Investments

The Company’s consolidated investments are summarized as follows:



	March 31, 2016
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Carrying Value
Asset-based loans	$	136.8	$	—	$	—	$	136.8	$	136.8
Other invested assets	2.5		—		—		2.5		2.5
Total Investments	$	139.3	$	—	$	—	$	139.3	$	139.3



	September 30, 2015
	(As Adjusted)
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Carrying Value
Corporate fixed-maturity securities, available-for-sale	$	14.1	$	—	$	—	$	14.1	$	14.1
Equity securities - held for trading	18.7		14.1		—		32.8		32.8
Asset-based loans	226.7		—		—		226.7		226.7
Other invested assets	5.3		—		—		5.3		5.3
Total Investments	$	264.8	$	14.1	$	—	$	278.9	$	278.9

Asset-based Loans

As of March 31, 2016 and September 30, 2015, the Company’s portfolio of asset-based loans receivable originated by Salus and its co-lender Front Street consisted of the following:



	March 31, 2016		September 30, 2015
			(As Adjusted)
Asset-based loans, net of deferred fees, by major industry:
Apparel	$	50.3	$	66.0
Electronics	45.4		45.9
Jewelry	35.6		36.9
Manufacturing	29.9		32.7
Other	23.4		93.1
Total asset-based loans	184.6		274.6
Less: Allowance for credit losses	47.8		47.9
Total asset-based loans, net	$	136.8	$	226.7

The Company establishes its allowance for credit losses through a provision for credit losses based on Salus’ evaluation of the credit quality of its loan portfolio. The following table presents the activity in its allowance for credit losses for the three and six months ended March 31, 2016 and 2015:



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
Allowance for credit losses:
Balance at beginning of period	$	43.7		$	5.3		$	47.9		$	5.5
Provision for credit losses	6.7			68.5			15.1			68.3
Charge-offs	(2.6		)	(51.1		)	(15.2		)	(51.1		)
Balance at end of period	$	47.8		$	22.7		$	47.8		$	22.7

Credit Quality Indicators

Salus monitors credit quality as indicated by various factors and utilizes such information in its evaluation of the adequacy of the allowance for credit losses. As of March 31, 2016 and September 30, 2015, there were ten and nine loans with a net carrying value of $104.0 and $79.8, respectively, considered delinquent by Salus and placed on non-accrual status. It is Salus’ policy to discontinue accruing interest when there is a reasonable doubt as to collectability in the normal course of business. Nonaccrual loans are considered impaired for reporting purposes and are individually evaluated for impairment.

During the three and six months ended March 31, 2016, the Company recognized charge-offs of $2.6 and $15.2, respectively. For the three and six months ended March 31, 2016, the Company recorded net increases (decreases) in the allowance for credit losses of $4.1 and $(0.1), respectively, for a total provision for credit losses of $6.7 and $15.1, respectively. The internal risk rating of two and four delinquent loans was categorized as doubtful during the three and six months ended March 31, 2016, respectively. Salus has assessed the adequacy of its allowance for credit losses and believes the level of allowance for credit losses to be adequate to mitigate inherent losses in the portfolio.

During the three and six months ended March 31, 2015, the Company recognized charge-offs of $51.1. For the three and six months ended March 31, 2015, the Company also recorded net decreases in the allowance for credit losses of $17.4 and $17.2, respectively, for a total provision for credit losses of $68.5 and $68.3, respectively. The internal risk rating of one delinquent loan was categorized as doubtful during the three and six months ended March 31, 2015.

During the fiscal year ended September 30, 2015, the bankruptcy court overseeing the Chapter 11 proceedings of RadioShack Corp. (“RadioShack”) approved the sale of 1,743 of the company’s stores to General Wireless Inc., an affiliate of Standard General LP. Salus was the lender under RadioShack’s $250.0 term loan placed in December 2013 with a net exposure to Salus and Front Street of $93.0 and $7.0, respectively, after giving effect to a $50.0 participation by FGL and a non-qualifying participation of $100.0 held by a third party. During the fiscal year ended September 30, 2015, the $100.0 held by a third party was repaid in full because this third party had the right of first out in the case of a bankruptcy under an intercreditor agreement with Salus. During the six months ended March 31, 2015, the Company recognized charge-offs of $51.1, excluding any charge-offs related to FGL’s participations which are included in “(Loss) income from discontinued operations, net of tax” in the accompanying Condensed Consolidated Statements of Operations; and an additional net increase in the provision of credit losses of $17.2 related to the loan with RadioShack. No additional changes to the provision for credit losses were recorded during the three and six months ended March 31, 2016. The extent to which Salus and Front Street will be able to recover amounts owed to them by RadioShack is dependent on a number of factors, including ongoing litigation. There can be no assurance of the amount that Salus and its affiliates will recover from the RadioShack loan.



	Internal Risk Rating
	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2016	$	12.1	$	33.0	$	17.1	$	122.4	$	184.6
September 30, 2015 (As Adjusted)	$	69.0	$	32.4	$	74.0	$	99.2	$	274.6