Delaware
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6411
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46-1282634
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(State or Other Jurisdiction of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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15438 N. Florida Avenue, Suite 201
Tampa, Florida, 33613
(
877) 376-5831
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
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Michael W. Kosloske
Chairman, President and Chief Executive Officer
Health Insurance Innovations, Inc.
15438 N. Florida Avenue, Suite 201
Tampa, Florida, 33613
(
877) 376-5831
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(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
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Copies to:
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Deanna Kirkpatrick, Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
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William J. Whelan, III, Esq.
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
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Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
CALCULATION OF REGISTRATION FEE
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Title of Each Class
Of Securities To Be Registered
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Proposed Maximum
Aggregate
Offering Price(1)(2)
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Amount of
Registration Fee
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Class A Common Stock, par value $0.001 per share
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$86,250,000
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$11,764.50
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(1)
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Includes the offering price of any additional shares of Class A common stock that the underwriters have the right to purchase to cover over-allotments.
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(2)
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Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
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Price to Public
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Underwriting
Discounts and
Commissions
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Proceeds to
Company
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Per Share
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$ | $ | $ | ||||||
Total
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$ | $ | $ |
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Page
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Prospectus Summary
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1
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Management |
81
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Risk Factors
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15
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Executive Compensation |
85
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Special Note Regarding Forward-Looking Statements
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36
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Relationships and Related Transactions
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90
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The Reorganization of Our Corporate Structure
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37
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Principal Stockholders
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92
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Use of Proceeds
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44 |
Description of Capital Stock
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93
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Dividend Policy
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44
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U.S. Federal Income and Estate Tax Considerations
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Capitalization
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45
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for Non-U.S. Holders of Class A Common Stock
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98
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Dilution
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46
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Shares Eligible for Future Sale
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101 | |
Unaudited Pro Forma Financial Information
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47
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Underwriting
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103
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Selected Historical Financial and Operational Data
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51
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Legal Matters
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108
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Management’s Discussion and Analysis of
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Experts
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108
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Financial Condition and Results of Operations |
53
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Where You Can Find More Information
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108
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Business | 68 | Index to Financial Statements |
F-1
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that you should consider before deciding to invest in our Class A common stock. You should read this entire prospectus carefully, including the “Risk Factors” section and the financial statements and the notes to those statements.
Health Insurance Innovations, Inc.
Overview
Our Company
We are a leading developer and administrator of affordable, web-based individual health insurance plans and ancillary products. Our highly scalable, proprietary, web-based technology platform allows for mass distribution of and online enrollment in our large and diverse portfolio of affordable health insurance offerings.
Our technology platform provides customers, who we refer to as members, immediate access to our products through our distribution partners anytime, anyplace. The health insurance products we develop are underwritten by insurance carrier companies, and we assume no underwriting, insurance or reimbursement risk. Members can price and tailor product selections to meet their needs, buy policies and print policy documents and identification cards in real-time.
Our sales are executed online and offer instant electronic fulfillment. Our technology platform uses abbreviated online applications, some with health questionnaires, to provide an immediate accept or reject decision on applications for all products that we offer. Once an application is accepted, individuals can use our automated payment system to complete the enrollment process and obtain instant electronic access to their policy fulfillment documents, including the insurance policy, benefits schedule and identification cards. We
receive credit card and Automated Clearing House (ACH) payments directly from members at the time of sale. Our technology platform provides significant operating leverage as we add members and reduces the costs associated with marketing, selling, underwriting and administering policies.
We are an industry leader in the sale of 12-month short-term medical, or STM, insurance plans, an alternative to traditional Individual Major Medical, or IMM, plans.
STM plans generally offer qualifying individuals comparable benefits for fixed short-term durations at approximately half the cost of IMM plans, which provide lifetime renewable coverage. While applications for IMM insurance may take up to 60 days to process, STM plans feature a streamlined underwriting process offering immediate coverage options. We also offer guaranteed-issue hospital indemnity plans for individuals under the age of 65, which pay fixed cash benefits for covered procedures and services, and a variety of ancillary products such as pharmacy benefit cards, dental plans, vision plans and cancer/critical illness plans that are frequently purchased as supplements to STM and hospital indemnity plans.
We design and structure insurance products on behalf of insurance carrier companies, market them to individuals through our large network of distributors and manage member relations via our online member portal, which is available 24 hours a day, seven days a week.
Our online enrollment process allows us to aggregate and analyze consumer data and purchasing habits to track market trends and drive product innovation.
We have established relationships with several highly rated insurance carriers, including Starr Indemnity & Liability Company, Companion Life, United States Fire (a member of the Crum & Forster group), ING, Markel and CIGNA, among others. In addition, as of September 30, 2012, the large independent distribution network we access consists of 32 licensed agent call centers and 248 wholesalers, including Marsh, eHealthInsurance and MasterCard, among others, that work with over 7,300 licensed brokers. Our data-driven product design, technology platform and extensive distribution network have enabled us to grow our revenues
from $11,790,000 in 2010 to $29,878,000 in 2011, and from $21,788,000 in the nine-month period ended September 30, 2011 to $30,102,000 in the nine-month period ended September 30, 2012.
We focus on the large and under-penetrated segment of the U.S. population who are uninsured or underinsured, which includes individuals who are unable to afford traditional IMM premiums and underserved “gap populations” that require insurance due to changes caused by life events, such as new graduates, divorcees, early retirees, military discharges, the unemployed, part-time and seasonal employees and temporary workers. Our target market consists of approximately 64 million Americans, including approximately 50 million Americans who were uninsured in 2010, according to the U.S. Census Bureau, and approximately 14 million non-elderly Americans who purchased individual health insurance plans in 2010, according to a 2010 Kaiser Family Foundation survey. As of September 30, 2012, we had approximately 24,416 STM members. We expect the number of uninsured and underinsured to significantly increase due to the rising costs and burdensome underwriting requirements of traditional IMM plans and a decline in employer-sponsored health insurance programs.
As of September 30, 2012, we had 24,416 STM plans in force, compared with 16,838 on September 30, 2011
, with an average monthly retention rate of 80% from September 30, 2011 to September 30, 2012.
We earn our revenues from commissions and fees related to the sale of products to our members. Our ancillary products have
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created several additional revenue streams and resulted in a significant portion of our business being generated by monthly member renewals. For the nine months ended September 30, 2012, our premium equivalents, revenue and EBITDA were $54,549,000, $30,102,000 and $3,551,000, respectively, representing a 42.6%, 38.2% and 89.8% increase compared to premium equivalents, revenues and EBITDA of $38,257,000, $21,788,000 and $1,871,000, respectively, for the nine months ended September 30, 2011. See “Selected Historical Financial and Operational Data” for a discussion regarding the use of premium equivalents and EBITDA as financial measures and for reconciliations to the most directly comparable GAAP financial measures.
Health Insurance Industry and Market Opportunity
We believe ongoing changes in the health insurance industry will expand and reshape our target market. For example, the Patient Protection and Affordable Care Act, or PPACA, and the Health Care and Education Reconciliation Act of 2010, or HCERA, which we refer to, collectively, as Healthcare Reform, were signed into law on March 23, 2010. After facing a number of legal challenges, Healthcare Reform was upheld by the U.S. Supreme Court on June 28, 2012.
Healthcare Reform includes a mandate requiring individuals to carry health insurance or face tax penalties; a mandate that certain employers with over 50 employees offer their employees group health insurance coverage or face tax penalties; prohibitions against insurance companies that offer traditional IMM insurance plans using pre-existing health conditions as a reason to deny an application for health insurance; and medical loss ratio, or MLR, requirements that require each health insurance carrier to spend a certain percentage of its IMM premium revenue on reimbursement for clinical services and activities that improve healthcare quality.
According to a 2011 McKinsey survey, the implementation of Healthcare Reform will likely increase the number of Americans in the individual health insurance market from 14 million to more than 100 million starting in 2014. We believe this increase will be primarily driven by two key factors: employers dropping group coverage and an additional 45 million uninsured Americans entering the individual insurance market. The McKinsey survey estimates that approximately 30% of employers would “definitely” or “probably” drop employer-sponsored insurance starting in 2014. The estimated penalty employers will face for not providing their employees coverage is $2,000 per employee for employers with over 50 employees (there is no penalty for employers with less than 50 employees), which is significantly less than the estimated price currently paid for employee coverage ($9,000 to $14,000 per employee). Assuming a 30% drop in employer-sponsored insurance, approximately 50 million Americans would join the individual health insurance market starting in 2014. In addition, because Americans will face penalties if they are uninsured, we expect that a large number of the current uninsured population of 50 million will enter the individual health insurance market. Accordingly, after 2014, we expect that the individual health insurance market will grow more than 600% to over 100 million policyholders, representing annual individual aggregate health insurance premiums in the United States of approximately $361 billion, compared with approximately $50 billion in 2010.
We believe certain dynamics in the health insurance industry present an opportunity to increase our market share in the individual health insurance market.
For example, the minimum MLR thresholds require that IMM carriers use 80% of all premiums collected to pay claims. This has significantly reduced distributor commission rates on traditional IMM policies, forcing many distributors to abandon the traditional face-to-face IMM sales model. Starting in 2014, IMM carriers will also be subject to a pre-existing condition mandate, requiring them to accept all customers regardless of their pre-existing conditions. This “must-carry” pre-existing conditions requirement will further increase the costs of IMM coverage. Unlike traditional IMM plans, our STM products are exempt from the minimum MLR thresholds and “must-carry” pre-existing conditions requirements under Healthcare Reform, allowing us to offer attractive distributor commission rates while providing affordable products for individuals.
In addition, Healthcare Reform also requires that states establish health insurance exchanges where uninsured individuals can select and purchase health insurance plans. We believe that these exchanges will further the transition from group-based insurance coverage to individual health insurance coverage, and that our STM products will be an attractive option in the non-subsidized exchange environment. Moreover, consumers are increasingly accessing the Internet to find affordable health insurance solutions. The current number of Internet users in the United States continues to grow and, according to a report published by Pew Research Center, represented 74% of the population in 2010. In addition, according to the same report, 33% of Internet users in 2010 looked online for information related to health insurance. This represents approximately 75 million Americans who used the Internet to access information related to health insurance in 2010.
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Lack of Access to Health Insurance.
Due to the streamlined underwriting process for our STM plans, we are able to provide an instant decision regarding acceptance. Individuals applying for STM coverage only have to answer an abbreviated, online questionnaire regarding the status of their health to screen for risks that cannot be supported by the rate structure and design of the plan before a decision is generated. We also offer hospital indemnity plans under which members are paid fixed dollar amounts by procedure or service according to a defined schedule which includes doctor visits, lab tests, surgeries and hospitalizations. As these plans are not based on an individual’s health status, they guarantee issuance to individuals under the age of 65 and provide a viable coverage alternative for otherwise uninsurable individuals.
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Growing Number of Uninsured and Underinsured Americans.
We focus on the large and under-penetrated segment of the U.S. population that is uninsured or underinsured. According to the U.S. Census Bureau, 16% of Americans were uninsured in 2011, representing approximately 50 million individuals. In addition, the percentage of non-elderly Americans with employer-sponsored insurance decreased from 68% in 2000 to 59% in 2009, driving more Americans into the individual health insurance market. The number of uninsured and underinsured Americans continues to grow in part due to reductions in employer-provided health benefits.
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High Cost of Health Insurance.
We offer affordable alternatives to IMM. According to the U.S. Census Bureau, approximately 34 million of the 50 million uninsured Americans in 2011 were members of families with annual incomes of less than $50,000. Based on these figures, we estimate that a sizable portion of the uninsured population chooses not to purchase insurance primarily due to its high cost.
According to a 2010 Kaiser Family Foundation survey, traditional IMM premiums increased an average of approximately 20% over a twelve-month period, while the cost of our STM plans remained stable. In addition, as a result of Healthcare Reform, IMM premiums are expected to increase significantly in price as a result of guaranteed issue requirements for individuals with pre-existing health conditions.
For individuals with pre-existing conditions, we currently offer guaranteed-issue hospital indemnity plans and, only where required by state mandate, STM plans. The implementation of Healthcare Reform will not expand our coverage of such individuals, allowing us to continue to offer attractive distributor commission rates while providing affordable products for members.
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Value Generated for All Key Constituents
. By combining extensive management experience with our technology platform, we have developed a business model that we believe enables us to create a “win-win” proposition for our key constituents.
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Our Carriers.
We offer carriers access to a large member base, substantially all of which has no covered pre-existing conditions. Our technology platform connects our carriers directly to a large independent distribution network. Our platform also provides our carriers access to real-time sales and membership data. We use this information to assist our carriers in designing products that cater to their target populations. We currently utilize several carrier companies, including Starr Indemnity & Liability Company, Companion Life, United States Fire (a member of the Crum & Forster group), ING, Markel and CIGNA among others. Our management team has long-standing relationships with most of the major carrier companies we utilize and has not lost a carrier relationship in over 10 years.
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Our Distributors.
At a time when commission rates on many health insurance products, including traditional IMM plans, are declining, we provide our distributors with specialized, highly sought-after product offerings and a compensation structure characterized by attractive commission rates and advance payments. We believe our long-standing relationships with most of the major carriers we
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utilize, as well as our technology platform, which enables real-time underwriting decisions, immediate sales conversions and access to commission data and selling tools, drive demand for distributors to partner with us. We also offer a turnkey solution that allows us to design products that best meet our distributors’ needs. This solution enables us to assist our distributors in choosing between insurance carriers on a single website and allows them to create customized products for their customers by bundling our STM and hospital indemnity products with our various ancillary products into one package. As of September 30, 2012, we utilized a network of 32 licensed agent call centers and 248 wholesalers that work with over 7,300 licensed brokers nationally.
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Our Members.
We provide our members with easy access to health insurance coverage at an affordable price. For qualifying individuals, our STM plans offer benefits comparable to traditional IMM plans at approximately half the cost.
For example, according to a 2010 Kaiser Family Foundation survey, the average cost for an IMM plan is $3,606 for an individual and $7,102 for a family. However, the average cost for one of our 12-month STM plans is $1,800 for an individual and $3,600 for a family.
Our technology platform allows our members to compare and quote prices for a broad spectrum of STM and hospital indemnity products and, after they have made informed purchase decisions, to buy and print policies online. In addition to STM and hospital indemnity plans, we allow our members the opportunity to purchase high quality ancillary products with automatic, monthly renewals at rates that fit our members’ budgets, all at the click of a button. For example, in September 2012, in addition to the 5,489 STM plans that we sold, we successfully cross-sold 3,008 new ancillary products that month.
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Proprietary, Web-Based Technology Platform
. We believe our technology platform represents a distinct competitive advantage as it reduces the need for customer care agents and provides significant operating leverage as we add members and product offerings. Our primary technology platform is named A.R.I.E.S. (Automated Real-Time Integrated E System). We believe our business benefits from the increasing trend of Internet use by individuals to research and purchase health insurance. The Internet offers a means of providing individuals access to health insurance products 24 hours a day, seven days a week and, for the carriers and distributors, reduces the cost and time associated with marketing, selling, underwriting and administering these products. We believe our target market is increasingly researching and applying for health insurance products online and shifting away from more traditional buying patterns. We believe our technology platform positions us for strong continued growth due to the following factors:
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Plan and Product Design
. Our technology platform provides real-time data that enables us, our carriers and our distributors to receive immediate information on our members, and allows us to design products that meet the changing demands of the market. Our platform also allows individuals to supplement our STM and hospital indemnity offerings with ancillary products such as pharmacy benefit cards, dental plans, vision plans and cancer/critical illness plans and makes it possible for us to instantly offer these products, which can be bundled to fit member needs.
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Sales
. Our technology platform combined with our customer service model drives faster sale conversions. The entire underwriting procedure is processed through our technology platform, which uses abbreviated, online health questionnaires and provides an immediate accept or reject decision, allowing for instant electronic fulfillment. Individuals can obtain full access to our technology platform through our distribution partners and can price products, buy policies and print their policy documents and identification cards anytime, anyplace.
Our call centers use our technology platform to, among other functions, perform online, real-time electronic quoting, to process electronic applications and to provide instant electronic approval and fulfillment, back-office administrative support and commission reporting.
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Distribution.
Our technology platform allows for low cost mass distribution of our products and provides significant operating leverage. Our automated payment system allows us to collect credit card and ACH payments electronically and directly from members and to disburse commission payments to our distributors in advance, weekly or monthly. In addition, the system provides distributors with direct access to commission statements, selling tools, reporting tools (for example, information as to cancelations, failed credit card and ACH payments and persistency, renewal and cross-sell rates) and custom links to support their business.
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Compliance.
