As of September 30, 2012, FGL’s continued profitability since its acquisition has resulted in FGL management changing its view with respect to its judgment regarding the realization of certain deferred tax assets in future years. As a result of the change in judgment, FGL recorded a $198 million tax benefit due to a net release of its valuation allowance for Fiscal 2012, of which $186 million was in the fourth quarter.
Adjusted operating income was $62 million (pre-tax) for Fiscal 2012. Adjusted operating income is a non-U.S. GAAP insurance industry measure that eliminates the impact of realized investment gains (losses), the effect of interest rate changes on the FIA embedded derivative liability, and the effects of acquisition-related reinsurance transactions – see “Non-U.S. GAAP Measures” and Table 4 for a reconciliation of adjusted operating income to the Insurance segment’s operating income.
As of September, 30, 2012, the HGI’s Insurance segment had a net U.S. GAAP book value of $1.2 billion (including AOCI of $434 million), almost double the book value of $667 million at the end of Fiscal 2011. As of September 30, 2012, the Insurance segment’s available for sale investment portfolio had net unrealized gains on a U.S. GAAP basis of $1.1 billion compared to net unrealized gains of $1.2 billion on a statutory basis. FGL's investment portfolio continues to be conservatively positioned, as it holds cash in excess of $1.0 billion, has shortened portfolio duration, and remains well matched against its liability profile.
Recent Business Highlights:
Following the end of Fiscal 2012, HGI made two significant announcements:
On November 5, 2012, HGI announced a joint venture with EXCO Resources, Inc. (“EXCO”; NYSE: XCO) to create a private oil and gas limited partnership (the “Partnership”) that will purchase and operate EXCO’s producing U.S. conventional oil and gas assets for a total consideration of $725 million. The transaction further diversifies HGI by establishing a new Energy operating business to complement its Consumer Products and Insurance and Financial Services businesses. Following the closing of the transaction, which is expected to occur in early calendar-year 2013, HGI expects dividends from all subsidiaries to exceed $100 million annually and to surpass HGI's existing interest and dividend payments. The full press release announcing the transaction can be found at the Investor Relations section of HGI’s website at
On October 9, 2012, HGI’s Spectrum Brands operating subsidiary announced that it had signed a definitive agreement to acquire the Hardware & Home Improvement Group (“HHI”) of Stanley Black & Decker, Inc. (NYSE: SWK) for $1.4 billion in cash. The transaction will add a leading maker of residential locksets, residential builders' hardware and faucets with #1 positions in key North American markets and a portfolio of renowned brands to Spectrum Brands. It is expected that the transaction will increase Spectrum Brands’ top-line growth and margins and be significantly and immediately accretive to Spectrum Brands’ earnings per share, EBITDA and free cash flow. The transaction, which includes certain assets of Tong Lung Metal Industry Co. Ltd. (“Tong Lung”), a Taiwanese manufacturer of residential and commercial locksets, is expected to close in two stages: The financing and the acquisition of HHI are expected to close during Spectrum Brands’ first quarter of fiscal 2013 ending December 31, 2012. The acquisition of the Tong Lung assets is expected to occur during Spectrum Brands’ second quarter of fiscal 2013. Additional detail on the transaction can be found on Spectrum Brands’ website:
Fourth Quarter 2012 Highlights:
About Harbinger Group Inc.
- Total revenues for the fourth quarter of Fiscal 2012 were $1.2 billion, compared to $889 million in the same period last year, an increase of 35%.
- Net income attributable to common and participating preferred stockholders increased to $159 million, or $0.79 per common share attributable to controlling interest, compared to a net loss of $107 million, or ($0.77) per common share attributable to controlling interest, in the same quarter Fiscal 2011.
- Consumer Products segment recorded record net sales of $833 million in the fourth quarter of Fiscal 2012, compared to $827 million last year.
- Consumer Products segment operating income more than doubled to $68 million versus $33 million in the prior year driven primarily by the non-recurrence of asset impairment charges. Adjusted EBITDA increased 11% versus the prior year on higher sales, synergy benefits and cost reduction initiatives.
- Insurance segment reported operating income of $72 million for the fourth quarter of Fiscal 2012, compared to an operating loss of $68 million in the same period of Fiscal 2011. Adjusted operating income was $19 million (pre-tax) for the fourth quarter of Fiscal 2012, compared to $20 million for the same period last year. The $1 million decrease is primarily due to holding a higher level of excess cash in 2012.
