What changed in this filing

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Item 1. Business

2021-03-10 compared with 2020-03-16 · 360 added, 648 removed, 344 unchanged (75% of the section changed)

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See "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Special Note Regarding Forward-Looking Statements."

HC2 is a diversified holding company that seeks opportunities to acquire and grow businesses that can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders.

As of December 31, 2019, our eight reportable operating segments based on management’s organization of the enterprise included Construction, Marine Services, Energy, Telecommunications, Insurance, Life Sciences, Broadcasting and Other, which includes businesses that do not meet the separately reportable segment thresholds.

HC2 is a diversified holding company that has a portfolio of subsidiaries in a variety of operating segments.

We seek to grow these businesses so that they can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders.

As of December 31, 2020, our four reportable operating segments, plus our Other segment, based on management’s organization of the enterprise included Infrastructure, Life Sciences, Spectrum, Insurance and Other, which includes businesses that do not meet the separately reportable segment thresholds.

Our principal operating subsidiaries include the following assets:

(i) DBM Global Inc.

("DBMG") (Construction), a family of companies providing fully integrated structural and steel construction services;

(ii) Global Marine Group ("GMSL") (Marine Services), a leading provider of engineering and underwater services on submarine cables;

(iii) American Natural Energy Corp.

("ANG") (Energy), a compressed natural gas fueling company;

(iv) PTGi-International Carrier Services Inc.

("ICS") (Telecommunications), a provider of internet-based protocol and time-division multiplexing access for the transport of long-distance voice minutes;

(v) Continental Insurance Group Ltd.

("CIG") (Insurance), a platform for our run-off long-term care and life and annuity business, through its insurance company, Continental General Insurance Company ("CGI" or the "Insurance Company");

(vi) Pansend Life Sciences, LLC ("Pansend") (Life Sciences), our subsidiary focused on supporting healthcare and biotechnology product development;

(vii) HC2 Broadcasting Holdings Inc.

and its subsidiaries ("HC2 Broadcasting"), a strategic acquirer and operator of Over-The-Air ("OTA") broadcasting stations across the United States ("U.S.") and Puerto Rico.

In addition, Broadcasting, through its wholly-owned subsidiary, HC2 Network Inc.

("DBMG") (Infrastructure), a family of companies providing fully integrated structural and steel construction services;

(ii) Pansend Life Sciences, LLC ("Pansend") (Life Sciences), our subsidiary focused on supporting healthcare and biotechnology product development;

(iii) HC2 Broadcasting Holdings Inc.

and its subsidiaries ("HC2 Broadcasting") (Spectrum), a strategic acquirer and operator of Over-The-Air ("OTA") broadcasting stations across the United States ("U.S.") and Puerto Rico.

In addition, Spectrum, through its wholly-owned subsidiary, HC2 Network Inc.

("Network"), operates Azteca America, a Spanish-language broadcast network offering high quality Hispanic content to a diverse demographic across the United States;

(viii) Other, which represents all other businesses or investments we believe have significant growth potential that do not meet the definition of a segment individually or in the aggregate.

We expect to continue to focus on acquiring and investing in businesses with attractive assets that we consider to be undervalued or fairly valued, and growing our acquired businesses.

(iv) Continental Insurance Group Ltd.

("CIG") (Insurance), a platform for our run-off long-term care and life and annuity business, through its insurance company, Continental General Insurance Company ("CGI" or the "Insurance Company");

(v) Other, which represents all other businesses or investments that do not meet the definition of a segment individually or in the aggregate.

We expect to focus on operating and managing our portfolio of companies and building value in Infrastructure, Life Sciences and Spectrum in the future.

We believe these segments are well positioned to take advantage of current trends in today’s economy and that there is opportunity to build value organically and inorganically in these three segments.

We will consider opportunities outside of these businesses in the longer term to acquire and invest in businesses with attractive assets that we consider to be undervalued or fairly valued.

Overall Business Strategy

We evaluate strategic and business alternatives, which may include the following:

acquiring assets or businesses unrelated to our current or historical operations;

operating, growing or acquiring additional assets or businesses related to our current or historical operations;

or winding down or selling our existing operations.

We generally pursue either controlling positions in durable, cash-flow generating businesses or companies we believe exhibit substantial growth potential.

or winding down or selling our existing operations (including our Insurance segment), or, in the longer-term, acquiring assets or businesses unrelated to our current or historical operations.

We will generally pursue either controlling positions in durable, cash-flow generating businesses, assets that will enhance our current businesses or companies we believe exhibit substantial growth potential in Infrastructure, Life Sciences and Spectrum.

We may choose to actively assemble or re-assemble a company’s management team to ensure the appropriate expertise is in place to execute the operating objectives of such business.

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We have broad discretion in selecting a business strategy for the Company.

If we elect to pursue an acquisition, we have broad discretion in identifying and selecting both the industry and the possible acquisition or business combination opportunity.

We have not identified a specific industry to focus on and there can be no assurance that we will, or we will be able to, identify or successfully complete any such transaction.

If we elect to pursue an acquisition, while we intend to focus on Infrastructure, Life Science and Spectrum, we have broad discretion in identifying and selecting both the industry and the possible acquisition or business combination opportunity.

In connection with evaluating these strategic and business alternatives, we may at any time be engaged in ongoing discussions with respect to possible acquisitions, business combinations and debt or equity securities offerings of widely varying sizes.

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Our financial resources and human resources may be relatively limited when contrasted with many of these competitors which may place us at a competitive disadvantage.

