Harbinger Group Inc. -SEC Filings

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SEC Filings

10-K

HRG GROUP, INC. filed this Form 10-K on 11/23/2016

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interests in accrued interest and fees on the securitized receivables, and cash reserve accounts. Salus continues to consolidate the loans transferred into the trust as it has determined that it is the primary beneficiary of the variable-interest entity represented by the trust, as result of it holding subordinate interest and servicing the receivables. Neither the Company nor Salus provided guarantees or recourse to the securitization trust other than standard representations and warranties.

Included within “Other assets” in the accompanying Consolidated Balance Sheets as of September 30, 2016 and 2015 were asset-based loans of $29.3 and $197.8, respectively, that serve as collateral to the obligations of the CLO. Such obligations include obligations to non-affiliates of $38.9, net of discount of $0.8 and $39.5, net of discount of $0.9, respectively. The unaffiliated obligations of the CLO are included within “Debt” in the accompanying Consolidated Balance Sheets as of September 30, 2016 and 2015, respectively. At September 30, 2016 and 2015, the total liabilities of the consolidated VIE included $96.3 and $317.3, respectively, of seller’s interest.

For additional information related to the increases in the provision for credit losses on the asset-based loan portfolio, see Note 13, Other Assets.

For additional information related to the reduction in senior secured and subordinated CLO debt, see Note 15, Debt.

The table below summarizes select information related to the CLO vehicle in which Salus held a variable interest at September 30, 2016 and 2015:



	September 30,
	2016		2015
Maximum loss exposure	$	29.3	$	197.8

Asset-based loans receivable	$	29.3	$	197.8
Cash and other assets	13.7		85.8
Total assets of consolidated VIE	$	43.0	$	283.6

Senior, Secured	$	—	$	219.2
Subordinated	135.2		137.6
Long-term debt	135.2		356.8
Other liabilities	—		0.7
Total liabilities of consolidated VIE	$	135.2	$	357.5

(7) Fair Value of Financial Instruments

The Company’s consolidated assets and liabilities measured at fair value are summarized according to the hierarchy previously described as follows:



	September 30, 2016								September 30, 2015
Assets	Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
Fixed maturity and equity securities included in funds withheld receivables	$	69.9	$	1,387.1	$	78.1	$	1,535.1	$	8.4	$	1,555.0	$	74.7	$	1,638.1
Derivatives:
Call option receivable from FGL included in funds withheld receivables	—		11.3		—		11.3		—		5.4		—		5.4
Call options	—		5.9		—		5.9		—		1.0		—		1.0
Foreign exchange contracts	—		5.8		—		5.8		—		6.0		—		6.0
Commodity contracts	—		2.9		—		2.9		—		—		—		—
Corporate fixed maturity securities AFS	—		—		—		—		—		—		14.1		14.1
Equity securities - trading	—		—		—		—		32.8		—		—		32.8
Other invested assets	—		—		—		—		—		—		2.8		2.8
Total financial assets	$	69.9	$	1,413.0	$	78.1	$	1,561.0	$	41.2	$	1,567.4	$	91.6	$	1,700.2
Liabilities
Front Street future policyholder benefit liability	$	—	$	—	$	631.8	$	631.8	$	—	$	—	$	629.2	$	629.2
Derivatives:
Embedded derivatives in Front Street's assumed FIA business	—		—		131.2		131.2		—		—		142.3		142.3
Commodity contracts	—		0.1		—		0.1		—		5.6		—		5.6
Interest rate contracts	—		1.1		—		1.1		—		2.6		—		2.6
Foreign exchange contracts	—		2.0		—		2.0		—		12.6		—		12.6
Total financial liabilities	$	—	$	3.2	$	763.0	$	766.2	$	—	$	20.8	$	771.5	$	792.3

F-40

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