In addition to our A.R.I.E.S. platform, we have obtained a license to use a technology platform called HiiVe, which we use to implement a highly automated compliance program that has enhanced quality while minimizing overhead and allowed us to offer higher commissions to our distributors. The compliance program enables us to record each enrollment phone call, retrieve archived calls within seconds and score calls based on script adherence.
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Established Long-Standing Insurance Carrier Relationships.
Our access to carriers is essential to our business. Our management team has developed close relationships with the senior management teams of many of our insurance carriers, some lasting over 15 years. Our management team has not lost a carrier relationship in over 10 years. We believe that the nature of our relationships with our insurance carriers, combined with our product knowledge and technology platform, allow us to provide value-added products to our members.
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Extensive Long-Term Relationships with Licensed Insurance Distributors.
We believe our product expertise, our relationships with multiple insurance carriers, our focus on compliance and our technology platform make us a partner of choice for our distributors. We offer an appealing, incentive-based compensation structure that we believe drives demand for distributors to partner with us. We have extensive knowledge of the individual health insurance products that we design and administer, which allows us to assist our distribution partners in placing business. Our management team has built a broad distribution network and continuously adds new distributors. As of September 30, 2012, we utilized a network of 32 licensed agent call centers and 248 wholesalers that work with over 7,300 licensed brokers. Over the last twelve months, we added over 3,700 licensed brokers, 10 independent licensed broker call centers and 59 wholesalers to our national distributor network.
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Seasoned Management Team.
Our management team has substantial experience and long-standing relationships developed over an average of 25 years in the insurance industry. Our management team draws on its industry experience to identify opportunities to expand our business and collaborate with insurance carriers and distributors to help develop products and respond to market trends. In addition, the majority of our management team has worked together under the leadership of Michael W. Kosloske, our Chairman,
President, and Chief Executive Officer,
for more than a decade.
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Expand and Enhance Distributor Relationships, Distribution Channels and Lead Generation Methods.
We believe we will continue to attract new distributors as the insurance marketplace continues to evolve, and we intend to continue to identify large distributor and lead relationships through the following strategies:
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Advance Commission Structure.
We will continue to focus on attracting additional distributors through expansion of our advance commission structure. We believe distributors increasingly demand alternative methods to fund the large and growing costs of lead generation. We estimate that these costs usually range from $2 to $20 per lead and represent a significant startup cost for our distributors. We are in the process of growing our advance commission structure, whereby we pay distributors commissions on policies sold in advance of when they would ordinarily be due to the distributor. Commissions are advanced for up to six months and are made to distributors with an established track record of selling our products. In return, we reduce subsequent commission fees payable to the distributor by up to 2% of premiums for each month that we advance commissions. We believe this structure will assist our distributors in funding their lead generation costs and will provide us with a competitive advantage in attracting and retaining distributors and will increase sales.
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Call Centers.
We believe we can grow our distribution network organically by developing call center managers and incentivizing them via attractive commissions. As part of this strategy, we assist in enhancing the sales model of many of our current call centers in order to increase efficiencies and maximize returns, and we established our Insurance Academy in June 2012 to expand the number of call centers selling our products. We anticipate that our Insurance Academy operations will closely resemble a “franchise model,” in that we will provide the tools (sales scripts, key metrics, lead programs, compensation programs, technology systems, etc.) for building a profitable and successful call center that focuses on selling our products and leverages our technology. Our goal is to assist in the training of owners and managers, who in return agree to enter into long-term agreements with us, under which they are required to market our products. We anticipate establishing relationships with 10 to 20 new call centers per year through our Insurance Academy initiative. We believe that this will enhance our ability to convert leads from our current distribution channels into sales.
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Lead Generation and Innovative Distributor Relationships.
We will continue to identify large and innovative distributor and lead relationships that we believe will increase revenue and diversify distribution.
For example, in September 2012, we entered into an agreement whereby MasterCard, through its approved pre-paid card member networks, will assist us in targeting and acquiring new relationships or
“
leads
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for marketing our products. Upon notification from MasterCard of a prospective lead, we will negotiate a separate referral fee arrangement with MasterCard at which point such prospective lead will be identified to us.
We will then attempt to enter into an agreement with the prospective lead under which it will provide us with a list of its customers who hold MasterCard prepaid cards or it will directly market our products to those customers on our behalf.
Our first agreement under this arrangement is with KEEPS America LLC, or KEEPS, for our prescription benefits cards. When sending their own pre-paid cards to customers, KEEPS includes our prescription benefits cards in the mailing. If the KEEPS customer uses our card, we pay KEEPS and MasterCard referral fees in connection with the distribution.
To further expand our lead generation efforts, we will also continue to explore methods of screening member data for key demographic factors to identify populations for whom our products are well suited.
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Increase Sales of Hospital Indemnity and Ancillary Products.
We believe we have a significant opportunity to expand our market share in the hospital indemnity market. Our hospital indemnity plans in force have remained relatively stable with approximately 7,000 plans in force at December 31, 2010 and 5,841 plans in force at September 30, 2012. After the implementation of Healthcare Reform in 2014, we expect hospital indemnity plans to be increasingly used to supplement high deductible plans. In addition, our technology platform enables us to sell ancillary products that carry higher profit margins than our core STM products and that can be issued to a broader population than STM plans. Our members demand a wide range of ancillary products, including pharmacy benefit cards and dental, cancer and critical illness plans. Ancillary product policies in force grew from zero at December 31, 2010 to 23,040 at September 30, 2012. We believe we are well-positioned to take advantage of these additional opportunities at the time of sale.
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Enhance Product and Name Recognition.
We are focused on increasing our marketing efforts to consumers. We intend to aggressively pursue opportunities to help consumers identify our products as the right choice for health insurance coverage. We are pursuing multiple avenues to increase our name awareness among distributors, carriers and our target market, such as through our arrangement with MasterCard that introduces our products and name to MasterCard’s large pre-paid card member networks.
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Develop and Establish New and Specialized Products to Meet Consumer Needs.
We plan to continue to develop and add new products to our existing portfolio of offerings. By leveraging our technology platform member data, feedback gathered by customer service agents and distributors and expertise in plan design, we believe we are well-positioned to design and bundle products that meet customer needs and add a viable source of revenue for us, our distributors and our carriers. For example, in June 2012, we introduced our cancer plan. We sold 517 of these policies in the first month, and we are currently developing new products, including fully-insured prescription cards.
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Our History and the Reorganization of Our Corporate Structure
We began operations in 2008, and historically, our business was operated through Health Plan Intermediaries, LLC. On September 28, 2011, we entered into an agreement to purchase the units of Health Plan Intermediaries, LLC owned by Naylor Group Partners, LLC
for $5,330,000 plus closing costs of $135,000 .
Prior to the purchase, which we refer to as the Acquisition, Health Plan Intermediaries, LLC was 50% owned by Naylor Group Partners, LLC and 50% owned by our Chairman, President and Chief Executive Officer, Mr. Kosloske. Following the purchase, Mr. Kosloske became the sole member of Health Plan Intermediaries, LLC.
In anticipation of this offering, on November 7, 2012, Health Plan Intermediaries, LLC assigned the operating assets of our business through a series of transactions to Health Plan Intermediaries Holdings, LLC, and Health Plan Intermediaries Holdings, LLC assumed the operating liabilities of Health Plan Intermediaries, LLC.
Health Insurance Innovations, Inc. was incorporated in the State of Delaware on October 26, 2012 for the purpose of this offering and has engaged to date only in activities in contemplation of this offering. Upon completion of the offering, Health Insurance Innovations, Inc. will be a holding company the principal asset of which will be its interest in Health Plan Intermediaries Holdings, LLC. That interest will represent approximately % of the economic interests in Health Plan Intermediaries Holdings, LLC, assuming the underwriters do not exercise their over-allotment option. All of our business will be conducted through Health Plan Intermediaries Holdings, LLC. Health Insurance Innovations, Inc. will be the sole managing member of Health Plan Intermediaries Holdings, LLC and will therefore control Health Plan Intermediaries Holdings, LLC. Health Plan Intermediaries, LLC and Health Plan Intermediaries Sub, LLC (a subsidiary of Health Plan Intermediaries, LLC that was formed on October 31, 2012 in connection with this offering), entities beneficially owned by Mr. Kosloske, will collectively own all of the balance of the economic interests in Health Plan Intermediaries Holdings, LLC. As a holding company, our only source of cash flow from operations will be distributions from Health Plan Intermediaries Holdings, LLC. See “The Reorganization of Our Corporate Structure.” After completion of this offering, Health Insurance Innovations, Inc. will be a “controlled company” under the listing rules of the NASDAQ Global Market.
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(1)
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The members of Health Plan Intermediaries Holdings, LLC, other than us, will include Health Plan Intermediaries, LLC and Health Plan Intermediaries Sub, LLC, which are beneficially owned by Mr. Kosloske.
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the decrease in demand for our products;
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the inability to retain our members;
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loss of our relationships with insurance carriers, failure to maintain good relationships with insurance carriers, becoming dependent upon a limited number of insurance carriers or failure to develop new relationships with insurance carriers;
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loss of our relationships with distributors, failure to maintain good relationships with distributors, becoming dependent upon a limited number of distributors or failure to develop new relationships with distributors;
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the reduction of the commissions paid to us or changes in plan pricing practices in ways that reduce the commissions paid to us;
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changes and developments in the health insurance system in the United States, particularly relating to the implementation of Healthcare Reform, that could harm our business;
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the ability to maintain and enhance our name recognition ; and
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our ability to build the necessary infrastructure and processes to maintain effective controls over financial reporting.
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THE OFFERING | ||
Class A common stock offered
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shares
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Class A common stock to be | ||
outstanding after this offering
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shares (or shares if each outstanding Series B Membership Interest was exchanged for one share of Class A common stock, as described under “The Reorganization of Our Corporate Structure—Amended and Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC”).
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Over-allotment option
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shares
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Class B common stock to be | ||
outstanding after this offering
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shares. Shares of our Class B common stock will be issued in connection with, and in equal proportion to, issuances of Series B Membership Interests of Health Plan Intermediaries Holdings, LLC. Each Series B Membership Interest of Health Plan Intermediaries Holdings, LLC, together with a share of our Class B common stock, will be exchangeable for one share of Class A common stock, as described under “The Reorganization of Our Corporate Structure— Amended and Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC.”
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Voting rights
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Each share of our Class A common stock and Class B common stock will entitle its holder to one vote on all matters to be voted on by stockholders. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by law. After completion of this offering, Mr. Kosloske will beneficially own
% (
% if the underwriters exercise their over-allotment option in full) and
% of the total number of shares of our outstanding Class A common stock and Class B common stock, respectively, and will have effective control over the outcome of votes on all matters requiring approval by our stockholders.
|
|
Use of proceeds
|
We estimate that the net proceeds to us from this offering will be approximately $
million, or approximately $
million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $
per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and
|
estimated offering expenses. Each $1 increase (decrease) in the public offering price per share would increase (decrease) our net proceeds, after deducting estimated underwriting discounts and commissions, by $ million (assuming no exercise of the underwriters’ over-allotment option). We intend to use a portion of the net proceeds of this offering to repay all of the outstanding debt under our term loan. We anticipate that we will use the remaining net proceeds of this offering to provide the funds necessary to expand our advance commission structure, to acquire Series B Membership Interests, together with an equal number of shares of our Class B common stock , from Health Plan Intermediaries, LLC, which is controlled by Mr. Kosloske (which Series B Membership Interests will immediately be recapitalized into Series A Membership Interests), and for general corporate purposes, including potential acquisitions that are complementary to our business or that enable us to enter new markets or provide new products or services. See “Use of Proceeds.” | ||
Dividend policy
|
We do not anticipate paying dividends. “See Dividend Policy.”
|
|
Risk Factors
|
For a discussion of certain factors you should consider before making an investment, see “Risk Factors.”
|
|
NASDAQ Global Market stock symbol
|
HIIQ
|
|
·
|
shares of Class A common stock that are issuable upon exchanges of Series B Membership Interests (and an equal number of our Class B common shares) that will be outstanding immediately after the completion of this offering;
|
|
·
|
unvested restricted stock awards to Michael D. Hershberger, our Chief Financial Officer, of which we expect shares of Class A common stock to vest by . See “Executive Compensation—Restricted Stock Agreements;”
|
|
·
|
the exercise by the underwriters of their over-allotment option to purchase additional shares of our Class A common stock, which, if exercised, would decrease the number of Class B shares outstanding by an equal number.
|
SUMMARY FINANCIAL AND OPERATIONAL DATA
The following summary financial and operational data of Health Plan Intermediaries, LLC should be read in conjunction with, and are qualified by reference to, “Unaudited Pro Forma Financial Information,” “Selected Historical Financial and Operational Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this prospectus. The statements of operations for the nine-month period ended Septemeber 30, 2012 (Successor), the three-month period ended December 31, 2011 (Successor), the nine-month period ended September 30, 2011 (Predecessor) and the year ended December 31, 2010 (Predecessor) and the balance sheet data as of September 30, 2012 (Successor) and December 31, 2011 (Successor) are derived from, and qualified by reference to, the audited consolidated financial statements of Health Plan Intermediaries, LLC included elsewhere in this prospectus and should be read in conjunction with those financial statements and notes thereto. Results for the nine-month period ended September 30, 2012 are not necessarily indicative of results that may be expected for the entire year.
The summary unaudited pro forma financial data for the year ended December 31, 2011 and for the nine months ended September 30, 2012 have been prepared to give pro forma effect to all of the reorganization transactions described under “The Reorganization of our Corporate Structure” and this offering and the application of the net proceeds from this offering as if they had been completed as of January 1, 2011 with respect to the unaudited pro forma statements of operations and as of September 30, 2012 with respect to the unaudited pro forma balance sheet data . These data are subject and give effect to the assumptions and adjustments described in the notes accompanying the unaudited pro forma financial statements included elsewhere in this prospectus. The summary unaudited pro forma financial data are presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the reorganization transactions and this offering been consummated on the dates indicated, and do not purport to be indicative of statements of financial condition data or results of operations as of any future date or for any future period.