Finally, managing rapid growth could create higher corporate expenses, as compared to many of our competitors who may be at a different stage of growth, which could affect our ability to compete for strategic opportunities.

Competitive conditions affecting our operating businesses are described in the discussions below.

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Our Operating Subsidiaries

Construction Segment (DBMG)

Infrastructure Segment (DBMG)

DBM Global Inc.

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Through its Aitken business ("Aitken"), DBMG manufactures pollution control scrubbers, tunnel liners, pressure vessels, strainers, filters, separators and a variety of customized products.

Through its most recent acquisition, GrayWolf Industrial ("GrayWolf"), DBMG also provides heavy mechanical, maintenance, repair, and installation services to a diverse set of end markets, including power, petrochemical, pulp & paper, and refinery.

Through its GrayWolf Industrial business ("GrayWolf"), DBMG also provides integrated solutions for digital engineering, modeling and detailing, construction, heavy equipment installation and facility services including maintenance, repair, and installation to a diverse range of end markets.

Headquartered in Phoenix, Arizona, DBMG has domestic operations in Alabama, Arizona, California, Georgia, Kansas, Kentucky, Oregon, South Carolina, Texas, Utah, and Washington with construction projects primarily located in the aforementioned states.

DBMG also has international operations located in Australia, Canada, India, New Zealand, the Philippines, Thailand, and the United Kingdom.

In addition, through its DBM Vircon business (“DBM Vircon”), DBMG also has international operations located in Australia, Canada, India, New Zealand, the Philippines, Thailand, and the United Kingdom, providing steel detailing, rebar detailing, BIM modeling, and BIM management services.

DBMG’s results of operations are affected primarily by (i) the level of commercial, industrial and infrastructure construction as well as the need for mechanical and maintenance services in its principal markets;

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By expanding the portfolio of products offered and geographic markets served, DBMG believes that it will be able to offer more value-added services to existing and new potential customers, as well as to reduce the impact of periodic adverse market or economic conditions.

• Ensure Project Delivery Success through Predictive Technologies :

DBMG uses resources including data analytics, modeling and detailing, laser scan to BIM, and augmented and virtual reality to provide fully integrated solutions for a project’s lifecycle, from design through fabrication, construction, and mechanical and facility services.

DBMG is thus able to deliver optimal value and reliable outcomes that are on schedule and on budget.

Services and Customers

DBMG consists of five business units spread across diverse markets:

Schuff Steel Company ("SSC") (steel fabrication and erection), Schuff Steel Management Company ("SSMC") (management of smaller projects, leveraging subcontractors), DBM Vircon ("DBM Vircon") (steel detailing, rebar detailing, bridge detailing, BIM modeling services and BIM management services), the Aitken product line ("Aitken") (manufacturing of equipment for the oil and gas industry), and GrayWolf (specialty facility maintenance, repair, and installation services).

For the fiscal year ended December 31, 2019 revenues were as follows (in millions):

Revenue % of Revenue

DBMG consists of four business units spread across diverse markets:

Schuff Steel Company ("SSC") (steel fabrication and erection), DBM Vircon ("DBM Vircon") (steel detailing, rebar detailing, bridge detailing, BIM modeling services and BIM management services), the Aitken product line ("Aitken") (manufacturing of equipment for the oil and gas industry) and GrayWolf (specialty facility maintenance, repair, and installation services, as well as management of smaller structural steel projects).

For the year ended December 31, 2020 revenues were as follows (in millions):

Revenue % of Total Revenue

SSC $ 436.3 64.5 %

SSMC 50.0 7.0 %

GrayWolf 192.9 28.5 %

DBM Vircon 40.6 6.0 %

Aitken 6.8 1.0 %

GrayWolf 138.9 19.5 %

$ 713.3 100.0 %

Total $ 676.6 100.0 %

The majority of DBMG's business is in North America, but DBM Vircon provides detailing services on five continents, and SSC provides fabricated steel to Canada and other select countries.

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Additionally, DBMG has in-house fabrication and erection combined with access to a network of subcontractors for smaller projects in order to provide high-quality solutions for its customers.

DBMG offers a range of services across a broad geography through its eleven fabrication shops in the United States and 31 sales and management facilities located in the United States, Australia, Canada, India, New Zealand, the Philippines, Thailand and the UK.

DBMG offers a range of services across a broad geography through its ten fabrication shops in the United States and 29 sales and management facilities located in the United States, Australia, Canada, India, New Zealand, the Philippines, Thailand and the UK.

DBMG operates with minimal bonding requirements, with a current balance of 23% of DBMG's backlog (out of a total backlog of $394.5 million) as of December 31, 2020, and bonding is reduced as projects are billed, rather than upon completion.

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• Fabrication:

Through its eight fabrication shops in Arizona, California, Texas, Kansas, South Carolina, and Utah, SSC has one of the highest fabrication capacities in the United States, with over 1.5 million square feet under roof and a maximum annual fabrication capacity of approximately 342,000 tons;

Through its six fabrication shops in Arizona, California, Kansas, and Utah, SSC has one of the highest fabrication capacities in the United States, with over 1.5 million square feet under roof and a maximum annual fabrication capacity of approximately 310,000 tons;

Named the top steel erector in the United States for 2007, 2008, 2011, and from 2013-2020 by Engineering News-Record, SSC knows how to add value to its projects through the safe and efficient erection of steel structures;

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Additionally, DBMG’s use of Steel Integrated Management Systems ("SIMS") in conjunction with its BIM platform Visualizer allows for real-time reporting on a project’s progress and an information-rich model review.

