaudited information has been provided to present a summary of the results of CRS that have been included in the Consolidated Financial Statements for the year ended December 31, 2017:



	Year Ended December 31, 2017
	Unaudited
Total underwriting revenues	$	236,769
Total underwriting deductions	$	183,637
Underwriting income, before general and administrative expenses	$	53,132