|
Pro Forma A
s
Adjusted
|
Historical
|
||||||||||||||||||||||||
Nine Months
Ended September
30,
2012
|
Year Ended December 31, 2011
|
Nine Months
Ended September
30, 2012
|
Three Months
Ended
December
31, 2011
|
Nine Months
Ended
September
30, 2011
|
Year Ended
December
31, 2011
|
Year Ended
December
31, 2010
|
|||||||||||||||||||
(Combined)
(Non-GAAP)
|
(Successor)
|
(Successor)
|
(Predecessor)
|
(Combined)
(Non-GAAP)
|
(Pre
decessor)
|
||||||||||||||||||||
Statements of Operations: |
(in thousands, except plans in force) |
Revenues
|
$ | 30,102 | $ | 8,090 | $ | 21,788 | $ | 29,878 | $ | 11,790 | |||||||||||||||
Third-party commissions
|
20,093 | 5,601 | 16,103 | 21,704 | 9,010 | ||||||||||||||||||||
Credit cards and ACH fees
|
693 | 197 | 473 | 670 | 275 | ||||||||||||||||||||
General and administrative expenses
|
5,786 | 1,421 | 3,341 | 4,762 | 2,514 | ||||||||||||||||||||
Depreciation and amortization
|
771 | 269 | 29 | 298 | 7 | ||||||||||||||||||||
Total operating costs and expenses
|
27,343 | 7,488 | 19,946 | 27,434 | 11,806 | ||||||||||||||||||||
Income (loss) from operations
|
2,759 | 602 | 1,842 | 2,444 | (16 | ) | |||||||||||||||||||
Other expenses (income):
|
|||||||||||||||||||||||||
Interest expense
|
194 | 71 | — | 71 | — | ||||||||||||||||||||
Interest income
|
— | — | — | — | (3 | ) |
Other income
|
(21 | ) | — | — | — | — | |||||||||||||||||||
Net income (loss)
|
$ | 2,586 | $ | 531 | $ | 1,842 | $ | 2,373 | $ | (13 | ) | ||||||||||||||
Net loss attributable to noncontrolling interest in subsidiary
|
$ | (63 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Net income (loss) attributable to Health Plan Intermediaries, LLC
|
$ | 2,649 | $ | 531 | $ | 1,842 | $ | 2,373 | $ | (13 | ) | ||||||||||||||
Other Financial and Operational Data:
|
|||||||||||||||||||||||||
Premium equivalents(1)
|
$ | 54,549 | $ | 14,949 | $ | 38,257 | $ | 53,206 | $ | 20,024 | |||||||||||||||
Plans in force (end of period)(2)
|
53,297 | 29,951 | 22,847 | 29,951 | 13,121 | ||||||||||||||||||||
EBITDA(3)
|
$ | 3,551 | $ | 871 | $ | 1,871 | $ | 2,742 | $ | (9 | ) |
(1)
|
“Premium equivalents” is defined as the combination of premiums, fees for discount benefit plans, fees for distributors and our enrollment fees. Premium equivalents does not represent, and should not be considered as, an alternative to revenues, as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. We have included premium equivalents in this prospectus because it is a key measure used by our management to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the inclusion of premium equivalents can provide a useful measure for period-to-period comparisons of our business. Premium equivalents has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. See “Management Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
|
Nine Months
Ended September
30, 2012
|
Three Months
Ended
December
31, 2011
|
Nine Months
Ended
September
30, 2011
|
Year Ended
December
31, 2011
|
Year Ended
December
31, 2010
|
||||||||||||||||
(Successor)
|
(Successor)
|
(Predecessor)
|
(Combined)
(Non-GAAP)
|
(Predecessor)
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Premium equivalents
|
$ | 54,549 | $ | 14,949 | $ | 38,257 | $ | 53,206 | $ | 20,024 | ||||||||||
Less risk premium
|
(23,296 | ) | (6,380 | ) | (15,180 | ) | (21,560 | ) | (7,616 | ) | ||||||||||
Less amounts earned by third-party obligors
|
(1,151 | ) | (479 | ) | (1,289 | ) | (1,768 | ) | (618 | ) | ||||||||||
Revenues
|
$ | 30,102 | $ | 8,090 | $ | 21,788 | $ | 29,878 | $ | 11,790 |
(2)
|
“Plans in force” is defined as policies or discount benefit plans issued to a member for which we have collected the applicable premium payments and/or discount benefit fees. A member may be enrolled in more than one policy or discount benefit plan simultaneously. See “Management Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
|
(3)
|
“EBITDA” is defined as net income before interest expense, interest income and depreciation and amortization. EBITDA does not represent, and should not be considered as, an alternative to net income or cash flows from operations, each as determined in accordance with U.S. GAAP. We have presented EBITDA because we consider it an important supplemental measure of our performance and believe that it is frequently used by analysts, investors and other interested parties in the evaluation of companies. Other companies may calculate EBITDA differently than we do. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. See “Management Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
|
Pro Forma As Adjusted
|
Historical | ||||||||||||||||||||||
Year Ended December 31, 2011
|
Nine Months
Ended September
30, 2012
|
Three Months
Ended
December
31, 2011
|
Nine Months
Ended
September
30, 2011
|
Year Ended
December
31, 2011
|
Year Ended December 31, 2010
|
||||||||||||||||||
Nine Months
Ended September 30, 2012
|
(Combined)
|
(Successor)
|
(Successor)
|
(Predecessor)
|
(Combined)
(Non-GAAP)
|
(Predecessor)
|
|||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Net Income (loss)
|
$ | 2,586 | $ | 531 | $ | 1,842 | $ | 2,373 | $ | (13 | ) | ||||||||||||
Interest expense
|
194 | 71 | — | 71 | — | ||||||||||||||||||
Interest income
|
— | — | — | — | (3 | ) | |||||||||||||||||
Depreciation and amortization
|
771 | 269 | 29 | 298 | 7 | ||||||||||||||||||
EBITDA
|
$ | 3,551 | $ | 871 | $ | 1,871 | $ | 2,742 | $ | (9 | ) |
As of September 30,
|
||||||||||||
2012
Pro Forma
|
2012
|
As of
December 31, 2011 |
||||||||||
(in thousands)
|
||||||||||||
Balance Sheet Data:
|
||||||||||||
Cash
|
$ | $ | 982 | $ | 618 | |||||||
Total assets
|
17,542 | 15,068 | ||||||||||
Debt, noncompete obligation and capital leases
|
4,340 | 4,078 | ||||||||||
Total member’s/stockholders’ equity
|
6,869 | 6,996 |
|
•
|
undertake more extensive marketing campaigns for their brands and services;
|
|
•
|
devote more resources to website and systems development;
|
|
•
|
negotiate more favorable commission rates; and
|
|
•
|
attract potential employees, marketing partners and third-party service providers.
|
|
·
|
increasing our competition;
|
|
·
|
reducing or eliminating the need for health insurance agents and brokers and/or demand for the health insurance that we sell through the manner in which the federal government and the states implement health insurance exchanges and the process for receiving subsidies and cost-sharing credits;
|
|
·
|
decreasing the number of types of health insurance plans and products that we sell, as well as the number of insurance carriers offering such plans and products;
|
|
·
|
causing insurance carriers to change the benefits and/or premiums for the plans and products they sell;
|
|
·
|
causing insurance carriers to reduce the amount they pay for our services or change their relationships with us in other ways;
|
|
·
|
causing STM to not qualify as adequate healthcare coverage, resulting in STM policyholders having to pay the government a penalty or tax;
|
|
·
|
causing STM policies to be subject to MLR threshold requirements; or
|
|
·
|
causing STM policies to be subject to “must carry” pre-existing condition requirements.
|
|
·
|
grant and revoke licenses to transact insurance business;
|
|
·
|
conduct inquiries into the insurance-related activities and conduct of agents and agencies;
|
|
·
|
require and regulate disclosure in connection with the sale and solicitation of health insurance;
|
|
·
|
authorize how, by which personnel and under what circumstances insurance premiums can be quoted and published and an insurance policy sold;
|
|
·
|
determine which entities can be paid commissions from carriers;
|
|
·
|
regulate the content of insurance-related advertisements, including web pages;
|
|
·
|
approve policy forms, require specific benefits and benefit levels and regulate premium rates;
|
|
·
|
impose fines and other penalties; and
|
|
·
|
impose continuing education requirements on agents and employees.
|
|
·
|
the growth of the Internet as a commerce medium generally, and as a market for individual health insurance plans and services specifically;
|
|
·
|
individuals’ willingness to conduct their own health insurance research;
|
|
·
|
our ability to make the process of purchasing health insurance online an attractive alternative to traditional and new means of purchasing health insurance;
|
|
·
|
our ability to successfully and cost-effectively market our services as superior to traditional or alternative sources for health insurance to a sufficiently large number of individuals; and
|
|
·
|
carriers’ willingness to use us and the Internet as a distribution channel for health insurance plans and products.
|
|
·
|
The Health Insurance Portability and Accountability Act, or HIPAA, and its implementing regulations were enacted to ensure that employees can retain and at times transfer their health insurance when they change jobs, and to simplify healthcare administrative processes. The enactment of HIPAA also expanded protection of the privacy and security of personal health information and required the adoption of standards for the exchange of electronic health information. Among the standards that the Department of Health and Human Services has adopted pursuant to HIPAA are standards for electronic transactions and code sets, unique identifiers for providers, employers, health plans and individuals, security, electronic signatures, privacy and enforcement. Failure to comply with HIPAA could result in fines and penalties that could have a material adverse effect on us.
|
|
·
|
The federal Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, enacted as part of the American Recovery and Reinvestment Act of 2009, also known as the “Stimulus Bill,” effective February 22, 2010, sets forth health information security breach notification requirements and increased penalties for violation of HIPAA. The HITECH Act requires individual notification for all breaches, media notification of breaches of over 500 individuals and at least annual reporting of all breaches to the Department of Health and Human Services. The HITECH Act also replaced the prior penalty system of one tier of penalties of $100 per violation and an annual maximum of $25,000 with a four-tier system of sanctions for breaches. Penalties now range from the original $100 per violation and an annual maximum of $25,000 for the first tier to a fourth-tier minimum of $50,000 per violation and an annual maximum of $1.5 million. Failure to comply with the HITECH Act could result in fines and penalties that could have a material adverse effect on us.
|
|
·
|
Other federal and state laws restricting the use and protecting the privacy and security of individually identifiable information may apply, many of which are not preempted by HIPAA.
|
|
·
|
Federal and state consumer protection laws are increasingly being applied by the United States Federal Trade Commission, or FTC, and states’ attorneys general to regulate the collection, use, storage and disclosure of personal or individually identifiable information, through websites or otherwise, and to regulate the presentation of website content.
|
|
·
|
difficulty integrating the purchased operations, technologies or products;
|
|
·
|
incurring substantial unanticipated integration costs;
|
|
·
|
assimilating the acquired businesses may divert significant management attention and financial resources from our other operations and could disrupt our ongoing business;
|
|
·
|
acquisitions could result in the loss of key employees, particularly those of the acquired operations;
|
|
·
|
difficulty retaining or developing the acquired businesses’ customers;
|
|
·
|
acquisitions could adversely affect our existing business relationships with suppliers and members;
|
|
·
|
failing to realize the potential cost savings or other financial benefits and/or the strategic benefits of the acquisitions; and
|
|
·
|
incurring liabilities from the acquired businesses for infringement of intellectual property rights or other claims, and we may not be successful in seeking indemnification for such liabilities or claims.
|
|
·
|
market conditions in the broader stock market in general, or in our industry in particular;
|
|
·
|
actual or anticipated fluctuations in our quarterly financial and results of operations;
|
|
·
|
our ability to satisfy our ongoing capital needs and unanticipated cash requirements, particularly with respect to our advance commissions structure;
|
|
·
|
additional indebtedness incurred in the future;
|
|
·
|
introduction of new products and services by us or our competitors;
|
|
·
|
issuance of new or changed securities analysts’ reports or recommendations;
|
|
·
|
sales of large blocks of our stock;
|
|
·
|
additions or departures of key personnel;
|
|
·
|
regulatory developments;
|
|
·
|
litigation and governmental investigations; and
|
|
·
|
economic and political conditions or events.
|
|
·
|
the requirement that a majority of the board of directors consist of independent directors;
|
|
·
|
the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
|
|
·
|
the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
|
|
·
|
the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
|
|
·
|
restrictions on the ability of our stockholders to fill a vacancy on the board of directors;
|
|
·
|
prohibit stockholder action by written consent after the date on which Mr. Kosloske ceases to beneficially own at least a majority of all of the outstanding shares of our capital stock entitled to vote;
|
|
·
|
prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of stock to elect some directors;
|
|
·
|
provide that special meetings of stockholders may be called only by the chairman of the board of directors, the chief executive officer or the board of directors, and establish advance notice procedures for the nomination of candidates for election as directors or for proposing matters that can be acted upon at stockholder meetings;
|
|
·
|
provide that on and after the date Mr. Kosloske collectively ceases to beneficially own a majority of all of the outstanding shares of our capital stock entitled to vote, (a) directors may be removed only for cause and only upon the affirmative vote of holders of at least 75% of all of the outstanding shares of our capital stock entitled to vote, and (b) certain provisions of our amended and restated certificate of incorporation may only be amended upon the affirmative vote of holders of at least 75% of all of the outstanding shares of our capital stock entitled to vote; and
|
|
·
|
the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval.
|
(1)
|
The members of Health Plan Intermediaries Holdings, LLC, other than us, will include Health Plan Intermediaries, LLC and Health Plan Intermediaries Sub, LLC, which are beneficially owned by Mr. Kosloske.
|
·
|
the timing of exchanges of Series B Membership Interests (together with an equal number of shares of our Class B common stock) for shares of our Class A common stock—for instance, the increase in any tax deductions will vary depending on the fair market value of the depreciable and amortizable assets of Health Plan Intermediaries Holdings, LLC at the time of the exchanges, and this value may fluctuate over time;
|
·
|
the price of our Class A common stock at the time of exchanges of Series B Membership Interests (together with an equal number of shares of our Class B common stock) for shares of our Class A common stock—the increase in our share of the basis in the assets of Health Plan Intermediaries Holdings, LLC, as well as the increase in any tax deductions, will be related to the price of our Class A common stock at the time of these exchanges;
|
·
|
the tax rates in effect at the time we use the increased amortization and depreciation deductions or realize other tax benefits; and
|
·
|
the amount, character and timing of our taxable income. We will be required to pay 85% of the tax savings, as and if realized. Except in certain circumstances, if we do not have taxable income in a given taxable year, we will not be required to make payments under the tax receivable agreement for that taxable year because no tax savings will have been realized.
|
|
·
|
Health Plan Intermediaries, LLC on an actual basis;
|
|
·
|
Health Insurance Innovations, Inc. on a pro forma basis to give effect to the reorganization transactions described under “The Reorganization of Our Corporate Structure;” and
|
|
·
|
Health Insurance Innovations, Inc. on a pro forma as adjusted basis to give further effect to the issuance and sale of
shares of Class A common stock by us in the offering at an assumed initial public offering price of $
per share, the midpoint of the range set forth on the cover page of this prospectus, and the application of the net proceeds of the offering, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, as set forth under “Use of Proceeds.” Each $1 increase (decrease) in the public offering price per share would increase (decrease) our total stockholders’ equity and total capitalization by $
million (assuming no exercise of the underwriters’ over-allotment option), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
Assumed initial public offering price per share
|
$ | |||||||
Pro forma net tangible book value per share as of September 30, 2012
|
$ | |||||||
Increase in pro forma net tangible book value per share attributable to new investors
|
||||||||
Pro forma net tangible book value per share after offering
|
||||||||
Dilution per share to new investors
|
$ |
Shares Purchased
|
Total Consideration
|
||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Average
Price Per
Share
|
|||||||||||||
Existing stockholders
|
|
%
|
$ |
%
|
$ | ||||||||||||
New investors
|
|||||||||||||||||
Total
|
100 | % | $ | 100 | % |
Health Plan
Intermediaries,
LLC Historical
|
Reorganization Adjustments
|
Health Insurance Innovations, Inc. (1) Pro Forma
|
Offering
Adjustments
|
Health Insurance Innovations, Inc. (1) Pro Forma as Adjusted
|
|||||||
Assets
|
|||||||||||
Current assets:
|
|||||||||||
Cash
|
$ | 982 | |||||||||
Cash held on behalf of others
|
3,570 | ||||||||||
Credit card transactions receivable
|
138 | ||||||||||
Credit card transactions receivable for others
|
846 | ||||||||||
Accounts receivable
|
315 | ||||||||||
Notes receivable
|
95 | ||||||||||
Advance commissions
|
300 | ||||||||||
Prepaid expenses
|
28 | ||||||||||
Gateway processor deposit | — | ||||||||||
Total current assets
|
6,274 | ||||||||||
Property and equipment, net of accumulated depreciation
|
207 | ||||||||||
Accounts receivable
|
— | ||||||||||
Deferred financing costs, net
|
87 | ||||||||||
Capitalized offering costs
|
863 | ||||||||||
Deposits
|
21 | ||||||||||
Goodwill
|
5,906 | ||||||||||
Intangible assets, net of accumulated amortization
|
4,184 | ||||||||||
Total assets
|
$ | 17,542 | |||||||||
Liabilities and member’s/stockholders’ equity
|
|||||||||||
Current liabilities:
|
|||||||||||
Accounts payable and accrued expenses
|
$ | 1,540 | |||||||||
Carriers and vendors payable
|
2,976 | ||||||||||
Commissions payable
|
1,441 | ||||||||||
Unearned commissions
|
197 | ||||||||||
Notes payable
|
110 | ||||||||||
Deferred rent
|
14 | ||||||||||
Deferred other income
|
8 | ||||||||||
Current portion of long-term debt
|
802 | ||||||||||
Current portion of noncomplete obligation
|
177 | ||||||||||
Current portion of capital leases
|
2 | ||||||||||
Due to member
|
— | ||||||||||
Total current liabilities
|
7,267 | ||||||||||
Capital lease obligations, less current portion
|
5 | ||||||||||
Long-term debt, less current portion
|
2,688 | ||||||||||
Noncomplete obligation
|
665 | ||||||||||
Deferred rent
|
48 | ||||||||||
Total liabilities
|
10,673 | ||||||||||
Member’s/stockholders’ equity
|
6,882 | ||||||||||
Noncontrolling interest in subsidiary
|
(13 | ) | |||||||||
Total equity
|
6,869 | ||||||||||
Total liabilities and member’s/stockholders’ equity
|
$ | 17,542 |
(1)
|
As a newly formed entity, Health Insurance Innovations, Inc. will have no assets or results of operations until the completion of this offering.