SSMC provides turn-key steel fabrication and erection services with expertise in project management.

Leveraging such strengths, SSMC uses its relationships with reliable subcontractors and erectors, along with state-of-the-art management systems, to deliver excellence to clients.

Aitken is a manufacturer of equipment used in the oil, gas, petrochemical and pipeline industries.

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shop drawings, erection plans, anchor bolt drawings, connection sketches, DSTV files for cutting and drilling, DXF files for plate work, field bolt lists, specialist reports and advance bill of material and piping.

GrayWolf provides services including maintenance, repair, and installation to a diverse range of end markets in order to provide high-quality outage, turnaround, and new installation services to customers.

GrayWolf provides the following service types through its four major brands:

GrayWolf provides services including steel fabrication, steel management, maintenance, repair, erection, and installation to a diverse range of end markets in order to provide high-quality outage, turnaround, and new installation services to customers.

GrayWolf provides the following services through its four major brands:

GrayWolf Integrated Construction (formerly Titan Contracting), Inco Services, Milco National Constructors and Titan Fabricators.

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• Specialty construction solutions for processing markets:

Customers in the pulp & paper, metals, mining & minerals, and petrochemical markets are able to receive specialized solutions including plant maintenance, process piping, equipment, and tank & vessel fabrication and erection that are catered to the needs and specifications of the customer’s industry through the Inco Services brand;

Customers in the pulp and paper, metals, mining and minerals, and petrochemical markets are able to receive specialized solutions including plant maintenance, process piping, equipment, and tank and vessel fabrication and erection that are catered to the needs and specifications of the customer’s industry through the Inco Services brand;

• Turnarounds, tank construction, and piping services:

GrayWolf offers services including plant maintenance, specialty welding, piping systems, and tanks & vessels construction to the power, refining, petrochemical, and water treatment markets in the Midwest, Mid-Atlantic, and West Coast;

• Custom steel fabrication:

GrayWolf offers engineering, design, modularization, and additional services to the heavy industrial markets in the Midwest and Gulf Coast.

GrayWolf offers services including plant maintenance, specialty welding, piping systems, and tanks and vessels construction to the power, refining, petrochemical, and water treatment markets in the Midwest, Mid-Atlantic, and West Coast;

• Custom steel fabrication and erection:

GrayWolf offers engineering, design, fabrication, modularization, erection and additional services to the heavy commercial and industrial markets in the Southwest, Midwest, Gulf Coast and Southeast;

• Structural steel management:

provides turn-key steel fabrication and erection services with expertise in project management.

Leveraging such strengths, GrayWolf uses its relationships with reliable subcontractors and erectors, along with state-of-the-art management systems, to deliver excellence to clients

DBMG currently purchases its steel from a variety of domestic and foreign steel producers but is not dependent on any one producer.

During the year ended December 31, 2020, DBMG, through SSC, purchased approximately 53% of the total value of steel and steel components purchased from two domestic steel vendors.

See Item 1A - Risk Factors - "Risks Related to the Construction segment" elsewhere in this document for discussion on DBMG’s reliance on suppliers of steel and steel components.

See Item 1A - Risk Factors - "Risks Related to the Infrastructure segment" elsewhere in this document for discussion on DBMG’s reliance on suppliers of steel and steel components.

Sales and Distributions

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DBMG competes for new project opportunities through its relationships and interaction with its active and prospective customer base which provides valuable current market information and sales opportunities.

In addition, DBMG is often contacted by governmental agencies in connection with public construction projects, and by large private-sector project owners, general contractors and engineering firms in connection with new building projects such as plants, warehouse and distribution centers, and other industrial and commercial facilities.

Upon selection of projects to bid or price, DBMG’s estimating division reviews and prepares projected costs of shop, field, detail drawing preparation and crane hours, steel and other raw materials, and other costs.

In addition, DBMG is often contacted by governmental agencies in connection with public construction projects, and by large private-sector project owners, general contractors and engineering firms in connection with new building projects such as manufacturing and industrial plants, data centers, warehouse and distribution centers, and other industrial and commercial facilities.

Upon selection of projects to bid or price, DBMG’s estimating departments review and prepare projected costs of shop, field, detail drawing preparation and crane hours, steel and other raw materials, and other costs.

With respect to bid projects, a formal bid is prepared detailing the specific services and materials DBMG plans to provide, along with payment terms and project completion timelines.

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Although DBMG’s management believes that its insurance is adequate for its present needs, there can be no assurance that it will be able to maintain adequate insurance at premium rates that management considers commercially reasonable, nor can there be any assurance that such coverage will be adequate to cover all claims that may arise.

Marine Services Segment (GMSL)

The Global Marine Group (GMSL) is an innovative worldwide market leader in offshore engineering and consists of three business units:

• Global Marine providing fiber optic cable solutions to the telecommunications and oil & gas markets;

• CWind delivering construction support and asset management services topside and subsea to the offshore renewables and utilities market;

• Global Offshore delivering trenching and power cable lay and repair services to the offshore renewables & utilities market and oil & gas industry.

GMSL has two equity method investments in China, SB Submarine Systems and Huawei Marine.

GMSL owns one of the world’s largest offshore support vessel fleets.

GMSL has installed over 300,000 kilometers of subsea cable.

