Harbinger Group Inc. -SEC Filings

Print Page | Close Window

SEC Filings

10-Q

HRG GROUP, INC. filed this Form 10-Q on 05/05/2017

Entire Document

<< Previous Page | Next Page >>

Table of Contents

derivatives in Front Street’s assumed FIA business are market value of options, interest swap rates, mortality multiplier, surrender rates, and non-performance spread. The mortality multiplier at March 31, 2017 and September 30, 2016 was applied to the Annuity 2000 mortality tables. Significant increases or decreases in the market value of an option in isolation would result in a higher or lower, respectively, fair value measurement. Significant increases or decreases in interest swap rates, mortality multiplier, surrender rates, or non-performance spread in isolation would result in a lower or higher, respectively, fair value measurement. Generally, a change in any one unobservable input would not result in a change in any other unobservable input.

Spectrum Brands’ derivative assets and liabilities are valued on a recurring basis using internal models, which are based on market observable inputs including interest rate curves and both forward and spot prices for currencies and commodities, which are generally based on quoted or observed market prices and classified as Level 2. The fair value of certain derivatives is estimated using pricing models based on contracts with similar terms and risks. Modeling techniques assume market correlation and volatility, such as using prices of one delivery point to calculate the price of the contract’s different delivery point. The nominal value of interest rate transactions is discounted using applicable forward interest rate curves. In addition, by applying a credit reserve which is calculated based on credit default swaps or published default probabilities for the actual and potential asset value, the fair value of Spectrum Brands’ derivative assets reflects the risk that the counterparties to these contracts may default on the obligations. Likewise, by assessing the requirements of a reserve for non-performance which is calculated based on the probability of default by Spectrum Brands, it adjusts its derivative liabilities to reflect the price at which a potential market participant would be willing to assume Spectrum Brands’ liabilities.

The Company has not changed its valuation techniques in measuring the fair value of any derivative assets and liabilities during the quarter.

Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of March 31, 2017 and September 30, 2016 were as follows:



	Fair Value at						Range (Weighted average)
Assets	March 31, 2017		September 30, 2016		Valuation Technique	Unobservable Input(s)	March 31, 2017	September 30, 2016
Funds withheld receivables:
Fixed maturity securities	$	33.6	$	35.2	Matrix pricing	Quoted prices	100% - 117% (106%)	98% - 122% (109%)
Fixed maturity securities	5.1		5.4		Loan Recovery Value	Recovery rate	56% - 100% (81%)	56% - 100% (82%)
Fixed maturity securities	10.0		35.7		Broker-quoted	Offered quotes	99% - 105% (100%)	97% - 100% (100%)
Loan participations	0.4		1.8		Loan Recovery Value	Recovery rate	56%	52% - 100% (71%)
Total	$	49.1	$	78.1
Liabilities
Front Street future policyholder benefit liability	$	661.2	$	631.8	Discounted cash flow	Non-performance risk spread	0.35%	0.32%
						Risk margin to reflect uncertainty	0.50%	0.50%
Embedded derivatives in Front Street's assumed FIA business	121.0		131.2		Discounted cash flow	Market value of option	0% - 24% (3%)	0% - 27% (2%)
						SWAP rates (discount rates)	2.0%	1.0%
						Mortality multiplier	80%	80%
						Surrender rates	0.50% - 75% (13%)	0.50% - 75% (10%)
						Non-performance risk spread	0.25%	0.25%
Total	$	782.2	$	763.0

<< Previous Page | Next Page >>