Overland Park, Kansas 253,612 - 253,612 Corporate headquarters, marketing and advertising, technical development, general and administrative, operations for all segments
We generate commission revenue from selling policies in the senior health, life and auto and home markets on behalf of our insurance carrier partners, the majority of which compensate us through first year and renewal commissions. We use our proprietary technology and processes to generate and obtain consumer leads and allocate those leads to agents who are best suited for those consumers. As a result, one of the primary factors affecting our growth is our total number of agents, comprised of both existing core agents and the number of new flex agents that we hire and train to sell new policies. We view agents as a critical component of helping consumers through the purchasing process to enable them to identify the most appropriate coverage that suits their needs. Through our years of experience, we have expanded our recruiting efforts and enhanced our training programs, both of which have allowed us to expand our agent force. We have also developed proprietary technologies and processes that enable us to expand our lead acquisition efforts to keep pace with our expanding sales force and maintain agent productivity despite the significant growth in number of agents.
and permanent life insurance policies, while ancillary premiums are for other products. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Life segment.
2020 compared to 2019-Total core premiums were flat for the year ended June 30, 2020, compared to the year ended June 30, 2019. The number of policies sold declined 4%, however, this was offset by a 4% increase in the average premium per policy sold. Total ancillary premiums increased 161% for the year ended June 30, 2020, compared to the year ended June 30, 2019, due to a 103% increase in the number of policies sold as a result of more agents selling ancillary insurance products and a 29% increase in average premium per product.
expenses such as severance payments and transaction costs. Our chief executive officer, who is the chief operating decision maker (“CODM”) does not separately evaluate assets by segment; therefore, assets by segment are not presented.
(1) Operating expenses in the Corp & Elims division primarily include $12.7 million in salaries and benefits for certain general, administrative, and IT related departments and $4.2 million in professional services fees.
2020 compared to 2019-Revenue from our Senior segment was $361.7 million for the year ended June 30, 2020, a $169.4 million, or 88%, increase compared to revenue of $192.3 million for the year ended June 30, 2019. The increase was primarily due to a $147.4 million, or 106%, increase in MA commission revenue, a $9.2 million, or 37%, increase in MS commission revenue, and an $4.6 million increase in revenue from InsideResponse.
Revenue from our Life segment was $130.0 million for the year ended June 30, 2020, a $19.5 million, or 18%, increase compared to revenue of $110.5 million for the year ended June 30, 2019. The increase was primarily due to a $19.5 million, or 149%, increase in other commission revenue which was the result of our focus on selling more ancillary insurance products.
Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission statements from our insurance carrier partners. If we were to experience a delay in receiving a commission payment from an insurance carrier partner within a quarter, our operating cash flows for that quarter could be adversely impacted.
taxes as the Company defers revenue related to certain commissions receivable into following years until it is collected and $3.5 million of depreciation and amortization related to the additional fixed assets purchased for new office space to accommodate our growth in headcount. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $6.3 million and $46.4 million in accounts receivable and commissions receivable, respectively, partially offset by a $3.1 million decrease in accounts payable and accrued expenses, all driven by the increased marketing and personnel costs required to produce our increased revenue.
all outstanding shares of Series E preferred stock automatically converted into shares of common stock at a fixed discount. See Note 11 to the consolidated financial statements for further details.
The Company applies ASC 740, Income Taxes (“ASC 740”), in accounting for uncertainty in income taxes recognized in the Company’s consolidated financial statements. ASC 740 requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured pursuant to ASC 740 and the tax position taken or expected to be taken on the Company’s tax return. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.
Description of Business-SelectQuote, Inc. and its subsidiaries (the “Company” or “SelectQuote”) contract with numerous insurance carriers to sell senior health (“Senior”), life (“Life”), and auto and home insurance (“Auto & Home”) policies by telephone to individuals throughout the United States through the use of multi-channel marketing and advertising campaigns. Senior sells Medicare Advantage, Medicare Supplement, Medicare Part D, and other ancillary senior health insurance related policies. Life sells primarily term and permanent life insurance policies. Auto & Home primarily sells non-commercial auto & home property and casualty insurance policies. SelectQuote’s licensed insurance agents provide comparative rates from a variety of insurance carriers relying on our technology distribution channel with a combination of proprietary and commercially available software to perform its quote service and sell insurance policies on behalf of the insurance carriers. The Company earns revenue in the form of commission payments from the insurance carriers. Commission payments are received both when the initial policy is sold (“first year”) and also when the underlying policyholder renews their policy in subsequent years (“renewal”). Additionally, the Company receives revenue from production bonuses based on metrics for first year policies sold and marketing development funds from some carriers.
Contracts with Customers-The Company’s customers are the insurance carriers that it contracts with to sell insurance policies on their behalf. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. The Company earns commissions for first year and renewal policies from the insurance carriers, as presented in the consolidated statements of comprehensive income as commission revenue. Additionally, the Company earns production bonuses on first year policies from the insurance carriers based on attaining predetermined target sales levels or other agreed upon objectives and marketing development funds received from certain insurance carriers based on historical experience to drive incremental policy sales, as presented in the consolidated statements of comprehensive income as production bonus and other revenue. The contracts with the insurance carriers are non-exclusive and can typically be terminated unilaterally by either party. We review individual contracts to determine the Company’s legal and enforceable rights to renewal commissions upon contract termination when determining variable consideration. Additionally, the insurance carriers often have the ability to amend provisions in the contracts relating to the prospective commission rates paid to the Company for new policies sold. The Company’s contracts with customers contain a single performance obligation satisfied at a point in time to which it allocates the total transaction price.
The Company does not receive consideration prior to the satisfaction of its performance obligation, and as a result, does not have contract liabilities with its customers. Refer to Note 12 of the consolidated financial statements for further information.
On May 1, 2020, the Company acquired 100% of the outstanding membership units of InsideResponse LLC (“InsideResponse”) for an aggregate purchase price of up to $65.0 million (subject to customary adjustments), as set forth in the Merger Agreement. The purchase price is comprised of $32.7 million, which was paid in cash at the closing of the transaction, and an earnout of up to $32.3 million. InsideResponse is an online marketing consulting firm the Company purchases leads from (refer to Note 16 to the consolidated financial statements for related party information). The Company expensed $1.0 million of acquisition-related costs that were recorded to income from operations on the consolidated statement of comprehensive income.
Common Stock-As of June 30, 2020, the Company has reserved the following authorized, but unissued, shares of common stock:
million shares (the “Amendment”), and iii) submit the Amendment to the Company’s stockholders for approval. On February 28, 2020, the holders of more than 50% of the outstanding shares of voting stock of the Company approved the Amendment and the Amendment was filed with the Secretary of State of the State of Delaware. The par value of each share of the Company’s common stock was not adjusted in connection with the aforementioned Forward Stock Split. As per the series A-D preferred stock agreements, shares of preferred stock are precluded from a stock split and thus, the number of shares of preferred stock before and after the split did not change. However, the conversion ratio was split effected. Therefore, the conversion ratio of series A-D preferred stock converting into common stock went from 1:1 to 8:1.
As discussed in Note 1 to the consolidated financial statements, the Company adopted ASC 606 effective July 1, 2018. For tax purposes, pursuant to proposed Treasury Regulation §1.451-3(c)(6)(ii), the Company defers revenue relating to certain commissions receivables into following years until it is collected, which gives rise to a deferred tax liability. This deferred tax liability is a source of future taxable income that can be used to support the realizability of deferred tax assets. The Company continues to recognize all of its deferred tax assets as of June 30, 2020, as it believes it is more likely than not that the deferred tax assets will be fully realized.