Strategy Overview

GMSL aims to maintain its leading market position in the telecommunications maintenance segment and seeks opportunities to grow its installation activities in the three market sectors (telecommunications, offshore power, and oil and gas) while capitalizing on high market growth in the offshore power sector through expansion of its installation and maintenance services in that sector.

In order to accomplish these goals, GMSL has developed a comprehensive strategy which includes:

• Developing opportunities in the offshore power market;

• Diversifying the business by pursuing growth within its three market segments (telecommunications, offshore power and oil & gas), which it believes will strengthen its quality of earnings and reduce exposure to one particular market segment;

• Retaining and building its leading position in telecommunications maintenance and installation;

• Working to develop convergence of its maintenance services across all three market segments;

• Pursuing targeted mergers and acquisitions, equity investments, partnerships and opportunities to build a larger operating platform that can benefit from increased operating efficiencies.

GMSL has a highly experienced management team with a proven track record and has demonstrated the ability to enter new markets and generate returns for investors from its three business units.

Global Marine

Global Marine is a market leader in subsea fiber optic cable installation and maintenance solutions to the telecoms sector amongst others.

Global Marine is recognized as a high quality, strategic partner with a successful track record across the industry.

Global Marine has a long, well-established reputation in the telecommunications sector and is a leading provider of subsea services in the industry.

It operates in a mature market and is the largest independent provider in the maintenance segment.

Global Marine provides vessels on standby to repair fiber optic telecommunications cables in defined geographic zones, and its maintenance business is provided through contracts with consortia of providers of global telecommunications services.

Typically, Global Marine enters into five- to seven-year contracts to provide maintenance services to cable systems that are located in specific geographical areas.

These contracts provide highly stable, predictable and recurring revenue and earnings.

Additionally, Global Marine provides installation of cable systems, including route planning, mapping, route engineering, cable-laying, trenching and burial.

Global Marine’s installation business is project-based, with contracts typically lasting one to five months.

CWind is part of GMSL, delivering topside, splash zone and subsea engineering services, to the offshore renewables and utilities market.

With experience at over 40 UK and European offshore wind farms, supporting over 12GW power generated by the offshore wind sector.

CWind demonstrates a commitment to innovation and is well-positioned to capitalize on the growth of the offshore alternative energy market in construction, as well as on-going operations and maintenance, with a strong presence in Northern Europe and Asia (especially China).

CWind has developed its strategies to realize this opportunity.

Global Offshore

Global Offshore is part of GMSL, delivering the company’s cable installation, repair and trenching services to the offshore renewables, utilities and oil & gas markets.

Global Offshore has developed a reputation as a trusted partner, delivering pipeline, cable and umbilical projects, platform-to-platform connectivity and subsea services.

Global Offshore’s primary activities for oil & gas include providing power from shore, enabling fiber-based communication between platforms and shore-based systems and installing permanent reservoir monitoring systems that allow customers to monitor subsea seismic data.

The majority of its oil and gas business is contracted on a project-by-project basis with major energy producers or Tier I engineering, procurement and construction ("EPC") contractors.

Global Marine Group’s 2019 track record

Notable GMSL announcements during the year include the following:

Global Marine begins the Telecoms Installation Subcom Jupiter project (resulting in 98.2% utilization of the Recorder vessel until January 2020).

GMSL disposes of the Networker vessel.

CWind signs charter agreement with Orsted for the Hybrid SES (an innovative CTV which is the first hybrid diesel-electric surface effect vessel to be brought to market).

GMSL launches the new pre lay plough (PLP240) from the Blyth offshore service hub.

Project planning starts on the Vattenfall Danish Cluster Global Offshore project for the inter array cable installation, burial, testing and termination at the 72 turbine Kriegers Flak site in Denmark.

Cable Innovator under permission from the North American Zone Agreement (NAZ) completes 30-day repair of a fault on the Hawaiian Island Fiber Network.

The business has agreed to a three-year charter, with options for a further five years, for the Normand Clipper.

Although the vessel will be mainly used for Global Offshore projects, it will also have capability for telecoms works.

Services and/or Products

GMSL is a pioneer in the subsea cable industry, having laid the first subsea cable in the 1850s and installed the first transatlantic fiber optic cable (TAT-8) in 1988.

GMSL is positioned as a global independent market leader in subsea cable installation and maintenance services and derives approximately 45% of its total revenue from long-term, recurring maintenance contracts.

GMSL has started a new phase of growth through applying its capabilities to the rapidly expanding offshore power sector into which GMSL re-entered in November 2015 (see "CWind" above), while retaining a leading position in the telecommunications sector.

GMSL has major offices in the United Kingdom and Singapore, with presence in Bermuda, Canada, China, Indonesia and the Philippines.

See "Item 1A - Risk Factors - Risks Related to GMSL for further details.

GMSL derives a significant amount of its revenues from sales to customers outside of the United States, which poses additional risks, including economic, political and other uncertainties.

Fleet Overview

GMSL operates one of the largest specialist cable laying fleets in the world, consisting of six vessels (three owned, three operated through long-term leases) and 17 crew transfer vessels operated by its wholly-owned subsidiary, CWind, as of December 31, 2019 The average age of the GMSL fleet is 21 years and the CWind fleet is 5 years.

Each cable vessel is equipped with specialist inspection, burial, and survey equipment.

By providing oil and gas, offshore power, and telecommunications installation as well as telecommunications maintenance, GMSL can retain vessels throughout their asset lives by cascading them through different uses as they age, as older vessels can or should only be used to provide specified services.

