SEC Filings
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| 10-K | |||||||||||||||||||||
| HRG GROUP, INC. filed this Form 10-K on 11/23/2016 | |||||||||||||||||||||
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of the investment portfolio in reaction to such change. Consequently, potential changes in value of financial instruments indicated by the simulations will likely be different from the actual changes experienced under given interest rate scenarios, and the differences may be material. Because Front Street actively manages its investments and liabilities, the net exposure to interest rates can vary over time. However, any such decreases in the fair value of fixed maturity securities (unless related to credit concerns of the issuer) would economically be realized only if Front Street was required to sell such securities at losses prior to their maturity to meet liquidity needs, which it manages using the surrender and withdrawal provisions of the annuity contracts and through other means. Equity Price Risk Front Street Assuming all other factors are constant, we estimate that a decline in equity market prices of 10% would cause the market value of Front Street’s equity investments included in the funds withheld portfolio to decline by approximately $0.8 million and its FIA embedded derivative liability to decrease by $1.1 million as of September 30, 2016. Foreign Exchange Risk Spectrum Brands As of September 30, 2016, the potential change in fair value of outstanding foreign exchange derivative instruments of Spectrum Brands, assuming a 10% unfavorable change in the underlying exchange rates, would be a loss of $35.7 million. The net impact on reported earnings, after also including the effect of the change in the underlying foreign currency-denominated exposures, would be a net gain of $19.3 million. Salus As of September 30, 2016, the potential change in fair value of outstanding foreign currency denominated asset-based loans, assuming a 10% unfavorable change in the underlying exchange rates, would be a loss of $0.2 million. Commodity Price Risk Spectrum Brands As of September 30, 2016, the potential change in fair value of outstanding commodity price derivative instruments of Spectrum Brands, assuming a 10% decline in the underlying commodity prices, would be a loss of $2.0 million. The net impact on reported earnings, after also including the reduction in cost of one year’s purchases of the related commodities due to the same change in commodity prices, would be a gain of $1.8 million. Risks Related to FGL (Business Held for Sale) For a discussion of the FGL Merger, see Part I, item 1A, Risk Factors - “The FGL Merger is subject to various closing conditions, including regulatory approvals, no assurance can be provided that such conditions will be satisfied and when, or if, the closing of the FGL Merger will occur.” Market Risk Factors FGL has significant holdings in financial instruments and are naturally exposed to a variety of market risks. FGL is primarily exposed to interest rate risk and equity price risk and has some exposure to credit risk and counterparty risk, which affect the fair value of financial instruments subject to market risk. Enterprise Risk Management FGL has established a dedicated risk management function with responsibility for the formulation of its risk appetite, strategies, policies and limits. FGL attempts to align its risk appetite with how its businesses are managed and how it anticipates future regulatory developments. FGL has implemented several limit structures to manage risk. Examples include, but are not limited to, the following:
FGL manages its risk appetite based on two key risk metrics:
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