Discontinued Operations

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

3. Discontinued Operations

The results of GMSL, ICS, Beyond6, and CIG and the related expenses directly attributable to the entities were reported as discontinued operations. Summarized operating results of the discontinued operations are as follows (in millions):


	Three Months Ended March 31,
	2021		2020
Revenue	$	1.7	$	214.1
Life, accident and health earned premiums, net	28.4		28.6
Net investment income	43.9		51.9
Realized/unrealized gains (losses) on investments	9.5		(19.0)
Total revenue	83.5		275.6
Cost of revenue	0.8		207.4
Policy benefits, changes in reserves, and commissions	56.1		72.4
Selling, general and administrative	12.4		27.3
Depreciation and amortization	(5.9)		—

Income (loss) from operations	20.1		(31.5)
Interest expense	(0.4)		(5.6)
Gain (loss) on sale and liquidation of subsidiaries	40.4		(39.3)
Income from equity investees	—		0.5
Other (loss) income	(3.1)		2.0
Pre-tax income (loss) from discontinued operations	57.0		(73.9)
Income tax (expense) benefit	(5.1)		2.8
Income (loss) from discontinued operations	$	51.9	$	(71.1)

Sale of CGI

On March 29, 2021, the Company announced the definitive agreement to sell its Insurance segment to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and a beneficial owner of approximately 6.6% of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020. The transaction value is approximately $90 million, inclusive of $65 million in cash plus certain assets at CGI. The sale is pending regulatory approval. As of the first quarter of 2021, the Insurance segment met the held-for-sale criteria under ASC 205-20 and has been presented in discontinued operations.

Sale of GMSL

The sale of GMSL closed on February 28, 2020. At the time of the sale, the Company recorded a $39.3 million loss on the sale, inclusive of recognizing a $31.3 million loss from the realization of AOCI. During the fourth quarter of 2020, the Company recognized a gain on sale of $2.4 million as a result of the cash collateralized bonding facility release. During the first quarter of 2021, the Company recognized a gain of $1.2 million as a result of indemnity release.

The net proceeds from the sale of GMSL were used to repay $15.0 million under the Revolving Credit Agreement and redeem $76.9 million aggregate principal amount of the Company's 11.5% senior secured notes due 2021 (the "2021 Senior Secured Notes"), plus accrued and unpaid interest since December 1, 2019 (the last regularly scheduled interest payment date).

As a result of the repayment of $15.0 million Revolving Credit Agreement, the Company allocated the following interest and the amortization of deferred financing costs for the three months ended March 31, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statement of Operations:


	Three Months Ended March 31,
	2021		2020
Interest expense	$	—	$	0.2
Amortization of deferred financing costs and original issuance discount	$	—	$	0.1

As a result of the mandatory redemption of $76.9 million of 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three months ended March 31, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:


	Three Months Ended March 31,
	2021		2020
Interest expense	$	—	$	2.2
Amortization of deferred financing costs and original issuance discount	$	—	$	0.2

Sale of ICS

The sale of ICS and its subsidiary, Go2 Tel, Inc., closed on October 31, 2020. The Company recorded a $0.9 million gain on the sale and recognized $8.2 million of accumulated other comprehensive loss related to the realization of foreign currency translation of PTGi International Carrier Services Ltd., which was essentially liquidated in conjunction with the sale. The proceeds were used for general corporate purposes.

Sale of Beyond6

On December 31, 2020, the Company announced a plan to sell Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Parent, and an affiliate of HC2 as the Stockholder Representative for the Beyond6 stockholders. The sale closed on January 15, 2021. The Company recognized a $39.2 million gain on the sale.

A portion of the proceeds from the sale of Beyond6 were used to repay $15.0 million under the Revolving Credit Agreement and repay $27.9 million of the Company's 2021 Senior Secured Notes.

As a result of the repayment of $15.0 million Revolving Credit Agreement, the Company allocated the following interest for the three months ended March 31, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:


	Three Months Ended March 31,
	2021		2020
Interest expense	$	0.1	$	—

As a result of the repayment of $27.9 million of the 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three months ended March 31, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:


	Three Months Ended March 31,
	2021		2020
Interest expense	$	0.3	$	0.8
Amortization of deferred financing costs and original issuance discount	$	—	$	0.1

Summarized assets and liabilities of the discontinued operations are as follows (in millions):


	March 31, 2021		December 31, 2020

Assets
Current assets
Cash and cash equivalents	$	213.7	$	195.2
Accounts receivable, net	—		13.6


Other current assets	8.1		8.7
Total current assets	221.8		217.5
Investments	4,361.3		4,610.2
Recoverable from reinsurers	953.4		957.5
Deferred tax asset	—		1.4
Property, plant and equipment, net	1.1		90.5
Goodwill	—		2.1
Intangibles, net	2.5		11.7
Other assets	48.2		51.2
Total assets held for sale	$	5,588.3	$	5,942.1

Liabilities
Current liabilities
Accounts payable	$	—	$	2.6
Accrued liabilities	15.4		35.8
Current portion of debt obligations	—		5.7


Other current liabilities	3.9		7.4
Total current liabilities	19.3		51.5
Life, accident and health reserves	4,632.2		4,627.5
Annuity reserves	227.2		228.8
Value of business acquired	193.6		199.8
Deferred tax liability	83.2		136.5
Debt obligations	—		50.6
Other liabilities	10.5		12.0
Total liabilities held for sale	$	5,166.0	$	5,306.7