- Insurance FIA product sales grew 55% from the fourth quarter of Fiscal 2011 to $260 million on market share gains by Prosperity Elite SM indexed annuities.
Harbinger Group Inc. ("HGI"; NYSE: HRG) is a diversified holding company. HGI’s principal operations are conducted through subsidiaries that offer life insurance and annuity products, and branded consumer products such as batteries, personal care products, small household appliances, pet supplies, and home and garden pest control products. HGI is principally focused on acquiring controlling and other equity stakes in businesses across a diversified range of industries and growing its existing businesses. In addition to HGI’s intention to acquire controlling equity interests, HGI may also from time to time make investments in debt instruments and acquire minority equity interests in companies. Harbinger Group Inc. is headquartered in New York and traded on the New York Stock Exchange under the symbol HRG. For more information on HGI, visit:
About Spectrum Brands Holdings, Inc.
On January 7, 2011, HGI completed the first step of its business strategy with the acquisition of Spectrum Brands Holdings, Inc. (NYSE: SPB). Spectrum Brands continues as a stand-alone company with its common stock traded on the New York Stock Exchange. Spectrum Brands, a member of the Russell 2000 Index, is a global and diversified consumer products company and a leading supplier of batteries, shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn & garden and home pest control products, personal insect repellents and portable lighting. Helping to meet the needs of consumers worldwide, Spectrum Brands offers a broad portfolio of market-leading, well-known and widely trusted brands including Rayovac®, Varta®, Remington®, George Foreman®, Black & Decker®, Russell Hobbs®, Toastmaster®, Farberware®, Tetra®, Marineland®, Nature’s Miracle®, Dingo®, 8-in-1®, FURminator®, Littermaid®, Spectracide®, Cutter®, Repel®, Hot Shot® and Black Flag®. Spectrum Brands' products are sold by the world's top 25 retailers and are available in more than one million stores in approximately 140 countries. With nearly 6,000 employees in 43 countries, Spectrum Brands generated net sales of approximately $3.3 billion in Fiscal 2012. For more information, visit:
About Fidelity & Guaranty Life
On April 6, 2011, HGI completed the acquisition of the U.S. annuity and life insurance business of Old Mutual. Under new ownership, the companies have adopted a new corporate identity, Fidelity & Guaranty Life, as well as new insurance company names: Fidelity & Guaranty Life Insurance Company and Fidelity & Guaranty Life Insurance Company of New York. Headquartered in Baltimore, MD, the company focuses its efforts on serving middle market consumers seeking the safety, protection and income features of secure life insurance and annuity products. Products are distributed through Fidelity & Guaranty Life’s established, independent network of master general agents. Fidelity & Guaranty Life has approximately $17.8 billion of cash and investment assets under management as of September 30, 2012. For more information on Fidelity & Guaranty Life, visit:
Forward Looking Statements
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: This document contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements, including those statements related to the transactions with regards to the Partnership and HHI. Such statements are subject to risks and uncertainties that could cause actual results, events and developments to differ materially from those set forth in or implied by such statements. These statements are based on the beliefs and assumptions of HGI’s management and the management of HGI’s subsidiaries (including target businesses). Generally, forward-looking statements include information concerning possible or assumed future actions, events, results, strategies and expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will” “could,” “might,” or “continues” or similar expressions. Factors that could cause actual results, events and developments to differ include, without limitation: the risk that closing of the transactions with regards to the Partnership and HHI will not occur, will be delayed or will close on terms materially different than expected, including, in the case of the Partnership transaction, as a result of title and environmental diligence of properties to be acquired, commodity price risks, drilling and production risks, related financing plans, reserve estimates and values, statements about the Partnership’s properties and potential reserves and production levels. Other factors could cause actual results, events and developments to differ include, without limitation: the ability of HGI’s subsidiaries (including, target businesses following their acquisition) to generate sufficient net income and cash flows to make upstream cash distributions, capital market conditions, HGI and its subsidiaries ability to identifying any suitable future acquisition opportunities, efficiencies/cost avoidance, cost savings, income and margins, growth, economies of scale, combined operations, future economic performance, conditions to, and the timetable for, completing the integration of financial reporting of acquired or target businesses with HGI or HGI subsidiaries, completing future acquisitions and dispositions, litigation, potential and contingent liabilities, management’s plans, changes in regulations, taxes and the those forward looking statements included under the caption “Risk Factors” in HGI’s Annual Report on Form 10-K for fiscal year ended September 30, 2012. All forward-looking statements described herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. HGI does not undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operation results.
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