As of December 31, 2019, we leased facilities in four different cities throughout the U.S. All properties are leased with various expiration dates. Our locations are summarized as follows:
ASC 606 was adopted using the modified retrospective transition method as further detailed in Notes 1 and 11 of Part IV, Item 15, of this Annual Report on Form 10-K. Accordingly, amounts presented prior to 2018 reflect revenue recognition under ASC 605.
Net income attributable to HIIQ for 2017 was significantly impacted by the changes in tax law further detailed in Note 13 of Part IV, Item 15, of this Annual Report on Form 10-K.
Management's Discussion and Analysis of Financial Condition and Results of Operations below presents the Company's operating results and its financial condition as of and for the period ended December 31, 2019, and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included herein can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
We are a technology driven distributor of Medicare and affordable health and life insurance products that meet the demands and needs of our consumers. We market products to individuals through televised commercials, e-commerce and other licensed-agent distribution channels, consisting of both our internal distribution network, and an external distribution network of independently owned and operated distributors.
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), or decision-making group, in deciding how to allocate resources and in assessing performance. Our President and Chief Executive Officer is our named CODM. As of December 31, 2019, the Company determined that we have two reportable segments within our operating platform, Medicare and IFP. The Company periodically reviews the structure of our organization and CODM communications to assess the continued appropriateness of our segment reporting. The CODM reviews our financial information in a manner substantially similar to the accompanying consolidated financial statements with emphasis on Medicare and IFP as two distinct operating segments. The Medicare and IFP segments are described further below:
IFP - The IFP segment focuses on the sale and service of individual and family health insurance plans ("IFP") which encompasses short-term medical ("STM") insurance plans and health benefit insurance plans ("HBIP"). We also offer supplemental products which include a variety of additional insurance and non-insurance products that are frequently purchased as supplements to IFPs.
On July 29, 2019, the Company entered into a Stock Purchase Agreement to acquire the interests of a corporation which owned and operated a domain name in the insurance industry. The acquisition was accounted for as a purchase of an asset and classified as an intangible asset on the balance sheet.
These acquisitions marked the beginning of the Company's strategic shift toward Medicare as the core product line.
On July 26, 2019, we announced that our Board of Directors commenced a process to explore, review and evaluate a range of potential strategic alternatives focused on maximizing shareholder value. These alternatives could include, among other things, a sale of the Company or a portion thereof, a strategic business combination, changes in the Company’s operations or strategy, or continuing to execute on the Company’s current business plan. On March 3, 2020, the Company announced that the review of potential strategic alternatives was ongoing.
On December 20, 2019, we announced a change in our overall business strategy to accelerate growth within the Medicare segment. The IFP segment will be de-emphasized moving forward and our focus for IFP will be to maximize cash flows and enhance e-commerce capabilities. By decreasing emphasis on new business within the IFP segment, we will be able to use cashflows from the IFP segment to invest in accelerating growth of the Medicare segment.
Expected duration units submitted for Medicare were 2.3 million for the year ended December 31, 2019.
Full year revenue from our IFP segment was $314.0 million, a decrease of 10.6%.
Fourth quarter revenue from our IFP segment was $105.0 million, a decrease of 20.4%.
Full year profit for the IFP segment was $66.8 million, an increase of 12.4%.
Policies in force as of December 31, 2019, totaled 498,047, compared to 387,000 as of December 31, 2018, an increase of 28.7%.
Net income was $36.7 million, compared to net income of $19.0 million in 2018, an increase of 93.2%.
Adjusted earnings per share, also referred to as adjusted net income per share, or adjusted EPS, was $4.24 compared to $2.60 in 2018, an increase of 63.1%.
In 2019, we continued to focus on our top initiatives: (i) expanding our entrance into the Medicare space, (ii) improving the lifetime value of policies sold, (iii) new product development, (iv) expanding compliant distribution, (v) improving the member experience, and (vi) enhancing technology.
Revenues. Our revenues primarily consist of commissions and fees earned for Medicare and IFP products issued to members, referral fees, and fees for discount benefit plans paid by members as a direct result of our enrollment services, brokerage services, member management, or referral sales. Revenues reported by the Company are net of risk premiums remitted to insurance carriers and fees paid for discount benefit plans.
Commission rates that we receive for the sale of products are agreed to in advance with the relevant contracted party and vary between contract and policy type. Under our compensation arrangements, the commission rate schedule that is in effect on the policy effective date governs the commissions over the life of the policy. We continue to receive a commission payment as a member renews their policy, or until a plan expires or is terminated.
Expected Duration Units. An expected duration unit represents the cumulative number of months the Company expects to collect from each policy submitted during the period. This metric is important because the vast majority of our revenues are recognized up front at the time the policy is sold. This portion of revenue represents the total amount of commissions we expect to collect over the life of each policy sold. Our expected duration units are an important indicator of our revenues. We have included expected duration units in this report because it is a key measure used by our management to understand and evaluate our core revenue performance and trends, to prepare our annual budget, and to develop short- and long-term operational plans. In particular, the inclusion of expected duration units can provide a useful measure for period-to-period comparisons of our business. Expected duration units has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
Submitted Applications. Our submitted applications are an important input of our expected revenues when included in context with the corresponding expected average duration of the submitted application. A member may be enrolled in more than one policy or discount benefit plan simultaneously. Submitted applications will differ from the amount of approved applications. We have included submitted applications in this report because in conjunction with expected duration units, it is a key measure used by our management to understand and evaluate our core revenue performance and trends, to prepare our annual budget and to develop short- and long-term operational plans. In particular, the inclusion of submitted applications can provide a useful measure for period-to-period comparisons of our business.