This provides a significant competitive advantage because GMSL can retain vessels for longer and reduce the frequency of capital expenditure requirements with a longer depreciation period.

GMSL’s fleet is operated by GMSL employees or long-term contractors.

Fleet Details

Vessels Ownership Lease Expiry Age Flag Base Port

Maintenance - GMSL

Innovator DYVI Cableship 11 AS May-25 24 UK Victoria, Canada

Wave Sentinel GMSL N/A 24 UK Portland, UK

Cable Retriever ICPL March-23 22 Singapore Batangas, Philippines

Sovereign GMSL N/A 28 UK Portland, UK

Installation - GMSL

CS Recorder Maersk Supply Service UK February-22 19 UK Blyth, UK

Global Symphony GMSL N/A 8 UK Montrose, UK

Offshore - CWind

Argocat CWind Limited N/A 9 UK Maldon, UK

Alliance 50% CWind Limited N/A 8 UK Maldon, UK

Endeavour CWind Limited N/A 6 UK Maldon, UK

Adventure CWind Limited N/A 6 UK Maldon, UK

Fulmar CWind Limited N/A 5 UK Colchester, UK

Artimus CWind Limited N/A 4 UK Colchester, UK

Buzzard CWind Limited N/A 7 UK London, UK

Challenger CWind Limited N/A 6 UK Bideford, UK

Resolution CWind Limited N/A 6 UK Southampton, UK

Sword CWind Limited N/A 5 UK Ramsgate, UK

Spirit CWind Limited N/A 4 UK Colchester, UK

Endurance CWind Limited N/A 6 UK Maldon, UK

Tempest CWind Limited N/A 4 UK Ramsgate, UK

Tornado CWind Limited N/A 4 UK Ramsgate, UK

Typhoon TOW CWind Limited N/A 4 UK Ramsgate, UK

Hurricane TOW CWind Limited N/A 4 UK Ramsgate, UK

CWind Phantom CWind Limited N/A 4 UK Maldon, UK

Product Research and Development

Over the years, GMSL has provided many important innovations to the subsea cable market.

One such innovation was GEOCABLE, GMSL’s proprietary Geographical Information System (GIS), which GMSL believes to be the largest cable database in the market and was developed specifically to meet the needs of the cable industry.

GEOCABLE is an important tool for any vendor planning subsea cable installation, and GMSL sells data from GEOCABLE to third-party customers.

In addition to GEOCABLE, GMSL also develops and owns (in a consortium with other industry participants) intellectual property associated with the Universal Joint, a product which easily and effectively links together cables from different manufacturers.

The Universal Joint has gained such prevalence in the industry that new fiber optic cables may be certified to meet the specifications of the Universal Joint, which is a service provided by GMSL among others, so that any subsea cable manufacturer can ensure compatibility of its subsea cables with other existing subsea cables as well as with the standardized equipment on cable repair vessels.

GMSL benefits from its sales of the Universal Joint, and proceeds from GMSL-sponsored training of jointing skills, but GMSL also enjoys the industry leadership and brand enhancement that come with the creation of an industry leading product.

Intellectual Property

GMSL is not dependent on any specific intellectual property, but it does vigorously protect its interests in its intellectual property and closely monitors industry changes.

GMSL’s customer base is made up primarily of large, established companies.

Contract lengths vary and are largely dependent on the type of services provided.

Maintenance and repair contracts tend to be long-term, five- to seven-years, with a relatively high level of expected renewal rates, and the customer is typically a consortium of different cable owners such as national, regional and international telecommunication companies and others who have an ownership interest in the subsea cables covered by the maintenance contract.

GMSL charges a standing fee for cost of vessels plus margin, paid in advance proportionally by each member, and an additional daily call out fee for repairs paid by the specific cable owner(s).

Four maintenance vessels are engaged on GMSL’s three current long-term telecommunications maintenance contracts with ACMA (Atlantic Cable Maintenance Agreement), SEAIOCMA (South East Asia and Indian Ocean Cable Maintenance Agreement), and NAZ (North American Zone).

Installation contracts tend to be much shorter term (30-150 days), and the counterparty tends to be a single client.

Contracts are typically bid for on a fixed-sum basis with an initial upfront payment plus subsequent installments providing working capital support.

Due to the added complexity of cable installation as opposed to maintenance, GMSL generally realizes higher margins on its installation contracts in the offshore power and oil and gas sectors.

Sales and Distributions

In the telecommunications cable market, cable maintenance is most often accomplished by zone maintenance contracts in which a consortium of telecommunications operators or cable owners contract with a maintenance provider like GMSL, over a long-term period of approximately five to seven years.

GMSL has three cable maintenance agreements, providing a steady, high-quality source of revenue.

These maintenance contracts are usually re-awarded to incumbent providers unless there are significant performance issues, which may mean that GMSL will not be required to expend extra capital to retain these contracts, although no assurance can be given that GMSL will be able to renew any specific contract.

GMSL constantly has a focused sales plan to build relationships with current and potential customers at regional and corporate offices and readily leverages Huawei Technologies’ large sales organization.

GMSL also has a focused sales and marketing plan to create relationships with major participants in the offshore power and oil and gas industries.

Despite the prevailing low oil price market conditions, GMSL hopes to use its expertise in installing Permanent Reservoir Monitoring ("PRM") systems to forge new contacts with both the end users of PRM services, such as oil majors, and the PRM suppliers themselves.

Additionally, GMSL is pursuing a strategy of specialization in installing the small power and fiber optic cables that its competitors in the oil and gas and offshore power sectors find unprofitable and in which they lack installation experience.

