ACQUISITIONS - 10K

12 Months Ended

Dec. 31, 2014

ACQUISITIONS

ACQUISITIONS

13. ACQUISITIONS

On February 5, 2014, we invested $5.3 million for a 20 percent equity ownership interest in Prime, an Illinois domiciled insurance carrier based in Salt Lake City, Utah. Prime is a privately-held excess and surplus lines insurance company that distributes its products through a network of wholesale brokers and specializes in hard-to-place risks. The investment in Prime is reflected on our balance sheet as an investment in unconsolidated investee. Under the equity method of accounting we recognize our proportionate share of Prime’s income as equity in earnings of unconsolidated investees. Our share of Prime’s earnings amounted to $0.3 million during 2014. Additionally, we entered into a 25 percent quota share reinsurance treaty with Prime, effective January 1, 2014, which contributed $10.2 million of gross premiums written and $5.3 million of net premiums earned during the year.

On November 2, 2012, we acquired Rockbridge, a Houston-based managing general agency. Rockbridge specializes in medical professional liability insurance in the excess and surplus markets. Coverage is offered to individual physicians and physician groups in all 50 states through a network of retail and wholesale brokers. Total consideration for the acquisition was $16.7 million, which included $15.5 million of cash paid at acquisition, and $1.2 million associated with the present value of a contingent earn-out agreement. The earn-out is subject to the achievement of certain loss ratio targets and may be adjusted, either upward or downward, in future periods based on actual performance achieved. As of December 31, 2014, the recorded value of the contingent earn-out agreement was $1.0 million. Rockbridge contributed $15.1 million and $16.7 million of gross premiums written during 2014 and 2013, respectively, and $15.9 million and $8.6 million of net premiums earned over the same periods.