|
Historical
|
|||||||||||||||
Three Months
Ended
December 31,
2011
(Successor)
|
Nine Months
Ended
September 30,
2011
(Predecessor)
|
Reorganization Adjustments
|
Health
Insurance Innovations,
Inc.(1)
Pro Forma
|
Offering Adjustments
|
Health
Insurance Innovations,
Inc.(1) Pro
Forma as
Adjusted
|
||||||||||
Revenues
|
$ | 8,090 | $ | 21,788 | |||||||||||
Third-party commissions
|
5,601 | 16,103 | |||||||||||||
Credit cards and ACH fees
|
197 | 473 | |||||||||||||
General and administrative expenses
|
1,421 | 3,341 | |||||||||||||
Depreciation and amortization
|
269 | 29 | |||||||||||||
Total operating costs and expenses
|
7,488 | 19,946 | |||||||||||||
Income (loss) from operations
|
602 | 1,842 | |||||||||||||
Other expenses (income):
|
|||||||||||||||
Interest expense
|
71 | — | |||||||||||||
Interest income
|
— | — | |||||||||||||
Net income (loss)
|
$ | 531 | $ | 1,842 |
(1)
|
As a newly formed entity, Health Insurance Innovations, Inc. will have no assets or results of operations until the completion of this offering.
|
Health Plan
Intermediaries,
LLC Historical
|
Reorganization Adjustments
|
Health
Insurance Innovations,
Inc.(1)
Pro Forma
|
Offering Adjustments
|
Health
Insurance Innovations,
Inc.(1) Pro
Forma as
Adjusted
|
|||||||
Revenues
|
$ | 30,102 | |||||||||
Third-party commissions
|
20,093 | ||||||||||
Credit cards and ACH fees
|
693 | ||||||||||
General and administrative expenses
|
5,786 | ||||||||||
Depreciation and amortization
|
771 | ||||||||||
Total operating costs and expenses
|
27,343 | ||||||||||
Income from operations
|
2,759 | ||||||||||
Other expenses (income):
|
|||||||||||
Interest expense
|
194 | ||||||||||
Interest income
|
— | ||||||||||
Other income
|
(21 | ) | |||||||||
Net income
|
$ | 2,586 | |||||||||
Net loss attributable to noncontrolling interest in subsidiary
|
(63 | ) | |||||||||
Net income attributable to Health Plan Intermediaries, LLC
|
$ | 2,649 |
(1)
|
As a newly formed entity, Health Insurance Innovations, Inc. will have no assets or results of operations until the completion of this offering.
|
Nine Months
Ended
September 30,
2012
|
Three Months
Ended
December 31,
2011
|
Nine Months
Ended
September 30,
2011
|
Year Ended
December 31,
2011
|
Year Ended
December 31,
2010
|
||||||||||||||||
(Successor)
|
(Successor)
|
(Predecessor)
|
(Combined)
(Non-GAAP)
|
(Predecessor)
|
||||||||||||||||
Statements of Operations:
|
(in thousands, except plans in force)
|
|||||||||||||||||||
Revenues
|
$ | 30,102 | $ | 8,090 | $ | 21,788 | $ | 29,878 | $ | 11,790 | ||||||||||
Third-party commissions
|
20,093 | 5,601 | 16,103 | 21,704 | 9,010 | |||||||||||||||
Credit cards and ACH fees
|
693 | 197 | 473 | 670 | 275 | |||||||||||||||
General and administrative expenses
|
5,786 | 1,421 | 3,341 | 4,762 | 2,514 | |||||||||||||||
Depreciation and amortization
|
771 | 269 | 29 | 298 | 7 | |||||||||||||||
Total operating costs and expenses
|
27,343 | 7,488 | 19,946 | 27,434 | 11,806 | |||||||||||||||
Income (loss) from operations
|
2,759 | 602 | 1,842 | 2,444 | (16 | ) | ||||||||||||||
Other expenses (income):
|
||||||||||||||||||||
Interest expense
|
194 | 71 | — | 71 | — | |||||||||||||||
Interest income
|
— | — | — | (3 | ) | |||||||||||||||
Other income
|
(21 | ) | — | — | ||||||||||||||||
Net income (loss)
|
$ | 2,586 | $ | 531 | $ | 1,842 | $ | 2,373 | $ | (13 | ) | |||||||||
Net loss attributable to noncontrolling interest in subsidiary
|
(63 | ) | — | — | — | — | ||||||||||||||
Net income (loss) attributable to Health Plan Intermediaries, LLC
|
$ | 2,649 | $ | 531 | $ | 1,842 | $ | 2,373 | $ | (13 | ) | |||||||||
Other Financial and Operational Data:
|
||||||||||||||||||||
Premium equivalents(1)
|
$ | 54,549 | $ | 14,949 | $ | 38,257 | $ | 53,206 | $ | 20,024 | ||||||||||
Plans in force (end of period)(2)
|
53,297 | 29,951 | 22,847 | 29,951 | 13,121 | |||||||||||||||
EBITDA(3)
|
$ | 3,551 | $ | 871 | $ | 1,871 | $ | 2,742 | $ | (9 | ) |
(1)
|
“Premium equivalents” is defined as the combination of premiums, fees for discount benefit plans, fees for distributors and our enrollment fees. Premium equivalents does not represent, and should not be considered as, an alternative to revenues, as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. We have included premium equivalents in this prospectus because it is a key measure used by our management to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the inclusion of premium equivalents can provide a useful measure for period-to-period comparisons of our business. Premium equivalents has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. See “Management Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
|
Nine Months
Ended September 30,
2012
|
Three Months
Ended
December 31,
2011
|
Nine Months
Ended
September 30,
2011
|
Year Ended
December 31,
2011
|
Year Ended
December 31,
2010
|
|||||||||||||||||
(Successor)
|
(Successor)
|
(Predecessor)
|
(Combined)
(Non-GAAP)
|
(Predecessor)
|
|||||||||||||||||
(in thousands)
|
|||||||||||||||||||||
Premium equivalents
|
$ | 54,549 | $ | 14,949 | $ | 38,257 | $ | 53,206 | $ | 20,024 | |||||||||||
Less risk premium
|
(23,296 | ) | (6,380 | ) | (15,180 | ) | (21,560 | ) | (7,616 | ) | |||||||||||
Less amounts earned by third-party obligors
|
(1,151 | ) | (479 | ) | (1,289 | ) | (1,768 | ) | (618 | ) | |||||||||||
Revenues
|
$ | 30,102 | $ | 8,090 | $ | 21,788 | $ | 29,878 | $ | 11,790 |
(2)
|
“Plans in force” is defined as policies or discount benefit plans issued to a member for which we have collected the applicable premium payments and/or discount benefit fees. See “Management Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.” A member may be enrolled in more than one policy or discount benefit plan simultaneously.
|
(3)
|
“EBITDA” is defined as net income before interest expense, interest income and depreciation and amortization. EBITDA does not represent, and should not be considered as, an alternative to net income or cash flows from operations, each as determined in accordance with U.S. GAAP. We have presented EBITDA because we consider it an important supplemental measure of our performance and believe that it is frequently used by analysts, investors and other interested parties in the evaluation of companies. Other companies may calculate EBITDA differently than we do. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.
|
Nine Months
Ended
September 30,
2012
|
Three Months
Ended
December 31,
2011
|
Nine Months
Ended
September 30,
2011
|
Year Ended
December 31,
2011
|
Year Ended
December 31,
2010
|
||||||||||||||||
(Successor)
|
(Successor)
|
(Predecessor)
|
(Combined)
(Non-GAAP)
|
(Predecessor)
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Net Income (loss)
|
$ | 2,586 | $ | 531 | $ | 1,842 | $ | 2,373 | $ | (13 | ) | |||||||||
Interest expense
|
194 | 71 | — | 71 | — | |||||||||||||||
Interest income
|
— | — | — | — | (3 | ) | ||||||||||||||
Depreciation and amortization
|
771 | 269 | 29 | 298 | 7 | |||||||||||||||
EBITDA
|
$ | 3,551 | $ | 871 | $ | 1,871 | $ | 2,742 | $ | (9 | ) |
As of
September 30,
2012
|
As of
December 31,
2011
|
|||||||
(in thousands)
|
||||||||
Balance Sheet Data:
|
||||||||
Cash
|
$ | 982 | $ | 618 | ||||
Total assets
|
17,542 | 15,068 | ||||||
Debt, noncompete obligation and capital leases
|
4,340 | 4,078 | ||||||
Total member’s equity
|
6,869 | 6,996 |
Weighted-Average
Amortization Period
(In Years)
|
Gross Carrying
Amount
|
Accumulated
Amortization
|
Intangible
Asset, net
|
|||||||||||||
Distributor relationships
|
7 | $ | 3,610,000 | $ | 516,000 | $ | 3,094,000 | |||||||||
Carrier network
|
5 | 40,000 | 8,000 | 32,000 | ||||||||||||
Brand
|
2 | 400,000 | 200,000 | 200,000 | ||||||||||||
Capitalized software
|
5 | 45,000 | 2,000 | 43,000 | ||||||||||||
Noncompete agreement
|
5 | 843,000 | 28,000 | 815,000 | ||||||||||||
Total intangible assets
|
$ | 4,938,000 | $ | 754,000 | $ | 4,184,000 |
Percentage of Total Revenue
|
||||||||||||||||
Nine Months Ended September 30,
|
Year Ended December 31,
|
|||||||||||||||
2012
|
2011
|
2011
|
2010
|
|||||||||||||
Revenues
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Third-party commissions
|
66.7 | % | 73.9 | % | 72.6 | % | 76.4 | % | ||||||||
Credit cards and ACH fees
|
2.3 | % | 2.2 | % | 2.2 | % | 2.3 | % | ||||||||
General and administrative expenses
|
19.2 | % | 15.3 | % | 15.9 | % | 21.3 | % | ||||||||
Depreciation and amortization
|
2.6 | % | 0.1 | % | 1.0 | % | 0.1 | % | ||||||||
Total operating costs and expenses
|
90.8 | % | 91.5 | % | 91.8 | % | 100.1 | % | ||||||||
Income (loss) from operations
|
9.2 | % | 8.5 | % | 8.2 | % | (0.1 | )% | ||||||||
Other expenses (income):
|
||||||||||||||||
Interest expense
|
0.6 | % | — | 0.2 | % | — | ||||||||||
Interest income
|
— | — | — | 0.0 | % | |||||||||||
Other income
|
(0.1 | )% | — | — | — | |||||||||||
Net income (loss)
|
8.6 | % | 8.5 | % | 7.9 | % | (0.1 | )% | ||||||||
Net loss attributable to noncontrolling interest in subsidiary
|
(0.2 | )% | — | — | — | |||||||||||
Net income (loss) attributable to Health Plan Intermediaries, LLC
|
8.8 | % | 8.5 | % | 7.9 | % | (0.1 | )% |
Nine Months Ended September 30,
|
||||||||||||||||
2012
|
2011
|
Change ($)
|
Change (%)
|
|||||||||||||
(in thousands, except percentages)
|
||||||||||||||||
Revenues
|
$ | 30,102 | $ | 21,788 | $ | 8,314 | 38.2 | % | ||||||||
Third-party commissions
|
20,093 | 16,103 | 3,990 | 24.8 | % | |||||||||||
Credit cards and ACH fees
|
693 | 473 | 220 | 46.5 | % | |||||||||||
General and administrative expenses
|
5,786 | 3,341 | 2,445 | 73.2 | % | |||||||||||
Depreciation and amortization
|
771 | 29 | 742 |
>100
|
% | |||||||||||
Total operating costs and expenses
|
27,343 | 19,946 | 7,397 | 37.1 | % | |||||||||||
Income from operations
|
2,759 | 1,842 | 917 | 49.8 | % | |||||||||||
Other expenses (income):
|
||||||||||||||||
Interest expense
|
194 | — | 194 | 100.0 | % | |||||||||||
Interest income
|
— | — | — | — | ||||||||||||
Other income
|
(21 | ) | — | (21 | ) | (100.0 | )% | |||||||||
Net income
|
$ | 2,586 | $ | 1,842 | $ | 744 | 40.4 | % | ||||||||
Net loss attributable to noncontrolling interest in subsidiary
|
(63 | ) | — | (63 | ) | 100.0 | % | |||||||||
Net income attributable to Health Plan Intermediaries, LLC
|
$ | 2,649 | $ | 1,842 | $ | 807 | 43.8 | % |
Year Ended December 31,
|
||||||||||||||||
2011
|
2010
|
Change ($)
|
Change (%)
|
|||||||||||||
(in thousands, except percentages)
|
||||||||||||||||
Revenues
|
$ | 29,878 | $ | 11,790 | $ | 18,088 | 153.4 | % | ||||||||
Third-party commissions
|
21,704 | 9,010 | 12,694 | 140.9 | % | |||||||||||
Credit cards and ACH fees
|
670 | 275 | 395 | 143.6 | % | |||||||||||
General and administrative expenses
|
4,762 | 2,514 | 2,248 | 89.4 | % | |||||||||||
Depreciation and amortization
|
298 | 7 | 291 | > 100.0 | % | |||||||||||
Total operating costs and expenses
|
27,434 | 11,806 | 15,628 | 132.4 | % | |||||||||||
Income (loss) from operations
|
2,444 | (16 | ) | 2,460 | > (100.0 | )% | ||||||||||
Other expenses (income):
|
||||||||||||||||
Interest expense
|
71 | — | 71 | 100 | % | |||||||||||
Interest income
|
— | (3 | ) | 3 | (100 | %) | ||||||||||
Net income (loss)
|
$ | 2,373 | $ | (13 | ) | $ | 2,386 | > (100.0 | )% |
Three Months Ended
|
||||||||||||||||
September 30,
2012
(Successor)
|
June 30, 2012
(Successor)
|
March 31, 2012
(Successor)
|
December 31,
2011
(Successor)
|
|||||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
Statements of Operations:
|
(in thousands)
|
|||||||||||||||
Revenues
|
$ | 11,613 | $ | 9,945 | $ | 8,544 | $ | 8,090 | ||||||||
Income from operations
|
963 | 940 | 856 | 602 | ||||||||||||
Net income
|
907 | 883 | 796 | 531 | ||||||||||||
EBITDA(1)
|
1,203 | 1,216 | 1,132 | 871 |
(1)
|
“EBITDA” is defined as net income before interest expense, interest income and depreciation and amortization. EBITDA does not represent, and should not be considered as, an alternative to net income or cash flows from operations, each as determined in accordance with U.S. GAAP. We have presented EBITDA because we consider it an important supplemental measure of our performance and believe that it is frequently used by analysts, investors and other interested parties in the evaluation of companies. Other companies may calculate EBITDA differently than we do. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. See “—Key Business Metrics.”
|
Three Months Ended
|
||||||||||||||||
September 30,
2012
(Successor)
|
June 30, 2012
(Successor)
|
March 31, 2012
(Successor)
|
December 31,
2011
(Successor)
|
|||||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
(in thousands)
|
||||||||||||||||
Net income
|
$ | 907 | $ | 883 | $ | 796 | $ | 531 | ||||||||
Interest expense
|
68 | 62 | 64 | 71 | ||||||||||||
Interest income
|
— | — | — | — | ||||||||||||
Depreciation and amortization
|
228 | 271 | 272 | 269 | ||||||||||||
EBITDA
|
$ | 1,203 | $ | 1,216 | $ | 1,132 | $ | 871 |
Nine Months Ended September 30,
|
Year Ended December 31,
|
|||||||||||||||
2012
|
2011
|
2011
|
2010
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Statements of Cash Flows Data:
|
||||||||||||||||
Net cash provided by (used in) operating activities
|
$ | 4,643 | $ | 1,637 | $ | 2,247 | $ | (31 | ) | |||||||
Net cash used in investing activities
|
$ | (213 | ) | $ | (38 | ) | $ | (5,392 | ) | $ | (80 | ) | ||||
Net cash (used in) provided by financing activities
|
$ | (4,066 | ) | $ | (1,305 | ) | $ | 3,757 | $ | 99 |
Payments Due by Period
|
||||||||||||||||||||
Total
|
Less Than 1 Year
|
1 to 3 Years
|
3 to 5 Years
|
More Than 5 Years
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Contractual Obligations:
|
||||||||||||||||||||
Operating leases
|
$ | 598 | $ | 219 | $ | 378 | $ | 1 | $ | — | ||||||||||
Software maintenance
|
1,508 | 312 | 624 | 572 | — | |||||||||||||||
Exclusivity agreement
|
928 | 192 | 384 | 352 | — | |||||||||||||||
Payments on debt obligations, including interest
|
3,884 | 968 | 1,937 | 979 | — | |||||||||||||||
Capital lease obligations
|
7 | 3 | 4 | — | — | |||||||||||||||
Other
|
100 | 100 | — | — | — | |||||||||||||||
Total contractual obligations
(1)
|
$ | 7,025 | $ | 1,794 | $ | 3,327 | $ | 1,904 | $ | — |
|
·
|
the last day of the fiscal year following the fifth anniversary of the date of our initial public offering of common equity securities;
|
|
·
|
the last day of the fiscal year in which we have annual gross revenue of $1.0 billion or more;
|
|
·
|
the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and
|
|
·
|
the date on which we are deemed to be a “large accelerated filer,” which will occur at such time as the company (a) has an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of its most recently completed second fiscal quarter, (b) has been required to file annual and quarterly reports under the Securities Exchange Act of 1934 for a period of at least 12 months, and (c) has filed at least one annual report pursuant to the Securities Act of 1934.
|
|
·
|
Lack of Access to Health Insurance.
