BusinessCombinationAndDeconsolidationDisclosure

6 Months Ended

Jun. 30, 2019

Notes

BusinessCombinationAndDeconsolidationDisclosure

Note 7.Acquisitions 

In 2019 the Company made several business acquisitions as follows:

In January 2019, the Company acquired all of the stock of My1HR, a web-based entity with a state-of-the-art insurance quoting and cloud-based enrollment platform. In general, companies that provide insurance through user-centric platforms, or create efficiencies in the insurance industry through technological advances, are referred to as “insuretech” companies. The Company acquired My1HR for its quoting and cloud-based enrollment platforms as part of an effort to expand our “insuretech” footprint through our agencies, which generate leads and sell our products through our owned call center and career advisors.

In April 2019, the Company purchased substantially all of the assets and liabilities of a sales and customer service call center. The Company acquired the call center in order to capitalize on technology-driven

trends in the purchase of health insurance directly by consumers. Prior to the purchase, the Company owned an equity interest in the call center. Immediately preceding the transaction, the Company determined the fair value of its equity interest to be $720,000 using a market approach and, as a result, recorded a loss of $237,000 which is included in other income on the Condensed Consolidated Statement of Income.

The aggregate fair value of consideration transferred for these acquisitions was $8,534,000 cash. The following table presents the aggregate acquisition-date fair values of the identifiable assets acquired and liabilities assumed in these transactions (in thousands):

Cash	$	582
Intangible assets		1,500
Other assets		1,301
Total identifiable assets		3,383
Other liabilities		3,637
Total liabilities		3,637
Net identifiable assets (liabilities) acquired	$	(254)

In connection with these acquisitions, the Company recorded $9,508,000 of goodwill and $1,500,000 of intangible assets (see Note 8). The fair value of the acquired identifiable intangible assets is provisional pending receipt of the final valuations for those assets and liabilities. The amount of goodwill and intangibles entitled to an amortization deduction for income tax purposes will be determined upon a mutually agreeable asset allocation of the acquisition consideration with the respective acquirees.

Goodwill reflects the synergies with our insurance carriers. My1HR has an existing distribution network and offers increased distribution sources for IHC carrier products through its quoting and cloud based enrollment platforms designed specifically for producers in the small group employer market and individual Affordable Care Act (“ACA”) and ancillary market. This new quoting and enrollment system will support group and individual products for all IHC carriers as well as select group ACA and level funded health coverages from leading national health plans. The acquisition of the call center is expected to expand our existing call center reach and increase sales of IHC-underwritten health insurance. Goodwill was calculated as the sum of (i) the aggregate acquisition-date fair value of total cash consideration transferred of $8,534,000 , (ii) the aggregate acquisition-date fair value of equity interests immediately before the acquisition of $720,000; and (iii) the net identifiable liabilities of $254,000 assumed. Enterprise values were determined either by an independent appraisal using a discounted cash flow model based upon the projected future earnings or by a market approach net of any control premiums.

Acquisition-related costs, primarily legal and consulting fees, were not material and are included in selling, general and administrative expenses in the Consolidated Statement of Income.

For the three months ended June 30, 2019, the Company’s Consolidated Statement of Income includes revenues and net income of $916,000 and $(406,000), respectively, from these acquisitions.  For the period from the acquisition dates to June 30, 2019, the Company’s Consolidated Statement of Income includes revenues and net income of $1,424,000 and $(383,000), respectively, from these acquisitions.

Pro forma adjustments to present the Company’s consolidated revenues and net income as if the acquisition dates were January 1, 2018 are not material and accordingly are omitted.