In accordance with ASU 2014-08, the Company has determined that the FGL Merger Agreement represented a strategic shift for the Company and, accordingly, has presented the results of operations for FGL as discontinued operations in the Condensed Consolidated Statements of Operations.
The following table summarizes the components of Net (loss) income from discontinued operations in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2015 and 2014:
|
| | | | | | | |
| Three months ended December 31, |
| 2015 | | 2014 |
Revenues: | | | |
Insurance premiums | $ | 15.4 |
| | $ | 11.6 |
|
Net investment income (a) | 222.2 |
| | 208.4 |
|
Net investment gains | 66.2 |
| | 58.5 |
|
Insurance and investment product fees and other | 28.8 |
| | 19.8 |
|
Total revenues | 332.6 |
| | 298.3 |
|
Operating costs and expenses: | | | |
Benefits and other changes in policy reserves | 180.9 |
| | 223.7 |
|
Selling, acquisition, operating and general expenses | 28.2 |
| | 29.2 |
|
Impairments and bad debt expense | — |
| | 0.5 |
|
Amortization of intangibles | 33.5 |
| | 11.3 |
|
Total operating costs and expenses | 242.6 |
| | 264.7 |
|
Operating income | 90.0 |
| | 33.6 |
|
Interest expense | 5.9 |
| | 5.9 |
|
Net income before income taxes | 84.1 |
| | 27.7 |
|
Income tax expense (b) | 119.7 |
| | 10.7 |
|
Net (loss) income | (35.6 | ) | | 17.0 |
|
Less: net (loss) income attributable to noncontrolling interest | 9.4 |
| | 3.3 |
|
Net (loss) income - attributable to controlling interest | $ | (45.0 | ) | | $ | 13.7 |
|
(a) Included in the net investment income attributable to FGL is interest income of $1.1 and $1.7 for the three months ended December 31, 2015 and 2014, respectively, on debt instruments issued by entities consolidated by HRG as they will continue to exist following the closing of the FGL Merger. The corresponding interest expense is recorded in continuing operations on the Condensed Consolidated Statements of Operations.
(b) Included in the income tax expense for the three months ended December 31, 2015 was a $90.9 net income tax expense related to the establishment of a deferred tax liability of $338.6 as a result of classifying our investment in FGL as held for sale, partially offset by a $247.7 reduction of valuation allowance on HRG’s net operating and capital loss carryforwards expected to offset the FGL taxable gain.
Compass Asset Sale
As discussed in Note 1, Description of Business, on December 1, 2015, Compass, completed the sale of its oil and gas interests located in the Holly, Waskom and Danville Fields in East Texas and North Louisiana. At closing, proceeds from the transaction, which were approximately $147.5, less estimated expenses of $1.9, were used primarily to reduce borrowings under Compass’ credit facility. Following the closing, pursuant to terms of the transaction agreement, Compass received an additional $4.2 in connection with resolving certain title and consent matters. The Company accounted for the sale in accordance with ASC Topic 932, Property, Plant and Equipment: Extractive Activities - Oil and Gas and recorded a gain on sale of oil and natural gas assets of $105.6. The Holly, Waskom and Danville Fields did not represent all or substantially all of Compass full-cost method assets and, as a result, the operations associated with these assets were presented as continuing operations in the Condensed Consolidated Statements of Operations.
(5) Investments
The Company’s consolidated investments are summarized as follows:
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2015 |
| Cost or Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | Carrying Value |
Asset-based loans | $ | 153.1 |
| | $ | — |
| | $ | — |
| | $ | 153.1 |
| | $ | 153.1 |
|
Other invested assets | 2.5 |
| | — |
| | — |
| | 2.5 |
| | 2.5 |
|
Total investments | $ | 155.6 |
| | $ | — |
| | $ | — |
| | $ | 155.6 |
| | $ | 155.6 |
|