GMSL is one of the few companies that provide subsea cable installation and maintenance services on a worldwide basis.

GMSL competes for contracts with companies that have worldwide operations, as well as numerous others operating locally in various areas.

There are a number of industry participants, mainly Asian based, who focus primarily on their countries of origin.

Competition for GMSL’s services historically has been based on vessel availability, location of or ability to deploy these vessels and associated subsea equipment, quality of service and price.

The relative importance of these factors can vary depending on the customer or specific project as well as also over time based on the prevailing market conditions.

The ability to develop, train and retain skilled engineering personnel is also an important competitive factor in GMSL’s markets.

GMSL believes that its ability to provide a wide range of subsea cable installation and maintenance services in the telecommunications, oil and gas and offshore power sectors on a worldwide basis enables it to compete effectively in the industry in which it operates.

However, in some cases involving projects that require less sophisticated vessel and subsea equipment, smaller companies may be able to bid for contracts at prices uneconomical to GMSL.

In addition, GMSL’s competitors generally have the capability to move their vessels to locations in which GMSL operates with relative ease, which may impact competition in the markets it serves.

Management and Employees

As of December 31, 2019, GMSL employed 452 people.

GMSL’s employees are not formally represented by any labor union or other trade organization, although the majority of the seafarers are members of an established trade union.

GMSL considers relations with its employees to be excellent and it has never experienced a work stoppage or strike.

GMSL regularly uses independent consultants and contractors to perform various professional services in different areas of the business, including in its installation and fleet operations and in certain administrative functions.

Dick Fagerstal is a 2.4% interest holder, chairman and chief executive officer of Global Marine Holdings LLC ("GMH LLC"), the parent holding company of Global Marine Holdings Limited, and he is the executive chairman of GMSL.

Fagerstal previously served in an executive capacity for companies operating in various industries, including energy, marine services, and their related infrastructure.

Legal, Environmental and Insurance

GMSL is from time to time subject to claims and legal proceedings that arise in the ordinary course of business.

Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to GMSL or that the resolution of any such matter will not have a material adverse effect upon GMSL’s business, consolidated financial position, results of operations or cash flows.

GMSL does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its business, consolidated financial position, results of operations or cash flows.

GMSL has comprehensive insurance coverage including protection and indemnity, hull and machinery, war risk, and property insurances, director and officers liability insurance, contract warranty insurance for the maintenance contracts, and all other necessary corporate insurances.

GMSL’s liability is capped and insured under each of its installation contracts.

Energy Segment (American Natural Energy)

American Natural Energy Corp.

(f/k/a American Natural Gas, Inc.) ("ANG")is a premier retailer of Compressed Natural Gas ("CNG") that designs, builds, owns, operates and maintains natural gas fueling stations for the transportation industry.

ANG’s principal business is supplying CNG for light-, medium- and heavy-duty vehicles.

ANG focuses its efforts on customers in a variety of markets, including heavy-duty trucking, airports, refuse, industrial, institutional energy users and government fleets.

ANG seeks to retain its customers by offering state-of-the-art fueling stations with exemplary service levels.

Market for Natural Gas as an Alternative Fuel for Vehicles

As of December 31, 2019, Natural Gas Vehicles for America ("NGVA") estimates that there are more than 1,600 CNG fueling stations in the United States and over 175,000 natural gas vehicles on American roads.

This includes approximately 39,500 heavy-duty vehicles (such as tractors, refuse trucks and buses), 25,800 medium-duty vehicles (such as delivery vans and shuttles) and 87,000 light-duty vehicles (such as passenger cars, sport utility vehicles, trucks and vans).

As of December 31, 2019, the U.S.

Department of Energy estimates that there are approximately 1,000 public CNG fueling stations in the United States.

ANG believes that natural gas is an attractive alternative to gasoline and diesel for use as a vehicle fuel in the United States as it is plentiful, domestically produced, cleaner and generally cheaper than gasoline or diesel.

Historically, oil, gasoline, and diesel prices have been highly volatile, while natural gas prices have generally been stable and lower than the cost of oil, gasoline and diesel on an energy equivalent basis.

ANG also expects increasingly stringent air quality regulations, expanding initiatives by fleet operators to lower greenhouse gas emissions and increase fuel diversity and additional regulations mandating low carbon fuels, all of which supports increased market adoption of natural gas as an alternative to gasoline and diesel as a vehicle fuel.

ANG believes these factors support current opportunities to market natural gas as a vehicle fuel in the United States.

Benefits of Natural Gas Fuel

Domestic and Plentiful Supply:

Technological advances in natural gas drilling and production have unlocked vast natural gas reserves.

is now the number one producer of natural gas in the world, with proven, abundant and growing reserves of natural gas.

Less Expensive:

Due to the abundance of natural gas, the cost of natural gas in the U.S.

is less than the cost of crude oil, on an energy equivalent basis.

ANG believes that natural gas used as a transportation fuel will remain cheaper than gasoline and diesel for the foreseeable future.

In addition, because the price of the commodity (natural gas) makes up a smaller portion of the cost of a Gasoline Gallon Equivalent ("GGE") of CNG relative to the commodity portion of the cost of gallon of diesel or gasoline, the price of CNG is less sensitive to increases in the underlying commodity cost.

Natural gas contains less carbon than any other fossil fuel and thus, produces fewer carbon dioxide emissions when burned.