CLTV per approved application for Medicare is presented gross of customer care and enrollment expenses ("CC&E"). Including CC&E, Medicare CLTV per submitted application for the year ended December 31, 2019 was $996.
Medicare CC&E cost per approved application includes compensation and benefits costs for personnel engaged in assistance to applicants during the enrollment process divided by Medicare approved applications in each period. CC&E costs include amounts netted against revenue for certain Medicare BPO relationships.
Premium Equivalents. During the fourth quarter of 2019, we determined that Premium Equivalents was no longer a key business metric that we use to evaluate our business performance and facilitate long-term strategic planning. Accordingly, we no longer present Premium Equivalents as a key business metric in our Management's Discussion and Analysis of Financial Condition and Results of Operations.
Policies in Force. During the fourth quarter 2019, we determined that Policies in Force was no longer a key business metric that we use to evaluate our business performance and facilitate long-term strategic planning. Accordingly, we no longer present Policies in Force as a key business metric in our Management's Discussion and Analysis of Financial Condition and Results of Operations.
SG&A expense for the year ended December 31, 2019 was $88.4 million, an increase of $20.4 million, or 29.9%, compared to 2018.
The increase in SG&A expenses for the year ended December 31, 2019 compared to the same period 2018 was primarily attributable to increased spending to build out capacity for the open enrollment activity as well as the inclusion of TogetherHealth SG&A expense. This investment included staffing, training, and professional fees. The increase in SG&A for the year ended December 31, 2019 also included transaction costs relating to our investment in TogetherHealth and other acquisitions.
For the year ended December 31, 2019, there was $212,000 of income recorded under the Tax Receivable Agreement ("TRA") primarily due to a revised estimate of future payments. TRA income for the year ended December 31, 2018 was $1.5 million, primarily due to changes in the Tax Cuts and Jobs Act. See Note 13 for further information.
Our President and Chief Executive Officer is our named CODM. To determine the Company's reportable operating segments, we consider the nature of operating activities, economic characteristics, existence of separate senior management teams and the type of information used by the CODM to evaluate the results of operations. Subsidiaries with similar economic characteristics, products and services, customers, distribution methods and operational processes that operate in a similar regulatory environment are combined.
The accounting policies of the segments are the same as those described in Note 1 included within Part IV, Item 15, of this Annual Report. The Company evaluates the performance of its reportable segments based on segment sales and segment operating income. Operating income for each segment includes sales to third parties and related operating expenses directly attributable to the segment. SG&A expenses are included in the segment in which the expenditures are incurred. Operating income for each segment excludes certain expenses managed outside the reportable segments which include various expenses such as corporate expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other separately managed general and administrative costs. The Company does not include intercompany transfers between segments for management reporting purposes. Our CODM does not separately evaluate assets by segment, and therefore assets by segment are not presented.
In the opinion of management, the financial information reflects all adjustments, consisting only of normal recurring adjustments which we consider necessary for a fair presentation of this data. This information should be read in conjunction with the audited consolidated financial statements and related notes included in Part IV, Item 15, "Exhibits and Financial Statement Schedules" in this Annual Report on Form 10-K. The results of historical periods are not necessarily indicative of the results of operations for any future period (in thousands, except per share data):
As of December 31, 2019, we had $3.8 million of cash and cash equivalents, excluding restricted cash.
The following table represents future contractual obligation payments as of December 31, 2019:
We are involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. We review these provisions at least quarterly and adjust these provisions accordingly to reflect the impact of negotiations, settlements, rulings, updates from legal counsel, and other updated information.
Our annual tax rate is based on our income, statutory tax rates and various tax laws applicable to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. We review our tax positions quarterly and adjust the balances as new information becomes available.
Significant management judgment is required in developing our provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. We have considered projected future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for valuation allowances. If we determine that a valuation allowance is required, such adjustment to the deferred tax assets would increase our tax expense in the period in which such determination is made. Conversely, if we determine that a valuation allowance exceeds our requirement, such adjustment to the deferred tax assets would decrease tax expense in the period in which such determination is made.
In evaluating the exposure associated with various tax filing positions, we accrue an income tax liability when such positions do not meet the more-likely-than-not threshold for recognition. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. We recognize potential liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes, interest and penalties will be due. If our estimate of income tax liabilities proves to be less than the actual amount ultimately assessed, a further charge to tax expense would be required. If the payment of these amounts ultimately proves to be unnecessary, the reversal of the accrued liabilities would result in tax benefits being recognized in the period when we determine the liabilities no longer exist. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
On an annual basis and at interim periods when circumstances require as a result of a triggering event, we test the recoverability of our goodwill and indefinite-lived intangible assets by performing an impairment analysis. An impairment is deemed to exist if the carrying value of goodwill or indefinite-lived intangible assets exceed their fair value as determined using level 3 inputs under the GAAP fair value hierarchy. The reviews of fair value involve judgment and estimates, including projected revenues, volatility rates, and discount rates. We believe our valuation techniques and assumptions are reasonable for this purpose.
We include in our operating results the results of operations of acquired businesses prospectively from the acquisition date. We allocate the fair value of the purchase consideration of our acquired businesses to the tangible and intangible assets acquired
and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
The approach to valuing the initial contingent consideration associated with an acquisition uses unobservable factors such as Company specific volatility rates, and projected revenues and expenses over the term of the contingent earn-out period discounted for the period over which the contingent consideration is measured.
The Company is subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. The Company accrues losses associated with legal claims when such losses are probable and reasonably estimable. If the Company determines that a loss is probable and cannot estimate a specific amount for that loss, but can estimate a range of loss, the best estimate within the range is accrued. If no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. Estimates are adjusted as additional information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred. For detailed discussion surrounding legal and other contingencies, see Note 17 in the accompanying consolidated financial statements.