Harbinger Group Inc. -SEC Filings

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SEC Filings

10-Q

HRG GROUP, INC. filed this Form 10-Q on 05/09/2016

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Financial Assets and Liabilities Not Measured at Fair Value

The carrying amount, estimated fair value and the level of the fair value hierarchy of the Company’s financial instrument assets and liabilities which are not measured at fair value in the accompanying Condensed Consolidated Balance Sheets are summarized as follows:



	March 31, 2016
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets (a)
Other invested assets	$	—	$	—	$	2.5	$	2.5	$	2.5
Asset-based loans	—		—		136.8		136.8		136.8
Total financial assets	$	—	$	—	$	139.3	$	139.3	$	139.3

Liabilities (a)
Investment contracts, included in contractholder funds and other insurance reserves	$	—	$	—	$	895.9	$	895.9	$	1,034.3
Total debt (b)	—		6,391.0		80.7		6,471.7		6,232.0
Total financial liabilities	$	—	$	6,391.0	$	976.6	$	7,367.6	$	7,266.3



	September 30, 2015
	(As Adjusted)
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets (a)
Other invested assets	$	—	$	—	$	2.5	$	2.5	$	2.5
Asset-based loans	—		—		226.7		226.7		226.7
Total financial assets	$	—	$	—	$	229.2	$	229.2	$	229.2

Liabilities (a)
Investment contracts, included in contractholder funds and other insurance reserves	$	—	$	—	$	960.3	$	960.3	$	1,084.5
Total debt (b)	—		6,398.0		99.1		6,497.1		6,310.5
Total financial liabilities	$	—	$	6,398.0	$	1,059.4	$	7,457.4	$	7,395.0

(a) The carrying amounts of cash and cash equivalents, trade receivables, accounts payable and accrued investment income approximate fair value due to their short duration and, accordingly, they are not presented in the tables above.

(b) The fair values of debt set forth above are generally based on quoted or observed market prices.

Valuation Methodology

Investment Contracts and Other Insurance Reserves

Investment contracts assumed from FGL by Front Street include deferred annuities, FIAs and immediate annuities. The fair value of deferred annuity and FIAs is based on their cash surrender value (which is the cost the Company would incur to extinguish the liability) as these contracts are generally issued without an annuitization date. See “Funds Withheld Receivables and Future Policyholder Benefits Liability” section above for discussion of the calculation of the fair value of the insurance reserves.

Asset-based loans

The fair value of the asset-based loans originated by Salus approximate their net carrying value. Such loans carry a variable rate that are typically revolving in nature and can be settled at the demand of either party. Nonaccrual loans are considered impaired for reporting purposes and are measured and recorded at fair value on a non-recurring basis. As the loans are collateral dependent, Salus measures such impairment based on the estimated fair value of eligible proceeds. This is generally based on estimated market prices from an independently prepared appraisal. The impaired loan balance represents those nonaccrual loans for which impairment was recognized during the quarter.

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