D
ue to the streamlined underwriting process for our STM plans, we are able to provide an instant decision regarding acceptance. Individuals applying for STM coverage only have to answer an abbreviated, online questionnaire regarding the status of their health to screen for risks that cannot be supported by the rate structure and design of the plan before a decision is generated. We also offer hospital indemnity plans under which members are paid fixed dollar amounts by procedure or service according to a defined schedule which includes doctor visits, lab tests, surgeries and hospitalizations. As these plans are not based on an individual’s health status, they guarantee issuance to individuals under the age of 65 and provide a viable coverage alternative for otherwise uninsurable individuals.
|
|
·
|
Growing Number of Uninsured and Underinsured Americans.
We focus on the large and under-penetrated segment of the U.S. population that is uninsured or underinsured. According to the U.S. Census Bureau, 16% of Americans were uninsured in 2011, representing approximately 50 million individuals. In addition, the percentage of non-elderly Americans with employer-sponsored insurance decreased from 68% in 2000 to 59% in 2009, driving more Americans into the individual health insurance market. The number of uninsured and underinsured Americans continues to grow in part due to reductions in employer-provided health benefits.
|
|
·
|
High Cost of Health Insurance.
We offer affordable alternatives to IMM. According to the U.S. Census Bureau, approximately 34 million of the 50 million uninsured Americans in 2011 were members of families with annual incomes of less than $50,000. Based on these figures, we estimate that a sizable portion of the uninsured population chooses not to purchase insurance primarily due to its high cost.
According to a 2010 Kaiser Family Foundation survey, traditional IMM premiums increased an average of approximately 20% over a twelve-month period, while the cost of our STM plans remained stable. In addition, as a result of Healthcare Reform, IMM premiums are expected to increase significantly in price as a result of guaranteed issue requirements for individuals with pre-existing health conditions.
For individuals with pre-existing conditions, we currently offer guaranteed-issue hospital indemnity plans and, only where required by state mandate, STM plans. The implementation of Healthcare Reform will not expand our coverage of such individuals, allowing us to continue to offer attractive distributor commission rates while providing affordable products for members.
|
|
·
|
Value Generated for All Key Constituents
. By combining extensive management experience with our technology platform, we have developed a business model that we believe enables us to create a “win-win” proposition for our key constituents.
|
|
·
|
Our Carriers.
We offer carriers access to a large member base with no covered pre-existing conditions. Our technology platform connects our carriers directly to a large independent distribution network. Our platform also provides our carriers access to real-time sales and membership data. We use this information to assist our carriers in designing products that cater to their target populations. We currently utilize several carrier companies, including Starr Indemnity & Liability Company, Companion Life, United States Fire (a member of the Crum & Forster group), ING, Markel and CIGNA, among others. Our management team has long-standing relationships with most of the major carrier companies we utilize and has not lost a carrier relationship in over 10 years.
|
|
·
|
Our Distributors.
At a time when commission rates on many health insurance products, including traditional IMM plans, are declining, we provide our distributors with specialized, highly sought-after product offerings and a compensation structure characterized by attractive commission rates and advance payments. We believe our long-standing relationships with most of the major carriers we utilize, as well as our technology platform, which enables real-time underwriting decisions, immediate sales conversions and access to commission data and selling tools, drive demand for distributors to partner with us. We also offer a turnkey solution that allows us to design products that best meet our distributors’ needs. This solution enables us to assist our distributors in choosing between insurance carriers on a single website and allows them to create customized products for their customers by bundling our STM and hospital indemnity products with our various ancillary products into one package. As of September 30, 2012, we utilized a network of 32 licensed agent call centers and 248 wholesalers that work with over 7,300 licensed brokers nationally.
|
|
·
|
Our Members.
We provide our members with easy access to health insurance coverage at an affordable price. For qualifying individuals, our STM plans offer benefits comparable to traditional IMM plans at approximately half the cost.
For example, according to a 2010 Kaiser Family Foundation survey, the average cost for an IMM plan is $3,606 for an individual and $7,102 for a family. However, the average cost for one of our 12-month STM plans is $1,800 for an individual and $3,600 for a family.
Our technology platform allows our members to compare and quote prices for a broad spectrum of STM and hospital indemnity products and, after they have made informed purchase
|
|
·
|
Proprietary, Web-Based Technology Platform
. We believe our technology platform represents a distinct competitive advantage as it reduces the need for customer care agents and provides significant operating leverage as we add members and product offerings. Our primary technology platform is named A.R.I.E.S. (Automated Real-Time Integrated E System). We believe our business benefits from the increasing trend of Internet use by individuals to research and purchase health insurance. The Internet offers a means of providing individuals access to health insurance products 24 hours a day, seven days a week and, for the carriers and distributors, reduces the cost and time associated with marketing, selling, underwriting and administering these products. We believe our target market is increasingly researching and applying for health insurance products online and shifting away from more traditional buying patterns. We believe our technology platform positions us for strong continued growth due to the following factors:
|
|
·
|
Plan and Product Design
. Our technology platform provides real-time data that enables us, our carriers and our distributors to receive immediate information on our members, and allows us to design products that meet the changing demands of the market. Our platform also allows individuals to supplement our STM and hospital indemnity offerings with ancillary products such as pharmacy benefit cards, dental plans, vision plans and cancer/critical illness plans and makes it possible for us to instantly offer these products, which can be bundled to fit member needs.
|
|
·
|
Sales
. Our technology platform combined with our customer service model drives faster sale conversions. The entire underwriting procedure is processed through our technology platform, which uses abbreviated, online health questionnaires and provides an immediate accept or reject decision, allowing for instant electronic fulfillment. Individuals can obtain full access to our technology platform through our distribution partners and can price products, buy policies and print their policy documents and identification cards anytime, anyplace.
Our call centers use our technology platform to, among other functions, perform online, real-time electronic quoting, to process electronic applications and to provide instant electronic approval and fulfillment, back-office administrative support and commission reporting.
|
|
·
|
Distribution.
Our technology platform allows for low cost mass distribution of our products and provides significant operating leverage. Our automated payment system allows us to collect credit card and ACH payments electronically and directly from members and to disburse commission payments to our distributors in advance, weekly or monthly. In addition, the system provides distributors with direct access to commission statements, selling tools, reporting tools (for example, information as to cancelations, failed credit card and ACH payments and persistency, renewal and cross-sell rates) and custom links to support their business.
|
|
·
|
Compliance.
In addition to our A.R.I.E.S. platform, we have obtained a license to use a technology platform called HiiVe, which we use to implement a highly automated compliance program that has enhanced quality while minimizing overhead and allowed us to offer higher commissions to our distributors. The compliance program enables us to record each enrollment phone call, retrieve archived calls within seconds and score calls based on script adherence.
|
|
·
|
Established Long-Standing Insurance Carrier Relationships.
Our access to carriers is essential to our business. Our management team has developed close relationships with the senior management teams of many of our insurance carriers, some lasting over 15 years. Our management team has not lost a carrier relationship in over 10 years. We believe that the nature of our relationships with our insurance carriers, combined with our product knowledge and technology platform, allow us to provide value-added products to our members.
|
|
·
|
Extensive Long-Term Relationships with Licensed Insurance Distributors.
We believe our product expertise, our relationships with multiple insurance carriers, our focus on compliance and our technology platform make us a partner of choice for our distributors. We offer an appealing, incentive-based compensation structure that we believe drives demand for distributors to partner with us. We have
|
|
·
|
Seasoned Management Team.
Our management team has substantial experience and long-standing relationships developed over an average of 25 years in the insurance industry. Our management team draws on its industry experience to identify opportunities to expand our business and collaborate with insurance carriers and distributors to help develop products and respond to market trends. In addition, the majority of our management team has worked together under the leadership of Michael W. Kosloske, our Chairman,
President, and Chief Executive Officer,
for more than a decade.
|
|
·
|
Expand and Enhance Distributor Relationships, Distribution Channels and Lead Generation Methods.
We believe we will continue to attract new distributors as the insurance marketplace continues to evolve, and we intend to continue to identify large distributor and lead relationships through the following strategies:
|
|
·
|
Advance Commission Structure.
We will continue to focus on attracting additional distributors through expansion of our advance commission structure. We believe distributors increasingly demand alternative methods to fund the large and growing costs of lead generation. We estimate that these costs usually range from $2 to $20 per lead and represent a significant startup cost for our distributors. We are in the process of growing our advance commission structure, whereby we pay distributors commissions on policies sold in advance of when they would ordinarily be due to the distributor. Commissions are advanced for up to six months and are made to distributors with an established track record of selling our products. In return, we reduce subsequent commission fees payable to the distributor by up to 2% of premiums for each month that we advance commissions. We believe this structure will assist our distributors in funding their lead generation costs and will provide us with a competitive advantage in attracting and retaining distributors and will increase sales.
|
|
·
|
Call Centers.
We believe we can grow our distribution network organically by developing call center managers and incentivizing them via attractive commissions. As part of this strategy, we assist in enhancing the sales model of many of our current call centers in order to increase efficiencies and maximize returns, and we established our Insurance Academy in June 2012 to expand the number of call centers selling our products. We anticipate that our Insurance Academy operations will closely resemble a “franchise model,” in that we will provide the tools (sales scripts, key metrics, lead programs, compensation programs, technology systems, etc.) for building a profitable and successful call center that focuses on selling our products and leverages our technology. Our goal is to assist in the training of owners and managers, who in return agree to enter into long-term agreements with us, under which they are required to market our products. We anticipate establishing relationships with 10 to 20 new call centers per year through our Insurance Academy initiative. We believe that this will enhance our ability to convert leads from our current distribution channels into sales.
|
|
·
|
Lead Generation and Innovative Distributor Relationships.
We will continue to identify large and innovative distributor and lead relationships that we believe will increase revenue and diversify distribution. For example,
in September 2012, we entered into an agreement whereby MasterCard, through its approved pre-paid card member networks, will assist us in targeting and acquiring new relationships or
“
leads
”
for marketing our products. Upon notification from MasterCard of a prospective lead, we will negotiate a separate referral fee arrangement with MasterCard at which point such prospective lead will be identified to us.
We will then attempt to enter into an agreement with the prospective lead under which it will provide us with a list of its customers who hold MasterCard prepaid cards or it will directly market our products to those customers on our behalf.
For example, we have entered into such an agreement with KEEPS America LLC, or KEEPS, for our prescription benefits cards. When sending their own pre-paid cards to customers, KEEPS includes our prescription benefits cards in the mailing. If the KEEPS customer uses our card, we pay KEEPS and MasterCard referral fees in connection with the distribution.
To further expand our lead generation efforts, we will also continue to explore methods of screening member data for key demographic factors to identify populations for whom our products are well suited.
|
|
·
|
Increase Sales of Hospital Indemnity and Ancillary Products.
We believe we have a significant opportunity to expand our market share in the hospital indemnity market. Our hospital indemnity plans in force have remained relatively stable with approximately 7,000 plans in force at December 31, 2010 and 5,841 plans in force at September 30, 2012. After the implementation of Healthcare Reform in 2014, we expect hospital indemnity plans to be increasingly used to supplement high deductible plans. In addition, our technology platform enables us to sell ancillary products that carry higher profit margins than our core STM products and that can be issued to a broader population than STM plans. Our members demand a wide range of ancillary products, including pharmacy benefit cards and dental, cancer and critical illness plans. Ancillary product policies in force grew from zero at December 31, 2010 to 23,040 at September 30, 2012. We believe we are well-positioned to take advantage of these additional opportunities at the time of sale.
|
|
·
|
Enhance Product and Name Recognition .
We are focused on increasing our marketing efforts to consumers. We intend to aggressively pursue opportunities to help consumers identify our products as the right choice for health insurance coverage. We are pursuing multiple avenues to increase our brand awareness among distributors, carriers and our target market, such as through our arrangement with MasterCard that introduces our products and name to MasterCard’s large pre-paid card member networks.
|
|
·
|
Develop and Establish New and Specialized Products to Meet Consumer Needs.
We plan to continue to develop and add new products to our existing portfolio of offerings. By leveraging our technology platform member data, feedback gathered by customer service agents and distributors and expertise in plan design, we believe we are well-positioned to design and bundle products that meet customer needs and add a viable source of revenue for us, our distributors and our carriers. For example, in June 2012, we introduced our cancer plan. We sold 517 of these policies in the first month, and we are currently developing new products, including fully-insured prescription cards.
|
|
·
|
Short-Term Medical Plans
. Our STM plans cover individuals for up to six and twelve month periods with a wide range of co-pay and deductible options at approximately half the cost of traditional IMM plans.
For example, according to a 2010 Kaiser Family Foundation survey, the average cost for an IMM plan is $3,606 for an individual and $7,102 for a family. However, the average cost for one of our 12-month STM plans is $1,800 for an individual and $3,600 for a family.
STM plans offer similar benefits for qualifying individuals as IMM plans. For example, both STM plans and IMM plans offer a choice of deductibles, a choice of coinsurance, coverage for emergency room care, surgeries, x-rays, lab work, diagnostics, doctor office co-payments, and preferred provider organization or “PPO” network discounts. However, while IMM plans cover prescription drugs, pre-existing conditions and preventive care, STM plans provide optional coverage for prescription drugs and do not cover pre-existing conditions or preventive care unless such coverage is mandated by the state. STM plans
do not cover certain medical events such as pregnancy.
Additionally, while IMM plans have guaranteed renewability and can be of a permanent duration, STM plan renewal is not guaranteed and STM plans have a limited duration of up to twelve months.
Our STM plans provide up to $2 million of lifetime coverage for each insured individual, allow members to choose any doctor or hospital, offer $50 physician office and urgent care co-pays, cover foreign travel and offer phone access to physician services. As of September 30, 2012, we had 24,416 STM plans in force.
|
|
·
|
Hospital Indemnity Plans
. Our hospital indemnity plans provide a daily cash benefit for hospital treatment and doctor office visits as well as accidental injury and death or dismemberment benefits. The claims process for hospital indemnity plans is streamlined: the member simply provides proof of hospitalization and the carrier pays the benefits. These policies are primarily used by customers who do not have adequate health insurance and do not qualify for our STM plans or who wish to supplement existing coverage, typically in conjunction with high deductible plans. As of September 30, 2012, we had 5,841 hospital indemnity plans in force.
|
|
·
|
Ancillary Products
. We provide numerous low-cost ancillary insurance products, including pharmacy benefit cards, dental plans and cancer/critical illness plans. These are typically monthly policies with automatic renewal. As of September 30, 2012, we had 23,040 ancillary product plans in force .
|
|
·
|
Financial and online services partners in industries such as credit card services, banking, insurance and mortgage and association partners; and
|
|
·
|
Employers who do not offer health insurance benefits to their employees or to one or more classes of their employees.
|
|
·
|
Automated Real-Time Integrated E System (A.R.I.E.S.).
A.R.I.E.S. is the core of our technology platform. This proprietary technology reduces the need for the continual involvement of customer care representatives after a member has enrolled by allowing him or her to change payment information and print identification cards anytime, anyplace. A.R.I.E.S. also offers distributors an unprecedented ability to manage their business by providing direct access to real-time commission statements, commission payment and real-time sales and membership data (including cancelations, failed credit card and ACH payments, persistency, renewal and cross-sell rates). Key elements of A.R.I.E.S. include:
|
|
·
|
Quote-Buy-Print
. Individuals access our technology platform through our distribution partners and can quote products and buy and print their policy documents and identification cards anytime, anyplace.
|
|
·
|
Automated Underwriting.
The entire underwriting process is handled by A.R.I.E.S. through the use of health questionnaires. Because our STM products are largely targeted to healthy individuals who do not have pre-existing conditions, we do not have a traditional underwriting department. Underwriting is an immediate accept or reject decision based on a prospective member’s answers to an abbreviated online health-related questionnaire.
|
|
·
|
Multiple Value-Added Products
.
Consumers can purchase multiple plans and specialty products with the click of a button. Consumers are able to supplement our core STM and hospital indemnity offerings with ancillary products such as pharmacy benefit cards, dental plans, vision plans and cancer/critical illness plans. Our technology platform makes it possible for us to instantly offer these bundled products to fit member needs.
|
|
·
|
Turn-Key Solution.
