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• | the impact on FGL’s and Front Street’s business of natural and of man-made catastrophes, pandemics, computer viruses, network security breaches, and malicious and terrorist acts; |
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• | FGL’s and Front Street’s ability to compete in a highly competitive industry; |
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• | FGL’s and Front Street’s ability to maintain competitive policy expense costs; |
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• | adverse consequences if the independent contractor status of FGL’s independent insurance marketing organizations (“IMOs”) is successfully challenged; |
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• | FGL’s ability to attract and retain national marketing organizations and independent agents; |
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• | the potential adverse tax consequences to FGL if FGL generates passive income in excess of operating expenses; |
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• | the significant operating and financial restrictions contained in FGL’s debt agreements, which may prevent FGL from capitalizing on business opportunities; |
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• | the impact on FGL and Front Street of non-performance of loans originated by Salus; and |
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• | the ability to maintain or obtain approval of the Iowa Insurance Division (“IID”) and other regulatory authorities as required for FGL’s operations and those of its insurance subsidiaries. |
Salus
Salus’ actual results or other outcomes may differ materially from those expressed or implied by the forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:
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• | Salus’ ability to recover amounts that are contractually owed to it and its ability to adequately address the various risks it faces in executing its business strategy; |
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• | Salus’ ability to orderly and efficiently wind-down its business and to address the variety of risks associated with such a process, including litigation risk, regulatory compliance and retention of employees, management, agents and advisors required for such wind-down; and |
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• | Salus’ ability to address a variety of other risks associated with its business, including the risk of fraud or theft, operational errors and systems malfunctions. |
Item 1. Business
OVERVIEW
HRG
Overview
We are a holding company that conducts its operations through its operating subsidiaries. As of September 30, 2016, our principal operating subsidiaries include the following: (i) Spectrum Brands, our subsidiary that provides global branded consumer products; (ii) FGL, our subsidiary that provides life insurance and annuity products; and (iii) Front Street, our subsidiary engaged in the business of providing long-term reinsurance, including reinsurance to the specialty insurance sector of fixed, deferred and payout annuities.
We were incorporated in Delaware in 1954 under the name Zapata Corporation and reincorporated in Nevada in April 1999 under the same name. On December 23, 2009, we reincorporated in Delaware under the name Harbinger Group Inc. Effective March 9, 2015, we changed our name from Harbinger Group Inc. to HRG Group, Inc. Our Common Stock trades on the New York Stock Exchange (“NYSE”) under the symbol “HRG.” Our principal executive offices are located at 450 Park Avenue, 29th Floor, New York, New York 10022.
We currently operate our business in two reporting segments: Consumer Products and Insurance. For the results of operations by segment and other segment data, see Part IV, Item 15. “Note 25, Segment and Geographic Data” to HRG’s Consolidated Financial Statements included elsewhere in this report.
For detailed information about revenues, operating income and total assets of HRG and its operating subsidiaries, see the financial statements beginning on page F-1 and S-1, respectively, of this report.
Strategy
During Fiscal 2016, we took certain actions to streamline our business and simplify our holding company structure. For instance, we sold our interest in Compass Production Partners (“Compass”), our former subsidiary that was engaged in the business of owning and operating oil and natural gas assets, and commenced the wind-down of Salus, our subsidiary that was engaged in the financing and asset management business. We also sold our interest in CorAmerica Capital, LLC (“CorAmerica”), our former subsidiary engaged in the business of asset management, and wound-down Energy & Infrastructure Capital LLC, our former subsidiary engaged in the business of asset management. In addition, FGL, our insurance subsidiary, entered into the FGL Merger Agreement pursuant to which at the effective time of the FGL Merger, the issued and outstanding shares of FGL common stock
