Business Combinations (Tables)

9 Months Ended

Sep. 30, 2020

Purchase Price Allocation for Current Year Acquisitions and Adjustments Made for Prior Year Acquisitions

The following table summarizes the purchase price allocations made as of the date of each acquisition for current year acquisitions and adjustments made during the measurement period for prior year acquisitions. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. These adjustments are made in the period in which the amounts are determined, and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.

(in thousands)
Name	Business segment	Effective date of acquisition	Cash paid		Common Stock Issued		Other payable		Recorded earn-out payable		Net assets acquired		Maximum potential earn- out payable
Special Risk Insurance Managers Ltd. (Special Risk)	National Programs	January 1, 2020	$	70,156	$	—	$	—	$	9,859	$	80,015	$	14,650
Texas All Risk General Agency, Inc. et al (Texas Risk)	Wholesale Brokerage	January 1, 2020		10,511		—		159		310		10,980		1,150
The Colonial Group, Inc. et al (Colonial)	Wholesale Brokerage	March 1, 2020		29,037		—		527		5,639		35,203		10,150
RLA Insurance Intermediaries, LLC (RLA)	Wholesale Brokerage	March 1, 2020		42,496		—		786		9,970		53,252		22,500
Dealer Financial Services of N.C., LLC d/b/a The Sterling Group (Sterling)	Retail	April 1, 2020		19,341		—		300		2,840		22,481		5,400
LP Insurance Services, LLC (LP)	National Programs	May 1, 2020		115,948		10,000		318		42,993		169,259		75,850
First Resource, Inc. (First)	Retail	July 1, 2020		10,700		—		450		3,776		14,926		5,800
Buiten & Associates, LLC (Buiten)	Retail	August 1, 2020		38,225		—		1,175		7,448		46,848		14,175
Amity Insurance Agency, Inc. (Amity)	Retail	August 1, 2020		14,820		2,000		200		1,860		18,880		4,060
Frank E. Neal & Co., Inc. (Neal)	Retail	September 1, 2020		32,589		3,120		345		5,732		41,786		10,325
BrookStone Insurance Group, LLC (BrookStone)	Retail	September 1, 2020		12,030		—		—		1,058		13,088		1,878
Other	Various	Various		6,505		—		90		5,360		11,955		5,840
Total			$	402,358	$	15,120	$	4,350	$	96,845	$	518,673	$	171,778

Estimated Fair Values of Aggregate Assets and Liabilities Acquired

The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.

(in thousands)	Special Risk			Texas Risk			Colonial			RLA			Sterling			LP			First
Cash	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Other current assets		1,702			446			1,344			—			612			3,528			302
Fixed assets		346			27			59			54			16			1,877			1
Goodwill		63,132			8,940			25,719			51,285			14,816			115,200			9,523
Purchased customer accounts		14,286			3,222			9,393			12,875			7,196			48,633			5,095
Non-compete agreements		136			25			43			481			21			31			21
Other assets		—			—			—			—			—			—			—
Total assets acquired		79,602			12,660			36,558			64,695			22,661			169,269			14,942
Other current liabilities		413			(1,680	)		(1,355	)		(11,443	)		(180	)		(10	)		(16	)
Other liabilities		—			—			—			—			—			—
Total liabilities assumed		413			(1,680	)		(1,355	)		(11,443	)		(180	)		(10	)		(16	)
Net assets acquired	$	80,015		$	10,980		$	35,203		$	53,252		$	22,481		$	169,259		$	14,926

(in thousands)	Buiten			Amity			Neal			BrookStone			Other			Total
Cash	$	—		$	—		$	—		$	—		$	—		$	—
Other current assets		2,595			653			2,337			364			911			14,794
Fixed assets		43			58			46			23			—			2,550
Goodwill		33,641			15,454			29,203			9,031			2,689			378,633
Purchased customer accounts		11,323			5,614			13,225			3,689			5,334			139,885
Non-compete agreements		91			21			31			21			52			974
Other assets		—			—			—			—			3,088			3,088
Total assets acquired		47,693			21,800			44,842			13,128			12,074			539,924
Other current liabilities		(845	)		(2,920	)		(3,056	)		(40	)		(119	)		(21,251	)
Other liabilities		—			—			—			—			—			—
Total liabilities assumed		(845	)		(2,920	)		(3,056	)		(40	)		(119	)		(21,251	)
Net assets acquired	$	46,848		$	18,880		$	41,786		$	13,088		$	11,955		$	518,673

Unaudited Proforma Results

These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.

(UNAUDITED)	Three months ended September 30,				Nine months ended September 30,
(in thousands, except per share data)	2020		2019		2020		2019
Total revenues	$	677,161	$	648,063	$	2,010,160	$	1,900,105
Income before income taxes	$	159,607	$	160,623	$	505,799	$	449,916
Net income	$	134,891	$	122,189	$	392,964	$	341,772
Net income per share:
Basic	$	0.48	$	0.43	$	1.39	$	1.21
Diluted	$	0.47	$	0.43	$	1.38	$	1.21
Weighted average number of shares outstanding:
Basic		275,515		272,962		273,803		272,425
Diluted		276,933		275,075		275,338		274,529

Additions, Payments, and Net Changes, as well as Interest Expense Accretion on Estimated Acquisition Earn-Out Payables

The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the nine months ended September 30, 2020 and 2019, were as follows:

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019
Balance as of the beginning of the period	$	218,467		$	104,976		$	161,513		$	89,924
Additions to estimated acquisition earn-out payables		22,091			47,498			96,845			71,464
Payments for estimated acquisition earn-out payables		(3,580	)		(601	)		(11,058	)		(7,865	)
Subtotal		236,978			151,873			247,300			153,523
Net change in earnings from estimated acquisition earn-out payables:
Change in fair value on estimated acquisition earn-out payables		13,433			(6,573	)		(516	)		(10,873	)
Interest expense accretion		1,885			1,303			5,512			3,953
Net change in earnings from estimated acquisition earn-out payables		15,318			(5,270	)		4,996			(6,920	)
Balance as of September 30,	$	252,296		$	146,603		$	252,296		$	146,603