Harbinger Group Inc.
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SEC Filings

10-K
HRG GROUP, INC. filed this Form 10-K on 11/23/2016
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of the Company’s customer-related promotional arrangements and programs are tailored to each customer and are documented through written contracts, correspondence or other communications with the individual customers.
The Company also enters into various arrangements, primarily with retail customers, which require the Company to make upfront cash payments in order to secure the right to distribute through such customers. The Company capitalizes these payments provided the payments are supported by a time or volume based arrangement with the retailer, and amortizes the associated payment over the appropriate time or volume based term of the arrangement. Capitalized payments are treated as a reduction of “Net consumer and other product sales” in the accompanying Consolidated Statements of Operations and a corresponding asset is reported in “Other assets” in the accompanying Consolidated Balance Sheets.
Net Investment Income
Dividends and interest income of Front Street and Salus and on the Reinsurance Agreements with FGL recorded inNet investment income,” are recognized when earned, net of related expenses. Amortization of premiums and accretion of discounts on investments in fixed maturity securities related to the Reinsurance Agreements with FGL are reflected inNet investment incomeover the contractual terms of the investments in a manner that produces a constant effective yield.
For asset-backed securities included in the fixed maturity AFS securities portfolios, which are related to the Reinsurance Agreements with FGL, the Company recognizes income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from originally anticipated prepayments, the effective yield is recalculated prospectively to reflect actual payments to date plus anticipated future payments. Any adjustments resulting from changes in effective yield are reflected inNet investment income”.
Net investment (losses) gains
Net investment (losses) gains include realized losses and gains from the sale of investments, write-downs for OTTI of AFS investments related to the Reinsurance Agreements with FGL; dividends and interest income and changes in the fair value of Front Street’s funds withheld receivables with third parties; and gains and losses on derivative investments.
Insurance and investment product fees and other
Insurance premiums and product fees are reported in the accompanying Consolidated Statements of Operations within the caption “Insurance and investment product fees and other.” Insurance premiums for traditional life insurance products are recognized as revenue when due from the contractholder. Traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist primarily of term life insurance and certain annuities with life contingencies.
Premium collections for fixed indexed and fixed rate annuities and immediate annuities without life contingency are reported as deposit liabilities (i.e., contractholder funds) instead of as revenues. Similarly, cash payments to policyholders are reported as decreases in the liability for contractholder funds and not as expenses. Sources of revenues for products accounted for as deposit liabilities are net investment income, surrender and other charges deducted from contractholder funds, and net realized gains (losses) on investments.
Product fee revenue from deferred annuities is comprised of policy and contract fees charged for the cost of insurance policy administration and rider fees that are assessed on a monthly basis, and recognized as revenue when assessed and earned. Product fee revenue also includes surrender charges which are recognized and collected when the policy is surrendered.
Shipping and Handling Costs
Shipping and handling costs, which are included in “Selling, acquisition, operating and general expenses” in the accompanying Consolidated Statements of Operations, include costs incurred with third-party carriers to transport products to customers and salaries and overhead costs related to activities to prepare the Company’s products for shipment at the Company’s distribution facilities. The Company’s shipping and handling costs were $294.7, $272.9 and $260.3 during Fiscal 2016, 2015 and 2014, respectively.
Advertising Costs
Advertising costs, which are included in “Selling, acquisition, operating and general expenses” in the accompanying Consolidated Statements of Operations, include agency fees and other costs to create advertisements, as well as costs paid to third parties to print or broadcast the Company’s advertisements and are expensed as incurred. The Company incurred advertising costs of $39.8, $35.1 and $21.5 during Fiscal 2016, 2015 and 2014, respectively.
Research and Development Costs
Research and development costs are charged to “Selling, acquisition, operating and general expenses” in the period they are incurred. The Company incurred research and development costs of $58.7, $51.3 and $47.9 during Fiscal 2016, 2015 and 2014, respectively.

F-20

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