Our technology platform is a turnkey solution, allowing distributors to tailor their offering to meet member needs and can be customized to enhance the experience of an affinity group or employer.
|
|
·
|
Payment.
Our sales are executed online and offer instant electronic fulfillment through our platform, through which we receive credit card ACH payments directly from members at the time of sale.
|
|
·
|
Member Services.
Members have the ability to log-in and change payment information and print new identification cards, all without the need of a customer service representative.
|
|
·
|
HiiVe
.
The HiiVe
technology system streamlines compliance by providing real-time sales scripting and monitoring for distributors to ensure customers are making informed purchase decisions. The compliance system enables us to record each enrollment phone call, retrieve archived calls within seconds and score calls based on script adherence. In addition, this technology has also allowed us to automate our compliance program, enhancing quality while minimizing overhead and thereby allowing us to offer higher commissions to our distributors.
|
|
·
|
value added healthcare products;
|
|
·
|
strength of carrier relationships and depth of technology integration with carriers;
|
|
·
|
proprietary, web-based technology platform;
|
|
·
|
data-driven product design;
|
|
·
|
highly automated compliance program;
|
|
·
|
strength of distribution relationships; and
|
|
·
|
proven capabilities measured in years of delivering sales and creating and using reliable technology.
|
Name
|
Age
|
Position
|
||
Michael W. Kosloske
|
48
|
Chairman, President and Chief Executive Officer
|
||
Michael D. Hershberger
|
49
|
Director Nominee, Chief Financial Officer, Treasurer and Secretary
|
||
Gary Raeckers
|
70
|
Director Nominee , Chief Operating Officer
|
||
Scott Lingle
|
44
|
Chief Sales Officer
|
||
Lori Kosloske
|
36
|
Chief Broker Compliance Officer
|
||
Bryan Krul
|
37
|
Senior Vice President of Sales and Operations
|
||
Paul E. Avery | 53 |
Director Nominee
|
||
Liana O’Drobinak
|
49
|
Director Nominee
|
||
A. Gordon Tunstall
|
68
|
Director Nominee
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||
Michael W. Kosloske, (Chairman, President and Chief Executive Officer)
|
2011
|
100,000 | 615,378 | (1) | 22,962 | (2) | 738,340 | |||||||||||
Michael D. Hershberger (Chief Financial Officer, Treasurer, Secretary)
|
2011
|
33,333 | 33,333 | |||||||||||||||
Gary Raeckers (Chief Operating Officer)
|
2011
|
145,000 | 145,000 | |||||||||||||||
Lori Kosloske (Chief Broker Compliance Officer)
|
2011
|
171,104 | 5,000 | 21,324 | (3) | 197,428 | ||||||||||||
Bryan Krul (Senior Vice President of Sales and Operations)
|
2011
|
156,250 | 19,293 | 175,543 |
(1)
|
Reflects amounts earned in respect of the 2011 fiscal year.
|
(2)
|
Reflects an automobile allowance of $16,260 and club dues of $6,702.
|
(3)
|
Reflects an automobile allowance of $21,324.
|
|
·
|
we have been or are to be a participant;
|
|
·
|
the amount involved exceeded or will exceed $120,000; and
|
|
·
|
any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or any member of their immediate family or person sharing their household had or will have a direct or indirect material interest.
|
|
·
|
each person whom we know to own beneficially more than 5% of our Class A common stock;
|
|
·
|
each of the directors and named executive officers individually; and
|
|
·
|
all directors and executive officers as a group.
|
Shares Beneficially Owned
Before this Offering
|
Total Voting
Power Before
this Offering(1)
|
Shares Beneficially Owned
After this Offering
|
Total Voting
Power After
this Offering(1)
|
|||||||||||||||||||||
Name of Beneficial Owner
|
Class A
Common
Stock
|
Class B
Common
Stock
|
%
|
Class A
Common
Stock
|
Class B
Common
Stock
|
%
|
||||||||||||||||||
Number
|
Number
|
|||||||||||||||||||||||
Named executive officers and directors:
|
||||||||||||||||||||||||
Michael W. Kosloske(2)
|
— | 100.00 | 100.0 | — | ||||||||||||||||||||
Michael D. Hershberger(3)
|
— | — | — | — | — | — | ||||||||||||||||||
Gary Raeckers | — | — | — | — | ||||||||||||||||||||
Lori Kosloske
|
— | — | — | — | — | — | ||||||||||||||||||
Bryan Krul
|
— | — | — | — | — | — | ||||||||||||||||||
Paul E. Avery | — | — | — | — | — | — | ||||||||||||||||||
Liana O’Drobinak
|
— | — | — | — | — | — | ||||||||||||||||||
A. Gordon Tunstall
|
— | — | — | — | — | — | ||||||||||||||||||
All directors and executive officers as a group ( people)
|
— | 100.00 | 100.0 | |||||||||||||||||||||
Greater than 5% Stockholders:
|
||||||||||||||||||||||||
Health Plan Intermediaries, LLC(4)
|
— | 99.00 | 99.0 | — |
|
(1)
|
Percentage total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, as a single class. Each share of our Class A common stock and Class B common stock will entitle its holder to one vote on all matters to be voted on by stockholders. Holders of Class A common stock and Class B common stock will vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by law.
|
|
(2)
|
|
(3)
|
|
(4)
|
Health Plan Intermediaries, LLC's address is 15438 N. Florida Avenue, Suite 201, Tampa, Florida 33613. |
|
·
|
the affirmative vote of a majority of directors present at any regular or special meeting of the board of directors called for that purpose, provided that any alteration, amendment or repeal of, or adoption of any bylaw inconsistent with, specified provisions of the bylaws, including those related to special and annual meetings of stockholders, action of stockholders by written consent, classification of the board of directors, nomination of directors, special meetings of directors, removal of directors, committees of the board of directors and indemnification of directors and officers, requires the affirmative vote of at least 75% of all directors in office at a meeting called for that purpose; or
|
|
·
|
the affirmative vote of holders of 75% of the voting power of our outstanding shares of voting stock, voting together as a single class.
|
|
·
|
make nominations in the election of directors;
|
|
·
|
propose that a director be removed;
|
|
·
|
propose any repeal or change in our bylaws; or
|
|
·
|
propose any other business to be brought before an annual or special meeting of stockholders.
|
|
·
|
a description of the business or nomination to be brought before the meeting and the reasons for conducting such business at the meeting;
|
|
·
|
the stockholder’s name and address;
|
|
·
|
any material interest of the stockholder in the proposal;
|
|
·
|
the number of shares beneficially owned by the stockholder and evidence of such ownership; and
|
|
·
|
the names and addresses of all persons with whom the stockholder is acting in concert and a description of all arrangements and understandings with those persons, and the number of shares such persons beneficially own.
|
|
·
|
in connection with an annual meeting of stockholders, not less than 120 nor more than 180 days prior to the month and day corresponding to the date on which the annual meeting of stockholders was held in the immediately preceding year, but in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date of the preceding annual meeting of stockholders, a stockholder notice will be timely if received by us not later than the close of business on the later of (1) the 120th day prior to the annual meeting and (2) the 10th day following the day on which we first publicly announce the date of the annual meeting; or
|
|
·
|
in connection with the election of a director at a special meeting of stockholders, not less than 40 nor more than 60 days prior to the date of the special meeting, but in the event that less than 55 days’ notice or prior public disclosure of the date of the special meeting of the stockholders is given or made to the stockholders, a stockholder notice will be timely if received by us not later than the close of business on the 10th day following the day on which a notice of the date of the special meeting was mailed to the stockholders or the public disclosure of that date was made.
|
|
·
|
any breach of the director’s duty of loyalty to our company or our stockholders;
|
|
·
|
any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law;
|
|
·
|
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; and
|
|
·
|
any transaction from which the director derived an improper personal benefit.
|
|
·
|
acquisition of control of us by means of a proxy contest or otherwise, or
|
|
·
|
removal of our incumbent officers and directors.
|
|
·
|
a non-resident alien individual, other than certain former citizens and residents of the United States subject to tax as expatriates;
|
|
·
|
a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of a jurisdiction other than the United States or any state or political subdivision thereof or the District of Columbia; or
|
|
·
|
an estate or trust, other than an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
|
|
·
|
the gain is effectively connected with a trade or business of the non-U.S. holder in the United States, subject to an applicable treaty providing otherwise; or
|
|
·
|
the Company is or has been a U.S. real property holding corporation, as defined in the Code, at any time within the five-year period preceding the disposition or the non-U.S. holder’s holding period, whichever period is shorter, and the Class A common stock has ceased to be traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs.
|
|
·
|
1% of the number of shares of our Class A common stock then outstanding, which will equal approximately shares immediately after this offering; or
|
|
·
|
the average weekly trading volume of our Class A common stock on the NASDAQ Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
|
Underwriter
|
Number
of Shares
|
|
Credit Suisse Securities (USA) LLC
|
||
Citigroup Global Markets Inc.
|
||
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
||
Raymond James Financial Inc.
|
||
Total
|
Per Share
|
Total
|
|||||||||||||||
Without
Over-allotment
|
With
Over-allotment
|
Without
Over-allotment
|
With
Over-allotment
|
|||||||||||||
Underwriting discounts and commissions paid by us
|
$ | $ | $ | $ | ||||||||||||
Expenses payable by us
|
$ | $ | $ | $ |
|
·
|
the information presented in this prospectus and otherwise available to the underwriters;
|
|
·
|
the history of, and prospects for, the industry in which we will compete;
|
|
·
|
the ability of our management;
|
|
·
|
the prospects for our future earnings;
|
|
·
|
the present state of our development and our current financial condition;
|
|
·
|
the general condition of the securities markets at the time of the offering; and
|
|
·
|
the recent market prices of, and the demand for, publicly traded Class A common stock of generally comparable companies.
|
|
·
|
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
|
|
·
|
Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.
|
|
·
|
Syndicate covering transactions involve purchases of the Class A common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares
|
·
|
to any legal entity that is a qualified investor as defined in the Prospectus Directive;
|
·
|
to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the manager for any such offer; or
|
·
|
in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3(2) of the Prospectus Directive.
|
|
·
|
released, issued, distributed or caused to be released, issued or distributed to the public in France; or
|
|
·
|
used in connection with any offer for subscription or sale of the shares to the public in France.
|
|
·
|
Such offers, sales and distributions will be made in France only:
|
|
·
|
to qualified investors (
investisseurs qualifiés
) and/or to a restricted circle of investors (
cercle restreint d’investisseurs
), in each case investing for their own account, all as defined in, and in accordance with articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French
Code monétaire et financier
;
|
|
·
|
to investment services providers authorized to engage in portfolio management on behalf of third parties; or
|
|
·
|
in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French
Code monétaire et financier
and article 211-2 of the General Regulations (
Règlement Général
) of the
Autorité des Marchés Financiers
, does not constitute a public offer (
appel public à l’épargne
).
|
|
·
|
has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of FSMA does not apply to the company; and
|
|
·
|
has complied with, and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Class A common stock in, from or otherwise involving the United Kingdom.
|
Page
|
|
Audited Consolidated Financial Statements
|
|
Report of Independent Registered Public Accounting Firm
|
F-2 |
Consolidated Balance Sheets | F-3 |
Consolidated Statements of Operations
|
F-4 |
Consolidated Statements of Member’s Equity (Deficit)
|
F-5 |
Consolidated Statements of Cash Flows
|
F-6 |
Notes to Consolidated Financial Statements
|
F-7 |
/s/ Ernst & Young LLP
Certified Public Accountants
|
September 30, 2012
|
December 31, 2011
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 981,884 | $ | 618,109 | ||||
Cash held on behalf of others
|
3,570,510 | 3,029,774 | ||||||
Credit card transactions receivable
|
137,794 | 73,666 | ||||||
Credit card transactions receivable for others
|
846,450 | 452,518 | ||||||
Accounts receivable
|
315,396 | 196,706 | ||||||
Notes receivable
|
95,000 | – | ||||||
Advanced commissions
|
300,120 | 23,771 | ||||||
Prepaid expenses
|
26,727 | 23,339 | ||||||
Gateway processor deposit
|
– | 400,000 | ||||||
Total current assets
|
6,273,881 | 4,817,883 | ||||||
Property and equipment, net of accumulated depreciation
|
206,622 | 124,924 | ||||||
Accounts receivable
|
– | 57,078 | ||||||
Deferred financing costs, net
|
88,247 | 122,486 | ||||||
Capitalized offering costs
|
862,513 | – | ||||||
Deposits
|
20,514 | 8,009 | ||||||
Goodwill
|
5,906,106 | 5,906,106 | ||||||
Intangible assets, net of accumulated amortization
|
4,184,422 | 4,031,214 | ||||||
Total assets
|
$ | 17,542,305 | $ | 15,067,700 | ||||
Liabilities and member’s equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$ | 1,540,207 | $ | 342,194 | ||||
Carriers and vendors payable
|
2,975,983 | 2,254,424 | ||||||
Commissions payable
|
1,440,977 | 1,255,898 | ||||||
Unearned commissions
|
196,458 | – | ||||||
Notes payable
|
110,475 | – | ||||||
Deferred rent
|
13,153 | – | ||||||
Deferred other income
|
8,434 | – | ||||||
Current portion of long-term debt
|
801,952 | 769,276 | ||||||
Current portion of noncompete obligation
|
177,372 | – | ||||||
Current portion of capital leases
|
2,467 | 5,346 | ||||||
Due to member
|
– | 125,752 | ||||||
Total current liabilities
|
7,267,478 | 4,752,890 | ||||||
Capital lease obligations, less current portion
|
4,331 | 9,520 | ||||||
Long-term debt, less current portion
|
2,688,136 | 3,293,466 | ||||||
Noncompete obligation
|
665,355 | – | ||||||
Deferred rent
|
48,127 | 15,925 | ||||||
Total liabilities
|
10,673,427 | 8,071,801 | ||||||
Member's equity
|
6,882,114 | 6,995,899 | ||||||
Noncontrolling interest in subsidiary
|
(13,236 | ) | – | |||||
Total equity
|
6,868,878 | 6,995,899 | ||||||
Total liabilities and equity
|
$ | 17,542,305 | $ | 15,067,700 | ||||
See accompanying notes.
|
Successor
|
Predecessor
|
|||||||||||||||
Nine-Month
|
Three-Month
|
Nine-Month
|
||||||||||||||
Period Ended
|
Period Ended
|
Period Ended
|
Year Ended
|
|||||||||||||
September 30,
|
December 31,
|
September 30,
|
December 31,
|
|||||||||||||
2012
|
2011
|
2011
|
2010
|
|||||||||||||
Revenues (premium equivalents of $54,549,087,
$14,949,088, $38,256,738 and $20,024,069 for the
Successor period ended September 30, 2012, Successor
period ended December 31, 2011, Predecessor period
ended September 30, 2011, and the Predecessor
year ended December 31, 2010, respectively)
|
$ | 30,101,980 | $ | 8,090,116 | $ | 21,788,101 | $ | 11,790,300 | ||||||||
Third-party commissions
|
20,093,404 | 5,600,758 | 16,102,759 | 9,009,880 | ||||||||||||
Credit cards and ACH fees
|
692,883 | 197,128 | 473,580 | 275,640 | ||||||||||||
General and administrative expenses
|
5,786,140 | 1,420,765 | 3,340,730 | 2,514,020 | ||||||||||||
Depreciation and amortization
|
770,878 | 269,390 | 29,311 | 6,851 | ||||||||||||
Total operating costs and expenses
|
27,343,305 | 7,488,041 | 19,946,380 | 11,806,391 | ||||||||||||
Income (loss) from operations
|
2,758,675 | 602,075 | 1,841,721 | (16,091 | ) | |||||||||||
Other expenses (income):
|
||||||||||||||||
Interest expense
|
194,318 | 71,213 | – | – | ||||||||||||
Interest income
|
– | – | – | (3,244 | ) | |||||||||||
Other income
|
(21,603 | ) | – | – | – | |||||||||||
Net income (loss)
|
2,585,960 | 530,862 | 1,841,721 | (12,847 | ) | |||||||||||
Net loss attributable to noncontrolling interest in subsidiary
|
(63,236 | ) | – | – | – | |||||||||||
Net income (loss) attributable to Health Plan Intermediaries, LLC
|
$ | 2,649,196 | $ | 530,862 | $ | 1,841,721 | $ | (12,847 | ) | |||||||
See accompanying notes.
