ACQUISITIONS

We account for business acquisitions in accordance with the acquisition method of accounting, which requires, among other things, that most assets acquired, liabilities assumed, and earn-out consideration be recognized at their fair values as of the acquisition date. Measurement period adjustments to provisional purchase price allocations are recognized in the period in which they are determined as if the accounting had been competed on the acquisition date.

AmCo Holding Company

On April 3, 2017, the Company completed its acquisition of AmCo and its subsidiaries. The transaction was completed through a series of mergers that ultimately resulted in the Company issuing 20,956,355 shares of its common stock as merger consideration to the equity holders of RDX Holding, LLC, the former parent company of AmCo. As a result of the mergers, AmCo merged with and into a wholly-owned subsidiary of the Company. The acquisition of AmCo supported our growth strategy and further strengthened our overall position in the commercial property and casualty insurance market. Goodwill recorded in the transaction, which reflected the synergies expected from the acquisition and enhanced reinsurance opportunities, is not tax deductible.

The operations of AmCo are included in our Consolidated Statements of Comprehensive Income (Loss) effective April 3, 2017. The final purchase price allocation was as follows:



Cash and cash equivalents	$	95,284
Investments	222,920
Premium and agents’ receivable	31,439
Reinsurance recoverable	20,230
Ceded unearned premiums	22,544
Intangible assets	30,286
Insurance contract asset	33,812
Goodwill	59,475
Other assets	4,591
Unpaid losses and loss adjustment expenses	(60,529		)
Unearned premiums	(128,824		)
Reinsurance payable	(22,406		)
Deferred taxes	(17,093		)
Other liabilities	(6,261		)
Total purchase price	$	285,468

The unaudited pro forma financial information below has been prepared as if the AmCo merger had taken place on January 1, 2016. The unaudited pro forma financial information is not necessarily indicative of the results that we would have achieved had the transaction taken place on January 1, 2016, and the unaudited pro forma information does not purport to be indicative of future financial operating results.



	Year ended December 31,
	2017						2016
	As		Pro Forma				As		Pro Forma
	Reported		Adjustments		Pro Forma		Reported		Adjustments		Pro Forma
Revenues	$	654,420	$	38,096	$	692,516	$	487,117	$	175,032	$	662,149
Net income	$	10,145	$	6,712	$	16,857	$	5,698	$	31,960	$	37,658
Diluted earnings per share	$	0.27	$	—	$	0.39	$	0.26	$	—	$	0.88

⁽¹⁾ Adjustments are for the period from January 1, 2016 through April 3, 2017.

The following table summarizes the results of the acquired AmCo operations since the acquisition date that have been included within our Consolidated Statements of Comprehensive Income (Loss).



	January 1, 2018 to December 31, 2018		April 3, 2017 to December 31, 2017
Revenues	$	193,168	$	134,386
Net income	18,673		14,778

As of April 3, 2017, the fair value of AmCo’s premium and agents’ receivables and reinsurance recoverables were $31,439,000 and $20,230,000, respectively. The cash flows not expected to be collected of these acquired receivables were not material.

In connection with the acquisition, we paid an investment advisory fee of $7,000,000. This amount was included in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss) during the year ended December 31, 2017.

Interboro Insurance Company

On April 29, 2016, we completed the acquisition of IIC. The purchase price for IIC consisted of $48,450,000 in cash, $8,550,000 in a note payable that matured during October 2017 and an accrued liability for $3,471,000 paid during July 2016. The acquisition of IIC supported our growth strategy and further strengthened our overall position in the property and casualty insurance market in the state of New York.

For the year ended December 31, 2016, IIC recorded $28,573,000 of revenues and $14,202,000 of pre-tax net income. These amounts are included in our results of operations for the year ended December 31, 2016.

The operations of IIC are included in our Consolidated Statements of Comprehensive Income (Loss) effective April 29, 2016. The final purchase price allocation is as follows:



Cash and cash equivalents	$	15,554
Investments	66,527
Premium and agents’ receivable	3,186
Reinsurance receivable	1,042
Intangible assets	5,877
Insurance contract asset	8,334
Goodwill	10,157
Other assets	3,980
Deferred taxes	575
Unpaid losses and loss adjustment expenses	(24,967		)
Unearned premiums	(26,243		)
Advanced premiums	(1,472		)
Other liabilities	(2,079		)
Total purchase price	$	60,471

The unaudited pro forma financial information for 2016 has been prepared as if the IIC acquisition had taken place on January 1, 2016. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transaction taken place on January 1, 2016, and the unaudited pro forma information does not purport to be indicative of future financial operating results.



	For the Year Ended December 31, 2016
	As		Pro Forma
	Reported		Adjustments⁽¹⁾		Pro Forma
Revenues	$	487,117	$	18,963	$	506,080
Net income	$	5,698	$	8,187	$	13,885
Diluted earnings per share	$	0.26	$	0.38	$	0.64

⁽¹⁾ Adjustments are for the period from January 1, 2016 through April 29, 2016.

The following table summarizes the results of the acquired IIC operations since the acquisition date that have been included within our Consolidated Statements of Comprehensive Income (Loss).



	January 1, 2018 to December 31, 2018			January 1, 2017 to December 31, 2017		April 29, 2016 to December 31, 2016
Revenues	$	27,024		$	31,780	$	28,573
Net income	(2,906		)	385		9,645

As of April 26, 2016, the fair value of IIC’s premium and agents’ receivables and reinsurance receivables were $3,186,000 and $1,042,000, respectively. The cash flows not expected to be collected of these acquired receivables were not material.

In connection with the acquisition, we paid an investment advisory fee of $224,000. This amount was included in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss) during the year ended December 31, 2016.