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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and subsidiary of HRG. Front Street Bermuda was formed in March 2010 to act as a long-term reinsurer. Front Street Cayman was formed in the Cayman Islands and on October 24, 2012, received from the Cayman Islands Monetary Authority a license to carry on business as an Unrestricted Class “B” Insurer that permits Front Street Cayman to conduct offshore direct and reinsurance business. Front Street Bermuda and Front Street Cayman are parties to reinsurance transactions. On December 31, 2012, following regulatory approval, Front Street Cayman entered into a coinsurance agreement (the “Cayman Reinsurance Agreement”) with FGL. Pursuant to the Cayman Reinsurance Agreement, Front Street Cayman reinsured a 10% quota share percentage of certain FGL annuity liabilities. Effective September 17, 2014, FGL entered into a second reinsurance treaty (the “MYGA Treaty”, and together with the Cayman Reinsurance Agreement, the “Reinsurance Agreements with FGL”) with Front Street Cayman whereby FGL ceded 30% of any new business of its multi-year guaranteed deferred annuity (“MYGA”) block of business on a funds withheld basis. This treaty was subsequently terminated as to new business effective April 30, 2015, but remains in effect for policies ceded to Front Street Cayman with an effective date between September 17, 2014 and April 30, 2015. At September 30, 2016 and 2015, Front Street had $978.8 million and $1,058.0 million, respectively, of funds withheld receivables and $1,119.5 million and $1,226.8 million, respectively, of insurance reserves related to the Reinsurance Agreements with FGL. On December 16, 2013, Front Street Cayman closed a reinsurance treaty with Bankers Life Insurance Company. Under the terms of the treaty, Bankers Life Insurance Company ceded annuity business to Front Street Cayman, on a funds withheld basis. At September 30, 2016 and 2015, Front Street had $125.8 million and $148.3 million, respectively, of funds withheld receivables and $119.0 million and $145.7 million, respectively, of insurance reserves related to this transaction. On October 31, 2014, Front Street Cayman purchased Ability Re from Ability Re Holdings. The Ability Re acquisition consisted of long-term care reinsurance business. The acquired reinsurance agreements complement Front Street Cayman’s existing in force long-duration insurance liabilities. At September 30, 2016 and 2015, Front Street had $295.6 million and $357.5 million, respectively, of funds withheld receivables and $271.5 million and $348.4 million, respectively, of insurance reserves related to this transaction. During Fiscal 2015, Front Street Cayman also closed three additional reinsurance transactions with unaffiliated parties. At September 30, 2016 and 2015, Front Street had $250.2 million and $146.3 million, respectively, of funds withheld receivables and $241.3 million and $135.1 million, respectively, of insurance reserves related to these transactions. Strategy Front Street was formed with the intention of building a flexible and diversified portfolio of life and annuity reinsurance treaties. Front Street may also conduct hedging and other investment activities. Front Street may, from time to time, selectively pursue other opportunities, including acquisition, and/or disposition opportunities. For Fiscal 2017, Front Street’s business strategy and activities may be impacted by the strategic review process underway at HRG. Competition The reinsurance industry is highly competitive. Front Street competes with major reinsurers, most of which are well established and have significant operating histories, strong financial strength ratings and long-standing client relationships. Front Street’s competitors include Athene Life Re Ltd., Global Atlantic Financial Group Limited, Guggenheim Life and Annuity Company, Reinsurance Group of America, Incorporated, Legal & General Reinsurance Company Ltd., and Resolution Life Holdings, Inc., as well as smaller companies and other niche reinsurers. See Part I, Item 1A. “Risk Factors-Risks Related to FGL’s and Front Street’s Businesses- FGL and Front Street operate in highly competitive industries, which could limit their abilities to gain or maintain their respective positions in the industries and could materially adversely affect their business, financial condition and results of operations.” Employees As of September 30, 2016, Front Street had four employees. As of September 30, 2016, none of Front Street’s employees were represented by labor unions or covered by collective bargaining agreements. Front Street believes that its overall relationship with its employees is good. Salus Salus, a Delaware limited liability company, was established to be a direct originator of secured asset-based loans to the middle market across a variety of industries. In Fiscal 2013 and February 2015, Salus completed a collateralized loan obligation (“CLO”) securitization. As of September 30, 2016, Salus and its co-lender Front Street had asset-based loans with a balance of $35.0 million, net of $11.0 million of allowance for credit losses, excluding the effect of loan participations by FGL. Strategy During Fiscal 2016, Salus determined to focus its efforts primarily on collecting on its existing loans and winding down its operations. For Fiscal 2017, Salus expects to continue to execute on its strategy of collecting on its existing loans and winding down its operations; however, it may also pursue other opportunities that it may consider strategically advantageous or 30 | |
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