The California Air Resources Board ("CARB") has concluded that a CNG fueled vehicle emits 20 to 29 percent fewer Greenhouse Gas ("GHG") emissions than a comparable gasoline or diesel-fueled vehicle on a well-to-wheel basis.

Additionally, a study from Argonne National Laboratory, a research laboratory operated by the University of Chicago for the U.S.

Department of Energy, indicates that natural gas vehicles produce at least 13 to 21 percent fewer GHG emissions than comparable gasoline and diesel-fueled vehicles.

The newest natural gas engines with Near-Zero or "Zero Emissions Equivalent" – technology produces 90% fewer NOx emissions than the current standard.

In fact, the cleanest heavy-duty truck engine in the world is powered by natural gas.

And when fueled with renewable natural gas, it has up to 115% fewer greenhouse gas emissions than diesel counterparts well-to-wheel.

As reported by NGV America, CNG is relatively safer than gasoline and diesel because it dissipates into the air when spilled or in the event of a vehicle accident.

When released, CNG is less combustible than gasoline or diesel as it ignites only at relatively high temperatures.

The fuel tanks and systems used in natural gas vehicles are subjected to a number of federally required safety tests, such as fire, environmental hazard, burst pressures, and crash testing, according to the U.S.

Department of Transportation National Highway Traffic Safety Administration.

In addition, CNG is stored in above ground tanks, thus reducing the risk of soil or groundwater contamination.

Currently, over 175,000 vehicles in the U.S.

and more than 23.0 million worldwide fuel safely with natural gas.

Natural Gas Vehicles

Natural gas vehicles use internal combustion engines similar to those used in gasoline or diesel-powered vehicles.

A natural gas vehicle uses sealed storage cylinders to hold CNG, specially designed fuel lines to deliver natural gas to the engine, and an engine tuned to run on natural gas.

Natural gas fuels have higher octane content than gasoline or diesel, and the acceleration and other performance characteristics of natural gas vehicles are similar to those of gasoline or diesel-powered vehicles of the same weight and engine class.

Natural gas vehicles running on CNG are refueled using a hose and nozzle to create an airtight seal with the gas tank.

For heavy-duty vehicles, spark ignited natural gas vehicles have proven to operate more quietly than diesel powered vehicles.

Natural gas vehicles typically cost more than gasoline or diesel-powered vehicles, primarily due to the higher cost of the storage systems that hold the CNG.

Virtually any car, truck, bus or other vehicle is capable of being manufactured or modified to run on natural gas.

These vehicles include long-haul tractors, refuse trucks, regional tractors, transit buses, cement trucks, delivery trucks, vocational work trucks, school buses, shuttles, passenger sedans, pickup trucks and cargo and passenger vans.

ANG expects that additional models and types of natural gas vehicles will become available as natural gas becomes more widely accepted as a vehicle fuel in the U.S.

Products and Services

ANG sells CNG through fueling stations located on properties owned or leased by ANG.

At these CNG fueling stations, ANG procures natural gas from local utilities or third-party marketers under standard, floating-rate or locked-in rate arrangements and then compresses and dispenses it into customers vehicles.

ANG's CNG fueling station sales are made primarily through contracts with customers.

Under these contracts, pricing is principally determined on a cost-plus basis, which is calculated by adding a margin to the utility price for natural gas.

As a result, CNG total sales revenues increase or decrease as a result of an increase or decrease in the price of natural gas.

The balance of ANG’s CNG fueling station sales are public sales based on prevailing market conditions.

O&M Services:

ANG performs Operate and Maintain ("O&M") services for CNG stations that are owned by their customers.

For these services, ANG generally charges either a monthly or per-GGE fee or time and material fee based on the volume of CNG dispensed at the station and the customers' goals and objectives.

Site Development:

ANG builds state-of-the-art fueling stations, either serving as general contractor or supervising qualified third-party contractors, for themselves or their customers.

ANG has also acquired existing stations (that ANG did not build) from third parties.

Equipment for a CNG station typically consists of dryers, compressors, dispensers and storage tanks.

Fifty-two of ANG’s fueling stations have separate public access areas for retail customers.

The fill rate at each of the public stations has comparable dispensing rates equivalent to traditional gasoline and diesel fueling stations.

Sales and Marketing

ANG focuses its sales and marketing efforts within the continental United States and targets such efforts primarily through direct sales.

ANG’s sales and marketing group stays informed of proposed and newly adopted regulations in order to provide education on the value of natural gas as a vehicle fuel to current and potential customers.

Key Markets and Customers

ANG targets customers in a variety of markets, such as trucking, airports, refuse, public transit and food and beverage distributors.

In 2019, approximately 52% of ANG’s revenues from CNG sales came from contracted customers.

Trucking and Food and Beverage Distributors:

ANG believes that heavy-duty trucking represents one of the greatest opportunities for natural gas to be used as a vehicle fuel in the United States.

Fleets with high-mileage trucks consume significant amounts of fuel and can benefit from the lower cost of natural gas.

A number of shippers, manufacturers, retailers and other truck fleet operators have started to adopt natural gas fueled trucks to move their freight.

Corporate Information;

Acquisitions and Divestitures

ANG was originally formed in 2011.

In August 2014, HC2 acquired a 51% interest in ANG.

In October 2014, ANG acquired Northville Natural Gas, which owned three stations in Indiana.

In May 2016, ANG acquired Southwestern Energy NGV Services, LLC, which included two stations in Arkansas.

