Harbinger Group Inc.
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SEC Filings

HRG GROUP, INC. filed this Form 8-K on 05/05/2017
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Certain Other Items:

Presentation of our Segments:
On August 23, 2016, HGI Energy Holdings, LLC (“HGI Energy”), a wholly-owned subsidiary of the Company, completed the sale of its equity interests in Compass Production Partners, LP and its subsidiaries (“Compass”) to a third party. Following the completion of the sale, the Company no longer owns, directly or indirectly, any oil and gas properties. Accordingly, the historical results of Compass are presented as discontinued operations, and the operations of HGI Energy are included in the Corporate and Other segment.
The operations of Salus, Energy & Infrastructure Capital, LLC (“EIC”) and CorAmerica Capital, LLC (“CorAmerica”), each an asset manager subsidiary of the Company, were historically presented in the Asset Management segment. During the fourth quarter of the fiscal year 2016, the Company sold all of its interest in CorAmerica to a third party. In addition, the Company has substantially completed the wind down of Salus' operations. Finally, during the Fiscal 2016 Quarter, the Company completed the wind down of EIC’s operations. As a result of the foregoing, the Company is presenting the results of Salus, EIC and CorAmerica within the Corporate and Other segment. All historical results have been restated to reflect this change.
Discontinued Operations:
Loss from discontinued operations, net of tax for the Fiscal 2017 Quarter was $54.4 million and was entirely attributable to FGL. Loss from discontinued operations, net of tax for the Fiscal 2016 Quarter was $47.6 million due to a $34.5 million loss related to Compass’ operations and a $13.1 million loss attributable to FGL. The increase in loss of $41.3 million attributable to FGL was driven by a $72.8 million write-down of the carrying value of the assets of business held for sale to fair value less cost to sell for the Fiscal 2017 Quarter compared to $23.5 million for the Fiscal 2016 Quarter; partially offset by an increase in net income attributable to FGL’s operations of $9.1 million.
The increase in net income attributable to FGL’s operations of $9.1 million was driven primarily by the change in the fixed indexed annuity present value of future credits and guarantee liability that increased $12.2 million during the Fiscal 2017 Quarter compared to a $77.2 million increase for the Fiscal 2016 Quarter. The change was a result of the greater decrease in longer duration risk free rates in the Fiscal 2016 Quarter compared to the Fiscal 2017 Quarter. Also contributing to the increase in net income attributable to FGL was higher net investment income driven by higher assets under management. These increases were partially offset by credit-related impairment losses of $20.0 million on available-for-sale debt securities; and higher amortization of intangibles and income tax expense.
Additional Information:
As previously disclosed, HRG has initiated a process to explore strategic alternatives with a view to maximizing shareholder value. Strategic alternatives may include, but are not limited to, a merger, sale or other business combination involving the Company and/or its assets.
As previously disclosed, on April 17, 2017, FGL terminated its Agreement and Plan of Merger (as amended, the “Merger Agreement” and the merger contemplated thereby, the “Merger”), by and among FGL, Anbang Insurance Group Co., Ltd. and its affiliates (collectively, “Anbang”). Prior to its termination, the Merger Agreement was amended on November 3, 2016 and on February 9, 2017, each time to extend the outside termination date. As part of the February 9, 2017 amendment, the Merger Agreement was also amended to permit FGL to explore and negotiate strategic alternatives with other parties, but not to enter into a definitive agreement with a third party while the Merger Agreement was in effect. As a result of the termination of the Merger Agreement, FGL has no remaining obligations under the Merger Agreement and may enter into an alternative transaction. In connection with the termination of the Merger Agreement, on April 17, 2017, the FGL Board of Directors announced that it was continuing to evaluate strategic alternatives to maximize shareholder value and had received interest from a number of parties.
Neither HRG nor FGL have set a definitive schedule to complete their respective review of strategic alternatives and neither company intends to provide any further updates until such time as it determines in its sole discretion or as required by law. There can be no assurance that any such process will result in a transaction, or if a transaction is undertaken, as to its terms or timing.


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