|
Noncontrolling interest
|
|||||||||||||
Member's equity
|
in subsidiary
|
Total
|
|||||||||||
Balance at January 1, 2010 (Predecessor)
|
$ | (165,305 | ) | $ | - | $ | (165,305 | ) | |||||
Net income (loss)
|
(12,847 | ) | - | (12,847 | ) | ||||||||
Contributions from members
|
101,325 | - | 101,325 | ||||||||||
Balance at December 31, 2010 (Predecessor)
|
(76,827 | ) | - | (76,827 | ) | ||||||||
Net income
|
1,841,721 | - | 1,841,721 | ||||||||||
Distributions to members
|
(1,301,000 | ) | - | (1,301,000 | ) | ||||||||
Balance at September 30, 2011 (Predecessor)
|
463,894 | - | 463,894 | ||||||||||
Balance at October 1, 2011 (Successor)
|
463,894 | - | 463,894 | ||||||||||
Net income
|
530,862 | - | 530,862 | ||||||||||
Contributions from member
|
1,135,036 | - | 1,135,036 |
`
|
|||||||||
Purchase of member's interest in Company and
|
|||||||||||||
adjustment to member's equity to reflect fair value
|
4,866,107 | - | 4,866,107 | ||||||||||
Balance at December 31, 2011 (Successor)
|
6,995,899 | - | 6,995,899 | ||||||||||
Net income (loss)
|
2,649,196 | (63,236 | ) | 2,585,960 | |||||||||
Contributions from minority partner
|
- | 50,000 | 50,000 | ||||||||||
Distributions to member
|
(2,762,981 | ) | - | (2,762,981 | ) | ||||||||
Balance at September 30, 2012 (Successor)
|
$ | 6,882,114 | $ | (13,236 | ) | $ | 6,868,878 | ||||||
See accompanying notes.
|
Successor
|
Predecessor
|
|||||||||||||||
Nine-Month Period Ended September 30, 2012
|
Three-Month Period Ended December 31, 2011
|
Nine-Month Period Ended September 30, 2011
|
Year Ended December 31, 2010
|
|||||||||||||
Operating activities
|
||||||||||||||||
Net income (loss)
|
$ | 2,585,960 | $ | 530,862 | $ | 1,841,721 | $ | (12,847 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash
|
||||||||||||||||
provided by (used in) operating activities:
|
||||||||||||||||
Depreciation and amortization
|
770,878 | 269,390 | 29,311 | 6,851 | ||||||||||||
Amortization of deferred financing costs
|
34,239 | 12,550 | - | - | ||||||||||||
Change in operating assets and liabilities:
|
||||||||||||||||
Increase in cash held on behalf of others
|
(540,736 | ) | (203,900 | ) | (414,168 | ) | (2,359,698 | ) | ||||||||
Increase (decrease) in credit card transactions receivable
|
(458,060 | ) | 17,426 | (460,672 | ) | (82,938 | ) | |||||||||
Increase (decrease) in accounts receivable
|
(61,612 | ) | 93,285 | (179,264 | ) | (74,995 | ) | |||||||||
Increase in advanced commissions
|
(276,349 | ) | (23,771 | ) | - | - | ||||||||||
Decrease (increase) in gateway processor deposit
|
400,000 | - | (400,000 | ) | - | |||||||||||
Increase (decrease) in prepaid expenses and deposits
|
4,862 | (119,879 | ) | 83,717 | (88,851 | ) | ||||||||||
Increase (decrease) in carriers and vendors payable
|
721,559 | (155,516 | ) | 1,266,876 | 1,127,674 | |||||||||||
Increase (decrease) in accounts payable, accrued
and deferred expenses
|
1,206,802 | 18,050 | (182,083 | ) | 339,000 | |||||||||||
Increase in commissions payable
|
185,079 | 45,497 | 411,514 | 679,690 | ||||||||||||
Increase in unearned commissions
|
196,458 | - | - | - | ||||||||||||
(Decrease) increase in amounts due to members
|
(125,752 | ) | 125,752 | (359,602 | ) | 435,400 | ||||||||||
Net cash provided by (used in) operating activities
|
4,643,328 | 609,746 | 1,637,350 | (30,714 | ) | |||||||||||
Investing activities
|
||||||||||||||||
Purchases of property and equipment
|
(118,057 | ) | (23,802 | ) | (38,453 | ) | (79,508 | ) | ||||||||
Loan to distributor
|
(220,000 | ) | - | - | - | |||||||||||
Proceeds from repayment of distributor loan
|
125,000 | - | - | - | ||||||||||||
Payments made on business acquisition
|
- | (5,330,000 | ) | - | - | |||||||||||
Net cash used in investing activities
|
(213,057 | ) | (5,353,802 | ) | (38,453 | ) | (79,508 | ) | ||||||||
Financing activities
|
||||||||||||||||
Issuance of long-term debt
|
- | 4,250,000 | - | - | ||||||||||||
Principal payments on notes payable
|
(10,280 | ) | - | - | - | |||||||||||
Principal payments on long-term debt
|
(572,654 | ) | (187,258 | ) | - | - | ||||||||||
Proceeds from note payable
|
100,000 | - | - | - | ||||||||||||
Payment of financing costs
|
- | (135,036 | ) | - | - | |||||||||||
Payment of fees for equity issuance
|
(862,513 | ) | - | - | - | |||||||||||
Payments on capital leases
|
(8,068 | ) | (1,303 | ) | (3,771 | ) | (2,270 | ) | ||||||||
Capital contribution
|
- | 1,135,036 | - | 101,325 | ||||||||||||
Proceeds from issuance of non-controlling interest in subsidiary
|
50,000 | - | - | - | ||||||||||||
Distributions to member
|
(2,762,981 | ) | - | (1,301,000 | ) | - | ||||||||||
Net cash (used in) provided by financing activities
|
(4,066,496 | ) | 5,061,439 | (1,304,771 | ) | 99,055 | ||||||||||
Net increase in cash
|
363,775 | 317,383 | 294,126 | (11,167 | ) | |||||||||||
Cash at beginning of period
|
618,109 | 300,726 | 6,600 | 17,767 | ||||||||||||
Cash at end of period
|
$ | 981,884 | $ | 618,109 | $ | 300,726 | 6,600 | |||||||||
Supplemental disclosures of cash flow information
|
||||||||||||||||
Cash paid for interest
|
$ | 152,795 | $ | 55,578 | $ | – | $ | – | ||||||||
Supplemental disclosure of non-cash investing and financing activities
|
||||||||||||||||
Equipment acquired through capital leases
|
$ | – | $ | – | $ | – | $ | 22,210 | ||||||||
Software acquired through issuance of trade payable
|
$ | 45,000 | $ | – | $ | – | $ | – | ||||||||
Purchase of insurance through premium financing agreement
|
$ | 20,755 | $ | – | $ | – | $ | – | ||||||||
Noncompete agreement acquired through issuance of long-term payable
|
$ | 842,727 | $ | – | $ | – | $ | – | ||||||||
See accompanying notes.
|
Computer equipment
|
5 years
|
Furniture and fixtures
|
7 years
|
Leasehold improvements
|
Shorter of the lease term or estimated useful life
|
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities
|
|
Level 2:
|
Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
|
|
Level 3:
|
Unobservable inputs for the asset or liability
|
Fair Value Measurements at September 30, 2012
(Successor)
|
||||||||||||||||
Carrying Value at September 30, 2012
(Successor)
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Long-term debt, including current portion
|
$ | 3,490,000 | $ | – | $ | 3,521,000 | $ | – | ||||||||
Noncompete obligation, including
current portion
|
843,000 | – | 843,000 | – | ||||||||||||
$ | 4,333,000 | $ | – | $ | 4,364,000 | $ | – |
Fair Value Measurements at December 31, 2011
(Successor)
|
||||||||||||||||
Carrying Value at
December 31, 2011
(Successor)
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Long-term debt, including current portion
|
$ | 4,063,000 | $ | – | $ | 4,078,000 | $ | – |
Cash
|
$ | 3,127,000 | ||
Receivables
|
891,000 | |||
Deposits
|
406,000 | |||
Property and equipment, net
|
112,000 | |||
Carriers payable
|
(2,410,000 | ) | ||
Commissions payable
|
(1,210,000 | ) | ||
Accrued expenses and other liabilities
|
(452,000 | ) | ||
Intangible asset – in-force insureds
|
240,000 | |||
Intangible asset – brand
|
400,000 | |||
Intangible asset – carrier network
|
40,000 | |||
Intangible asset – distributor relationships
|
3,610,000 | |||
Goodwill
|
5,906,000 | |||
Total fair value
|
$ | 10,660,000 |
September 30, 2012
(Successor)
|
December 31, 2011
(Successor)
|
|||||||
Computer equipment
|
$ | 96,000 | $ | 36,000 | ||||
Furniture and fixtures
|
74,000 | 51,000 | ||||||
Leasehold improvements
|
75,000 | 49,000 | ||||||
Total property and equipment
|
245,000 | 136,000 | ||||||
Less accumulated depreciation
|
(38,000 | ) | (11,000 | ) | ||||
Total property and equipment, net
|
$ | 207,000 | $ | 125,000 |
Balance as of January 1, 2011 (Predecessor)
|
$ | – | ||
Goodwill acquired during the period
|
– | |||
Impairment of goodwill
|
– | |||
Balance as of September 30, 2011 (Predecessor)
|
– | |||
Goodwill acquired during the period
|
5,906,000 | |||
Impairment of goodwill
|
– | |||
Balance as of December 31, 2011 (Successor)
|
5,906,000 | |||
Goodwill acquired during the period
|
– | |||
Impairment of goodwill
|
– | |||
Balance as of September 30, 2012 (Successor)
|
$ | 5,906,000 |
Weighted-Average Amortization Period
(In Years)
|
Gross Carrying Amount
|
Accumulated Amortization
|
Intangible Asset, net
|
|||||||||||||
Distributor relationships
|
7 | $ | 3,610,000 | $ | 516,000 | $ | 3,094,000 | |||||||||
Carrier network
|
5 | 40,000 | 8,000 | 32,000 | ||||||||||||
Brand
|
2 | 400,000 | 200,000 | 200,000 | ||||||||||||
Capitalized software
|
5 | 45,000 | 2,000 | 43,000 | ||||||||||||
Noncompete agreement
|
5 | 843,000 | 28,000 | 815,000 | ||||||||||||
Total intangible assets
|
$ | 4,938,000 | $ | 754,000 | $ | 4,184,000 |
Weighted-Average Amortization Period
(In Years)
|
Gross Carrying Amount
|
Accumulated Amortization
|
Intangible Asset, net
|
|||||||||||||
Distributor relationships
|
7 | $ | 3,610,000 | $ | 127,000 | $ | 3,483,000 | |||||||||
Carrier network
|
5 | 40,000 | 2,000 | 38,000 | ||||||||||||
Brand
|
2 | 400,000 | 50,000 | 350,000 | ||||||||||||
In-force insureds
|
0.8 | 240,000 | 80,000 | 160,000 | ||||||||||||
Total intangible assets
|
$ | 4,290,000 | $ | 259,000 | $ | 4,031,000 |
Remainder of 2012
|
$ | 225,000 | ||
2013
|
851,000 | |||
2014
|
701,000 | |||
2015
|
701,000 | |||
2016
|
699,000 | |||
Thereafter
|
1,007,000 | |||
Total
|
$ | 4,184,000 |
Remainder of 2012
|
$ | 196,000 | ||
2013
|
813,000 | |||
2014
|
857,000 | |||
2015
|
904,000 | |||
2016
|
720,000 | |||
Total minimum payments
|
$ | 3,490,000 |
September 30, 2012
(Successor)
|
December 31, 2011
(Successor)
|
|||||||
Accounts payable
|
$ | 674,000 | $ | 75,000 | ||||
Accrued professional fees
|
377,000 | – | ||||||
Accrued refunds
|
242,000 | 87,000 | ||||||
Deferred salaries
|
30,000 | 10,000 | ||||||
Accrued wages
|
167,000 | 49,000 | ||||||
Accrued credit card/ACH fees
|
50,000 | 31,000 | ||||||
Due to Naylor as a result of acquisition
|
– | 80,000 | ||||||
Other accrueds
|
– | 10,000 | ||||||
Total accounts payable and accrued expenses
|
$ | 1,540,000 | $ | 342,000 |
Remainder of 2012
|
$ | 56,000 | ||
2013
|
218,000 | |||
2014
|
222,000 | |||
2015
|
102,000 | |||
Total minimum lease payments
|
$ | 598,000 |
Nine – Month
Period Ended
September 30, 2012
(Successor)
|
Three – Month
Period Ended
December 31, 2011
(Successor)
|
Nine – Month
Period Ended
September 30, 2011
(Predecessor)
|
Year Ended
December 31, 2010
(Predecessor)
|
|||||||||||||
Pro forma statutory tax provision
|
$875,000 | $180,000 | $626,000 | $(2,000 | ) | |||||||||||
State income taxes, net
|
62,000 | 12,000 | 43,000 | (1,000 | ) | |||||||||||
Nondeductible expenses
|
27,000 | 9,000 | 26,000 | 4,000 | ||||||||||||
Pro forma total provision for income taxes
|
$964,000 | $201,000 | $695,000 | $1,000 |
Amount To
Be Paid
|
||||
Registration fee
|
$ | |||
FINRA filing fee
|
||||
Listing fee
|
||||
Transfer agent’s fees
|
||||
Printing and engraving expenses
|
||||
Legal fees and expenses
|
||||
Accounting fees and expenses
|
||||
Blue Sky fees and expenses
|
||||
Miscellaneous
|
||||
Total
|
$ |
Exhibit Number
|
Description
|
|
1.1*
|
Form of Underwriting Agreement
|
|
3.1**
|
Certificate of Incorporation of Health Insurance Innovations, Inc., as currently in effect
|
|
3.2**
|
Bylaws of Health Insurance Innovations, Inc., as currently in effect
|
|
3.3*
|
Form of Amended and Restated Certificate of Incorporation of Health Insurance Innovations, Inc.
|
|
3.4*
|
Form of Amended and Restated Bylaws of Health Insurance Innovations, Inc.
|
|
4.1*
|
Form of Class A common stock Certificate
|
|
4.2*
|
Form of Registration Rights Agreement
|
|
5.1*
|
Opinion of Davis Polk & Wardwell
LLP
|
|
10.1*
|
Form of Amended and Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC
|
|
10.2**
|
Contribution Agreement between Health Plan Intermediaries Holdings, LLC and Health Plan Intermediaries, LLC
|
|
10.3**
|
Unit Purchase Agreement among Michael W. Kosloske, Naylor Group Partners, LLC, Mathew S. Naylor and Russell R. Naylor and Health Plan Intermediaries, LLC
|
|
10.4**
|
Amendment to United Purchase Agreement among Michael W. Kosloske, Naylor Group Partners, LLC, Mathew S. Naylor and Russell R. Naylor and Health Plan Intermediaries, LLC
|
|
10.5*
|
Form of Tax Receivable Agreement
|
|
10.6*
|
Form of Exchange Agreement
|
|
10.7**
|
Loan Agreement between Health Plan Intermediaries, LLC and SunTrust Bank
|
|
10.8**
|
Master Service Agreement between Health Plan Intermediaries, LLC and BimSym eBusiness Solutions, Inc.
|
|
10.9**
|
Software Assignment Agreement between Health Plan Intermediaries, LLC and BimSym eBusiness Solutions, Inc.
|
|
10.10**†
|
General Manager’s Agreement between Health Plan Intermediaries, LLC and Companion Life Insurance Company
|
|
10.11**†
|
Agency Agreement between Health Plan Intermediaries, LLC and Starr Indemnity & Liability Company
|
|
10.12**
|
Administrative Services Agreement among Health Plan Insurance Innovations, LLC, United States Fire Insurance Company and The North River Insurance Company
|
|
10.13** | Marketing/Billing Agreement between Med-Sense Guaranteed Association and Health Insurance Innovations | |
10.14#
|
Form of Employment Agreement between Michael W. Kosloske and Health Insurance Innovations, Inc.
|
|
10.15*#
|
Form of Employment Agreement between Michael D. Hershberger and Health Insurance Innovations, Inc.
|
|
10.16**#
|
Employment and Non-Compete Agreement between Gary Raeckers and Health Plan Intermediaries, LLC
|
|
10.17**#
|
Employment and Non-Compete Agreement between Scott Lingle and Health Plan Intermediaries, LLC
|
|
10.18#
|
Form of Employment Agreement between Lori Kosloske and Health Insurance Innovations, Inc.
