Revenues

6 Months Ended

Jun. 30, 2020

Revenues [Abstract]

Revenues

NOTE 3 Revenues

The following tables present the revenues disaggregated by revenue source:

	Three months ended June 30, 2020
(in thousands)	Retail		National Programs		Wholesale Brokerage		Services		Other (8)			Total
Base commissions (1)	$	221,674	$	107,392	$	68,300	$	—	$	—		$	397,366
Fees (2)		65,583		37,453		16,856		42,930		(323	)		162,499
Incentive commissions (3)		14,706		111		516		—		—			15,333
Profit-sharing contingent commissions (4)		6,926		9,269		2,458		—		—			18,653
Guaranteed supplemental commissions (5)		3,405		306		595		—		—			4,306
Investment income (6)		41		129		46		—		117			333
Other income, net (7)		227		7		82		—		—			316
Total Revenues	$	312,562	$	154,667	$	88,853	$	42,930	$	(206	)	$	598,806

	Six months ended June 30, 2020
(in thousands)	Retail		National Programs			Wholesale Brokerage		Services		Other (8)			Total
Base commissions (1)	$	540,218	$	198,159		$	125,776	$	—	$	—		$	864,153
Fees (2)		123,224		70,013			32,475		87,382		(644	)		312,450
Incentive commissions (3)		64,694		222			2,384		—		—			67,300
Profit-sharing contingent commissions (4)		23,021		14,980			4,594		—		—			42,595
Guaranteed supplemental commissions (5)		7,837		(707	)		1,032		—		—			8,162
Investment income (6)		124		392			97		—		882			1,495
Other income, net (7)		933		21			193		—		—			1,147
Total Revenues	$	760,051	$	283,080		$	166,551	$	87,382	$	238		$	1,297,302

(1) Base commissions generally represent a percentage of the premium paid by an insured and are affected by fluctuations in both premium rate levels charged by insurance companies and the insureds’ underlying “insurable exposure units,” which are units that insurance companies use to measure or express insurance exposed to risk (such as property values, or sales and payroll levels) to determine what premium to charge the insured. Insurance companies establish these premium rates based upon many factors, including loss experience, risk profile and reinsurance rates paid by such insurance companies, none of which we control.

(2) Fee revenues relate to fees for services other than securing coverage for our customers, fees negotiated in lieu of commissions, and F&I products and services.

(3) Incentive commissions include additional commissions over base commissions received from insurance carriers based on predetermined production levels mutually agreed upon by both parties.

(4) Profit-sharing contingent commissions are based primarily on underwriting results, but may also reflect considerations for volume, growth and/or retention.

(5) Guaranteed supplemental commissions represent guaranteed fixed-base agreements in lieu of profit-sharing contingent commissions.

(6) Investment income consists primarily of interest on cash and investments.

(7) Other income consists primarily of legal settlements and other miscellaneous income.

(8) Fees within other reflects the elimination of intercompany revenues.

Contract Assets and Liabilities

The balances of contract assets and contract liabilities arising from contracts with customers as of June 30, 2020 and December 31, 2019 were as follows:

(in thousands)	June 30, 2020		December 31, 2019
Contract assets	$	313,014	$	289,609
Contract liabilities	$	57,204	$	58,126

Unbilled receivables (contract assets) arise when the Company recognizes revenue for amounts which have not yet been billed in the Company's systems and are reflected in premiums, commissions and fee receivables in the Company's Condensed Consolidated Balance Sheet. Deferred revenue (contract liabilities) relates to payments received in advance of performance under the contract before the transfer of a good or service to the customer. Deferred revenue is reflected within accrued expenses and other liabilities for those to be recognized in less than 12 months and in other liabilities for those to be recognized more than 12 months from the date presented in the Company's Condensed Consolidated Balance Sheet.

As of June 30, 2020, deferred revenue consisted of $40.5 million as current portion to be recognized within one year and $16.7 million in long term to be recognized beyond one year. As of December 31, 2019, deferred revenue consisted of $41.2 million as current portion to be recognized within one year and $16.9 million in long-term deferred revenue to be recognized beyond one year.

During the six months ended June 30, 2020, the net amount of revenue recognized related to performance obligations satisfied in a previous period was a $10.5 million, consisting of $17.6 million of additional variable consideration received on our supplemental commissions, offset by $7.1 million of revised estimates related to variable consideration on policies where the exposure units are expected to be impacted by the COVID-19 pandemic (“COVID-19”).

Other Assets and Deferred Cost

Incremental cost to obtain - The Company defers certain costs to obtain customer contracts primarily as they relate to commission-based compensation plans in the Retail Segment, in which the Company pays an incremental amount of compensation on new business. These incremental costs are deferred and amortized over a 15-year period. The cost to obtain balance within the other assets caption in the Company's Condensed Consolidated Balance Sheet was $34.9 million and $26.9 million as of June 30, 2020 and December 31, 2019, respectively. For the six months ended June 30, 2020, the Company deferred $9.1 million of incremental cost to obtain customer contracts. The Company recorded an expense of $1.1 million associated with the incremental cost to obtain customer contracts for the six months ended June 30, 2020.

Cost to fulfill - The Company defers certain costs to fulfill contracts and recognizes these costs as the associated performance obligations are fulfilled. The cost to fulfill balance within the other current assets caption in the Company's Condensed Consolidated Balance Sheet was $68.8 million and $73.3 million as of June 30, 2020 and December 31, 2019, respectively. For the six months ended June 30, 2020, the Company had net expense of $4.5 million related to the release of previously deferred contract fulfillment costs associated with performance obligations that were satisfied in the period, net of current year deferrals for costs incurred that related to performance obligations yet to be fulfilled.