Mercury Insurance 2010 Annual Report Download - page 95

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MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
8. Acquisition
Effective January 1, 2009, the Company acquired all of the membership interests of AISM, which is the
parent company of AIS and PoliSeek. AIS is a major producer of automobile insurance in the state of California
and was the Company’s largest independent broker. This preexisting relationship did not require measurement at
the date of acquisition as there was no settlement of executory contracts between the Company and AIS as part of
the acquisition.
Goodwill of $37.6 million arising from the acquisition consists largely of the efficiencies and economies of
scale expected from combining the operations of the Company and AIS, and is expected to be fully deductible for
income tax purposes.
The Company recognized the assets acquired and the liabilities assumed at the acquisition date, measured at
their fair values as of that date. The following table summarizes the consideration paid for AIS and the allocation
of the purchase price.
January 1, 2009
(Amounts in thousands)
Consideration
Cash ....................................................... $120,000
Fair value of total consideration transferred ..................... $120,000
Acquisition-related costs ........................................... $ 2,000
Recognized amounts of identifiable assets acquired and liabilities assumed
Financial assets ............................................... $ 12,875
Property, plant, and equipment ................................... 2,915
Favorable leases .............................................. 1,725
Trade names ................................................. 15,400
Customer relationships ......................................... 51,200
Software and technology ....................................... 4,850
Liabilities assumed ............................................ (6,608)
Total identifiable net assets ................................. 82,357
Goodwill .................................................... 37,643
Total ................................................... $120,000
Pursuant to the terms of the Purchase Agreement, the Company was required to pay the former owner of
AIS up to an undiscounted maximum amount of an additional $34.7 million as contingent consideration. Based
on the actual performance of the AIS business as of December 31, 2010, the Company is not required to pay any
of the contingent consideration.
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