|
|
10.19**#
|
Employment and Non-Compete Agreement between Bryan Krul and Health Plan Intermediaries, LLC
|
|
10.20#
|
Form of Health Insurance Innovations, Inc. Long Term Incentive Plan
|
|
10.21*#
|
Form of Health Insurance Innovations, Inc. Restricted Stock Award Agreement pursuant to the Health Insurance Innovations, Inc. Long Term Incentive Plan
|
|
10.22 |
Office Lease Agreement between Health Plan Intermediaries, LLC and Magdalene Center of Tampa, LLC
|
|
16.1**
|
Letter from former accountants addressed to the Securities and Exchange Commission
|
|
21.1
|
List of subsidiaries
|
|
23.1
|
Consent of Ernst & Young LLP,
ind
ependent registered public accounting firm
|
|
23.2*
|
Consent of Davis Polk & Wardwell
LLP
(included in Exhibit 5.1)
|
|
24.1**
|
Power of Attorney (included on signature page)
|
|
99.1**
|
Consent of Michael D. Hershberger, as director nominee
|
Exhibit Number
|
Description
|
99.2**
|
Consent of Liana O’Drobinak, as director nominee
|
|
99.3**
|
Consent of Gordon Tunstall, as director nominee
|
|
99.4
|
Consent of Paul E. Avery, as director nominee
|
|
99.5
|
Consent of Gary Raeckers, as director nominee |
Health Insurance Innovations, Inc.
|
||
By:
|
/s/ Michael W. Kosloske
|
|
Name:
|
Michael W. Kosloske
|
|
Title:
|
Chairman, President and Chief Executive Officer
|
Signature
|
Title
|
Date
|
/s/ Michael W. Kosloske
|
Chairman, President and Chief Executive Officer
(principal executive officer)
|
December 20, 2012
|
Michael W. Kosloske
|
||
/s/ Michael D. Hershberger
|
Chief Financial Officer
(principal financial officer)
|
December 20, 2012
|
Michael D. Hershberger
|
||
/s/ Joan Rodgers
|
Chief Accounting Officer
(principal accounting officer)
|
December 20, 2012
|
Joan Rodgers
|
Exhibit Number
|
Description
|
|
1.1*
|
Form of Underwriting Agreement
|
|
3.1**
|
Certificate of Incorporation of Health Insurance Innovations, Inc., as currently in effect
|
|
3.2**
|
Bylaws of Health Insurance Innovations, Inc., as currently in effect
|
|
3.3*
|
Form of Amended and Restated Certificate of Incorporation of Health Insurance Innovations, Inc.
|
|
3.4*
|
Form of Amended and Restated Bylaws of Health Insurance Innovations, Inc.
|
|
4.1*
|
Form of Class A common stock Certificate
|
|
4.2*
|
Form of Registration Rights Agreement
|
|
5.1*
|
Opinion of Davis Polk & Wardwell
LLP
|
|
10.1*
|
Form of Amended and Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC
|
|
10.2**
|
Contribution Agreement between Health Plan Intermediaries Holdings, LLC and Health Plan Intermediaries, LLC
|
|
10.3**
|
Unit Purchase Agreement among Michael W. Kosloske, Naylor Group Partners, LLC, Mathew S. Naylor and Russell R. Naylor and Health Plan Intermediaries, LLC
|
|
10.4**
|
Amendment to United Purchase Agreement among Michael W. Kosloske, Naylor Group Partners, LLC, Mathew S. Naylor and Russell R. Naylor and Health Plan Intermediaries, LLC
|
|
10.5*
|
Form of Tax Receivable Agreement
|
|
10.6*
|
Form of Exchange Agreement
|
|
10.7**
|
Loan Agreement between Health Plan Intermediaries, LLC and SunTrust Bank
|
|
10.8**
|
Master Service Agreement between Health Plan Intermediaries, LLC and BimSym eBusiness Solutions, Inc.
|
|
10.9**
|
Software Assignment Agreement between Health Plan Intermediaries, LLC and BimSym eBusiness Solutions, Inc.
|
|
10.10**
†
|
General Manager’s Agreement between Health Plan Intermediaries, LLC and Companion Life Insurance Company
|
|
10.11**
†
|
Agency Agreement between Health Plan Intermediaries, LLC and Starr Indemnity & Liability Company
|
|
10.12**
|
Administrative Services Agreement among Health Plan Insurance Innovations, LLC, United States Fire Insurance Company and The North River Insurance Company
|
|
10.13**
|
Marketing/Billing Agreement between Med-Sense Guaranteed Association and Health Insurance Innovations | |
10.14#
|
Form of Employment Agreement between Michael W. Kosloske and Health Insurance Innovations, Inc.
|
|
10.15*#
|
Form of Employment Agreement between Michael D. Hershberger and Health Insurance Innovations, Inc.
|
|
10.16**#
|
Employment and Non-Compete Agreement between Gary Raeckers and Health Plan Intermediaries, LLC
|
|
10.17**#
|
Employment and Non-Compete Agreement between Scott Lingle and Health Plan Intermediaries, LLC
|
|
10.18#
|
Form of Employment Agreement between Lori Kosloske and Health Insurance Innovations, Inc.
|
|
10.19**#
|
Employment and Non-Compete Agreement between Bryan Krul and Health Plan Intermediaries, LLC
|
|
10.20#
|
Form of Health Insurance Innovations, Inc. Long Term Incentive Plan
|
|
10.21*#
|
Form of Health Insurance Innovations, Inc. Restricted Stock Award Agreement pursuant to the Health Insurance Innovations, Inc. Long Term Incentive Plan
|
|
10.22 |
Office Lease Agreement between Health Plan Intermediaries, LLC and Magdalene Center of Tampa, LLC
|
|
16.1**
|
Letter from former accountants addressed to the Securities and Exchange Commission
|
|
21.1
|
List of subsidiaries
|
|
23.1
|
Consent of Ernst & Young LLP,
ind
ependent registered public accounting firm
|
|
23.2*
|
Consent of Davis Polk & Wardwell
LLP
(included in Exhibit 5.1)
|
|
24.1**
|
Power of Attorney (included on signature page)
|
|
99.1**
|
Consent of Michael D. Hershberger, as director nominee
|
|
99.2**
|
Consent of Liana O’Drobinak, as director nominee
|
|
99.3**
|
Consent of Gordon Tunstall, as director nominee
|
|
99.4
|
Consent of Paul E. Avery, as director nominee
|
|
99.5
|
Consent of Gary Raeckers, as director nominee
|
If to the Company:
|
Health Insurance Innovations, Inc.
15438 N. Florida Avenue, Suite 201
Tampa, Florida, 33613
Attention: Michael W. Kosloske
Telecopy: (877) 376-5832
|
with a copy to (which shall not constitute notice hereunder): Gary Raekers
|
|
If to Executive:
|
To Executive’s address as reflected on the payroll records of the Company
|
HEALTH INSURANCE INNOVATIONS, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
EXECUTIVE
|
||
Michael W. Kosloske
|
HEALTH INSURANCE INNOVATIONS, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
EXECUTIVE
|
||
Michael W. Kosloske
|
|
|||
Name of Executive:
|
|||
Date: |
If to the Company:
|
Health Insurance Innovations, Inc.
15438 N. Florida Avenue, Suite 201
Tampa, Florida, 33613
Attention: Lori Kosloske
Telecopy: (877) 376-5832
|
with a copy to (which shall not constitute notice hereunder): Gary Raeckers
|
|
If to Executive:
|
To Executive’s address as reflected on the payroll records of the Company
|
HEALTH INSURANCE INNOVATIONS, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
EXECUTIVE
|
||
Lori Kosloske
|
HEALTH INSURANCE INNOVATIONS, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
EXECUTIVE
|
||
Lori Kosloske
|
|
|||
Name of Executive:
|
|||
Date: |
“Tenant”
|
Health Plan Intermediaries, LLC
A
Florida
(State)
☐
corporation /
☐
partnership /
☒
limited liability company /
☐
limited partnership /
☐
sole proprietorship /
☐
_____________ (select one)
|
|
“Tenant’s Address”
|
218 E. Bearss Avenue Suite 325, Tampa, FL 33613
|
|
“Guarantor”
|
N/A
|
|
“Project”
|
Magdalene Center, located at 15436 & 15438 N. Florida Ave., Tampa, Florida 33613 containing approximately 40.725 square feet
|
|
“Premises”
|
Suite
201-N
of the Project, as more particularly identified on the Site Plan of the Project attached hereto as
Exhibit “A”
and containing approximately
6,462
rentable square feet of office space, and representing
15.87% of the Project (“Pro Rata Share”)
.
|
|
“Lease Term”
|
Forty two (42) month(s)
|
|
“Commencement Date”
|
January 1, 2012
|
With permission from the Landlord. Tenant may take occupancy of the Leased Premises prior to the Commencement Date. In the event Tenant takes such early occupancy, all terms and conditions of this Lease shall be in effect with the exception of rent, which shall begin on the Commencement Date regardless of the date of occupancy. |
Page 1 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
“Expiration Date”
|
June 30, 2015
unless the Lease Term is sooner terminated as provided herein.
|
|
“Base Monthly Rent”
|
01/01/2012 – 03/31/2012
|
$5,971.25
|
|
04/01/2012 – 06/30/2012
|
$7,516.06
|
||
07/01/2012 – 06/30/2013
|
$8,885.25
|
||
07/01/2013 – 6/30/2014
|
$9,240.66
|
||
07/01/2014 – 06/30/2015
|
$9,610.29
|
“Sales Tax”
|
Tenant shall pay state sales tax, if applicable, which is currently 7%
|
|
“Utilities”
|
Electric at the premises is the responsibility to the Tenant
|
|
“Free Rent”
|
No rent shall be due for the period of 07/01/2012 – 07/31/2012
|
|
“Security Deposit”
|
$5,134.00
|
|
“Tenant’s Permitted Use”
|
Administrative office purposes
under the trade name “
Health Insurance Innovations
”
|
|
“Work Letter Agreement”
|
See
Exhibit “B”
attached hereto
|
|
“Lease Year”
|
Every twelve month period commencing with the Commencement Date or, if the Commencement Date falls on a day other than the first day of a calendar month, every twelve month period commencing with the first day of the calendar month following the Commencement Date.
|
|
“Normal Business Hours”
|
8:00 a.m. to 6:00 p.m., Monday through Friday, except recognized State of Florida and Federal Holidays (which holidays include, without limitation, New Year’s Day, President’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving, and Christmas Day) (a “
Holiday
”)
|
“Landlord’s Address”
|
Magdalene Center of Tampa, LLC c/o Om Ventures Realty, 4008 N. Florida Ave. Tampa FL 33603
|
|
“Parking Spaces”
|
26
non-exclusive vehicular parking spaces of which Tenant has elected exclusive right to
3
of the allotted parking spaces for the duration of the Lease Term. Landlord grants to Tenant the exclusive right to use covered parking spaces number 1, 2, 3 as indicated on the Site Plan marked as Exhibit “A”
|
|
“Broker”
|
OM Ventures Realty, LLC
(see Section 34)
|
Page 4 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 5 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 6 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 8 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 9 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 10 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 11 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 12 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 13 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 14 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 15 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 16 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 17 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Page 18 of 26 | |||||
Landlord | Tenant | ||||
Initials | Initials |
Exhibit “B” to Lease – Work Letter Agreement
|
Landlord | Tenant | |||
Initials | Initials |
|
1.
|
Smoking is not permitted in the Premises, any of the office suites, interior or exterior bathrooms, parking area, exterior corridors, walkways or anywhere else on or about the site other than in the designated smoking areas. Tenant shall not permit its employees, invitees or guests to loiter or smoke in the Premises or the lobbies, passages, corridors, rest rooms, common walkways, parking lot, entrances or any other area within the Premises or shared in common with other tenants in the Project. A site plan will be provided denoting the designated smoking areas at the Project.
|
|
2.
|
Tenant & Guests shall not engage in criminal activity, including but not limited to drug-related criminal activity, gang related activity, any act intended to facilitate criminal activity of any kind, on or near the Project or Premises. “Drug-related criminal activity” means the illegal manufacture, sale, distribution or use of a controlled substance (as defined in Section 102 of the Controlled Substance Act).
|
|
3.
|
Tenant & Guests will not engage in an act of violence or threats of violence, including, but not limited to verbal or physical fights and the unlawful discharge of firearms on or near the Project or Premises. Tenant & Guests shall not conduct any activity on or about the Premises or Project that will draw pickets, demonstrators, or the like.
|
|
4.
|
Tenant & Guests shall at all times conduct themselves in a professional businesslike manner and will not engage in loud or profane discussions, arguments, phone calls and/or cellular phone calls in or about the Premises or common areas of the Project that disturb the quiet enjoyment of Tenant & Guests, neighboring tenants and their guests, invitees, customers and employees, the Landlord and its employees, agents, guests or invitees and management, maintenance, vendors or cleaning personnel employed by the Project.
|
|
5.
|
Tenant & Guests shall not make or permit any vibration or improper, objectionable or unpleasant noises or odors in the Project or otherwise interfere in any way with other tenants or persons having business with them. No machinery of any kind (other than normal office equipment) shall be operated by any tenant on its Premises without Landlord’s prior written consent, nor shall any tenant use or keep in the Project any flammable or explosive fluid or substance, building gasoline, kerosene oil, acids, caustics (other than typical office supplies (e.g., photocopier toner) used in compliance with all Laws), or any explosive fluid or substance, or any illuminating material, unless it is battery powered, UL approved.
|
|
6.
|
Tenant & Guests shall not do anything or permit anything to be done, in or about the Project or bring or keep anything therein that will in any way increase the possibility of fire or other casualty, or obstruct or interfere with the rights of or otherwise injure or annoy other Tenants, or do anything in conflict with the valid pertinent laws, rules or regulations of any governmental authority. Tenant shall not use any electrical space heaters within the Premises.
|
|
7.
|
Tenants are responsible for all deliveries to their Premises and must insure that all boxes, wooden pallets, plastic carriers and debris of any sort is properly disposed of and/or removed by their delivery company at their sole cost and expense. Tenants must make their own arrangements for the proper disposal of construction materials, furniture and fixtures, copy machines, printers, computers, monitors and appliances of any kind. The trash dumpsters are for garbage and paper goods only.
|
|
8.
|
Tenant & Guests shall cooperate with Landlord and Landlord’s employees and/or the Project’s cleaning and maintenance personnel in keeping its Premises and the common areas of the Project neat and clean.
|
|
9.
|
Landlord will not be responsible for damaged or lost or stolen personal property, fixtures, furniture, equipment, money or jewelry from tenant’s Premises or common areas of the Project regardless of whether such loss occurs when the area is locked against entry or not.
|
|
10.
|
Loitering is strictly prohibited on the Premises. Sidewalks, doorways, halls, designated smoking locations, parking lot and similar areas shall not be obstructed or used for any purpose other than ingress and egress to and from the Premises and for going from one part of the Project to another part of the Project.
|
|
11.
|
Plumbing fixtures and appliances shall be used only for the purposes for which constructed, and no sweepings, rubbish, rags or other unsuitable material shall be thrown or placed therein. Any violation of this provision which causes a stoppage or damage to any such fixtures or appliances by the Tenant, and/or any of Tenant’s officers, employees, agents, patrons, customers, licensees, visitors or invitees shall be repaired at the sole expense of the Tenant.
|
|
12.
|
Canvassing, soliciting, and peddling in the Project, Premises parking lot or common area grounds is prohibited. To ensure orderly operation of the Project and compliance with the Landlord’s “No Soliciting” rule, no ice, mineral or other water, towels, newspapers, etc. shall be delivered to any Premises except by persons approved by Landlord. No vending or dispensing machines of any kind other than bottled drinking water may be maintained in any Premises without the prior written permission of Landlord.
|
|
13.
|
Exterior and interior doors, when not in use, shall be kept free from obstructions at all times in accordance with the fire codes.
|
|
14.
|
No tenant may enter into the phone rooms, electrical rooms, mechanical rooms or other service areas of the Project unless accompanied by Landlord or the Property Manager / Maintenance Personnel.
|
|
15.
|
Nothing (including, without limitation, boxes, crates or excess trash) shall be swept into, disposed of, or deposited in the parking lot, exterior walkways, grounds, recreation or lawn areas, entries, passages, doors or hallways. Exterior doors when not in use, shall be kept closed at all times.
|
Exhibit “D” to Lease – Rules and Regulations
|
Landlord | Tenant | |||
Initials | Initials |
Name of Subsidiary
|
Jursidiction of
Incorporation or
Organization
|
Health Plan Intermediaries Holdings, LLC Ownership Interest
|
||
Insurance Center for Excellence, LLC
|
Delaware
|
80%
|
/s/ Ernst & Young LLP
Certified Public Accountants
|
|||
/s/ Paul E. Avery
|
|
Name: Paul E. Avery
|
|
Date: December 20, 2012
|
/s/ Gary Raeckers
|
|
Name: Gary Raeckers
|
|
Date: December 20, 2012
|