SEC Filings
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| 10-K | |
| HRG GROUP, INC. filed this Form 10-K on 11/23/2016 | |
| Entire Document | |
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Certain prior year amounts have been reclassified or combined to conform to the current year presentation. These reclassifications and combinations had no effect on previously reported results of operations or accumulated deficit. Revenue Recognition Net Investment Income Dividends and interest income of Front Street and Salus and on the Reinsurance Agreements with FGL recorded in “Net 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 in “Net investment income” over 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 in “Net investment income”. Net investment gains (losses) Net investment gains (losses) 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. Legal Matters and Contingencies The Company records legal fees and accruals in accordance with ASC Topic 450, “Contingencies”. Contingencies arising from environmental remediation costs, regulatory judgments, claims, assessments, guarantees, litigation, recourse reserves, fines, penalties and other sources are recorded when deemed probable and reasonably estimable. Benefits and Other Changes in Policy Reserves Benefit expenses for deferred annuity and FIA policies related to the Reinsurance Agreements with FGL include index credits and interest credited to contractholder account balances and benefit claims incurred during the period in excess of contract account balances. For the periods from Fiscal 2014 through Fiscal 2016, the interest crediting rates associated with funds invested ranged from 0.0% to 6.0% for deferred annuities and FIAs, combined. Other changes in policy reserves include the change in the fair value of the FIA embedded derivative and the change in the reserve for secondary guarantee benefit payments. For immediate annuities, policy benefit claims are charged to expense in the period that the claims are incurred. Benefits and other changes in policy reserves also include changes in the fair value of the insurance liabilities with third parties. Interest Expense Interest expense on the Company’s short-term and long-term debt is recognized as due and any associated premiums, discounts, and costs are amortized (accreted) over the term of the related borrowing utilizing the effective interest method. Interest expense also includes fees on the Company’s credit facilities. Comprehensive Income (Loss) Comprehensive income (loss) includes unrealized gains (losses) and non-credit related OTTI on investment securities classified as AFS of business held for sale. Net unrealized gains and losses on investment securities classified as AFS by the business held for sale are reduced by deferred income taxes and adjustments to intangible assets that would have resulted had such gains and losses been realized. Refer to Note 11, Shareholder’s Equity, for further detail. S-70 | |
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