SEC Filings
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| 10-K | ||||||||||||||||||||||||||||||||||||||||||||||
| HRG GROUP, INC. filed this Form 10-K on 11/23/2016 | ||||||||||||||||||||||||||||||||||||||||||||||
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margin and a factor to reflect own credit risk. The change in discount rate methodology reduced the fair value of the Front Street future policyholder benefit liability by $7.0 at December 31, 2015. The Insurance segment’s aggregate reserves for contractholder funds, future policy benefits and product guarantees as of September 30, 2016 are summarized as follows (in millions):
See Note 2, Significant Accounting Policies and Practices and Recent Accounting Pronouncements to our Consolidated Financial Statements for a more complete discussion. Corporate and Other Segment Allowance for Credit Losses on Asset Based Loans Salus monitors credit quality as indicated by various factors and utilizes such information in its evaluation of the adequacy of the allowance for credit losses. As of September 30, 2016 and 2015,loans with a net carrying value of $30.1 million and $79.8 million, respectively, were considered delinquent by Salus and placed on non-accrual status. It is Salus’ policy to discontinue accruing interest on its loans when there is a reasonable doubt as to collectability in the normal course of business. Nonaccrual loans are considered impaired for reporting purposes and are individually evaluated for impairment. Salus has assessed the adequacy of its allowance for credit losses and believes the level of allowance for credit losses to be adequate to mitigate inherent losses in the portfolio. During Fiscal 2014, there were no outstanding loans that had been individually considered impaired. During Fiscal 2015, the bankruptcy court overseeing the Chapter 11 proceedings of RadioShack approved the sale of 1,743 of the company’s stores to General Wireless Inc., an affiliate of Standard General LP. Salus was the lender under RadioShack’s $250.0 million term loan placed in December 2013 with a net exposure to Salus and Front Street of $93.0 million and $7.0 million, respectively, after giving effect to a $50.0 million participation by FGL and a non-qualifying participation of $100.0 million held by a third party. During Fiscal 2015, the $100.0 million held by a third party was repaid in full because this third party had the right of first payment in the case of a bankruptcy under an intercreditor agreement with Salus. During Fiscal 2015, the Company recognized charge-offs of $51.1 million, excluding any charge-offs related to FGL’s participations which are included in “(Loss) income from discontinued operations, net of tax” in the accompanying Consolidated Statements of Operations; and an additional net increase in the provision of credit losses of $19.2 million related to the loan with RadioShack. During Fiscal 2016, Salus and Front Street received a partial repayment on the loan to RadioShack of $45.4 million, excluding $22.7 million repayment on FGL’s participation on the loan. At September 30, 2016, the Company expects an additional $3.0 million of future recoveries of the loan to RadioShack, excluding $1.5 million related to FGL’s participation on the loan that is included in “Assets of business held for sale” in the accompanying Consolidated Balance Sheets. As a result of the higher than expected recovery rates during Fiscal 2016, the Company reversed $18.0 million of previously recorded allowance for credit losses, excluding $9.0 million of realized gains by FGL recorded in “(Loss) income from discontinued operations, net of tax” in the accompanying Consolidated Statements of Operations. During Fiscal 2016, Salus recorded provision of credit losses of $30.8 related to delinquent loans unrelated to RadioShack where the underlying collateral was underperforming. Goodwill, Intangible Assets During the third quarter of Fiscal 2016, the Company determined that sufficient indicators of potential impairment existed to require an interim goodwill impairment analysis for the CorAmerica reporting unit. The Company estimated the fair value of the CorAmerica reporting unit using the income approach. Under the income approach, the Company calculated the fair value of the CorAmerica reporting unit based on the present value of estimated future cash flows. The Company’s estimate of discounted cash flows for each reporting unit required significant judgment. Cash flow projections were based on management’s estimates of revenue and operating margins, taking into consideration existing agreements, industry and market conditions. The discount rate used was based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to CorAmerica’s ability to execute on the projected cash flows. The evaluation was management’s best estimate of projected fair values. Management’s estimate of implied fair value of goodwill was zero and, consequently, resulted in a goodwill impairment charge of $10.7 million. The goodwill impairment charge was reflected in “Impairments and bad debt expense” on the accompanying Consolidated Statements of Operations. 109 | ||||||||||||||||||||||||||||||||||||||||||||||
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