In September 2016, ANG purchased the assets of American CNG, Inc.

and K&K SWD #1, LLC, which was comprised of one station in Arkansas.

In December 2016, ANG acquired Questar Fueling Company and Constellation CNG, LLC.

These acquisitions further expanded ANG’s network by adding 17 stations in Arizona, California, Utah, Colorado, Texas, Kansas, Indiana and Ohio.

In June 2019, ANG acquired ampCNG, LLC.

This acquisition expanded ANG’s network with the addition of 20 stations located in Texas, Ohio, North Carolina, Indiana, Florida, Arkansas, Georgia, and Tennessee.

ANG intends to continue to pursue additional acquisitions, divestitures, partnerships and investments as ANG becomes aware of opportunities that it believes will increase its competitive advantage, take advantage of industry developments, or enhance their market position.

Tax Incentives

From October 2012 through December 2019, ANG has been eligible to receive the Alternative Fuels Excise Tax Credit ("AFTC"), of $0.50 per GGE of CNG sold as vehicle fuel.

In addition, other U.S.

federal and state government tax incentives are available to offset the cost of acquiring natural gas vehicles, converting vehicles to use natural gas or construct natural gas fueling stations.

As of the date of this filing, the U.S.

Congress has passed an AFTC extension making the law effective through December 31, 2020.

Grant Programs

ANG continues to seek out and apply for, and help its fleet customers apply for federal, state and regional grant programs.

These programs provide funding for natural gas vehicle conversions and purchases, natural gas fueling station construction and vehicle fuel sold.

The market for vehicle fuels is highly competitive.

The biggest competition for CNG is gasoline and diesel, as the vast majority of vehicles in the United States are powered by gasoline and diesel.

Many of the producers and sellers of gasoline and diesel fuels are large entities that have significantly greater resources than ANG possesses.

ANG also competes with suppliers of other alternative vehicle fuels, including ethanol, biodiesel and hydrogen fuels, as well as providers of hybrid and electric vehicles.

New technologies and improvements to existing technologies may make alternatives other than natural gas more attractive to the market or may slow the development of the market for natural gas as a vehicle fuel if such advances are made with respect to oil and gas usage.

A significant number of established businesses, including oil and gas companies, alternative vehicle and alternative fuel companies, natural gas utilities and their affiliates, industrial gas companies, truck stop and fuel station operators, fuel providers and other organizations have entered or are planning to enter the market for natural gas and other alternatives for use as vehicle fuels.

Many of these current and potential competitors have substantially greater financial, marketing, research and other resources than ANG has.

Several natural gas utilities and their affiliates own and operate public access CNG stations that compete with ANG’s stations.

Government Regulation and Environmental Matters

Certain aspects of ANG’s operations are subject to regulation under federal, state, local and foreign laws.

If ANG were to violate these laws or if the laws were to change, it could have a material adverse effect on ANG’s business, financial condition and results of operations.

Regulations that significantly affect ANG’s operations are described below.

CNG Stations:

To construct a CNG fueling station, ANG must satisfy permitting and other requirements and either ANG or a third-party contractor must be licensed as a general engineering contractor.

Each CNG fueling station must be constructed in accordance with federal, state, NFPA-52 and local regulations pertaining to station design, environmental health, accidental release prevention, above-ground storage tanks, hazardous waste and hazardous materials.

ANG is also required to register with certain state agencies as a retailer/wholesaler of CNG.

ANG believes it is in material compliance with environmental laws and regulations and other known regulatory requirements.

Compliance with these regulations has not had a material effect on ANG’s capital expenditures, earnings or competitive position;

however, new laws or regulations or amendments to existing laws or regulations to make them more stringent, such as more rigorous air emissions requirements, proposals to make waste materials subject to more stringent and costly handling, disposal and clean-up requirements or regulations of greenhouse gas emissions, could require ANG to undertake significant capital expenditures in the future.

Telecommunications Segment (PTGi-International Carrier Services, Inc.)

ICS provides customers with internet-protocol-based and time-division multiplexing ("TDM") access for the transport of long-distance voice minutes.

ICS operates a global telecommunications network consisting of domestic switching and related peripheral equipment, and carrier-grade routers and switches for Internet and circuit-based services.

To ensure high-quality communications services, ICS’s network employs digital switching and fiber optic technologies, incorporates the use of Voice-over-Internet Protocol protocols and SS7/C7 signaling, and is supported by comprehensive network monitoring and technical support services.

Switching Systems

ICS’s network makes use of a domestic switch system, Internet routers and media gateways in the U.S.

and points of presence throughout the world via third party interconnections.

Foreign Carrier Agreements

In selected countries where competition with the traditional Post Telegraph and Telecommunications companies ("PTTs") is limited, ICS has entered into foreign carrier agreements with PTTs or other service providers that permit ICS to provide traffic into, and receive return traffic from, these countries.

Network Management and Control

ICS owns and operates network management systems in Herndon, Virginia which are used to monitor and control ICS's switching systems, global data network, and other digital transmission equipment used in ICS's network.

Additional network monitoring, network management, and traffic management services are supported from ICS's Network Management Centers located in Guatemala City, Guatemala and Bucharest, Romania.

The network management control centers are constantly online.

Sales and Marketing

ICS markets its services through a variety of sales channels, as summarized below:

• Trade Shows :

ICS attends industry trade shows around the globe throughout the year.

At each trade show, ICS markets to both existing and potential new customers through prearranged meetings, social gatherings and networking;

• Business Development :

ICS's world class sales team focuses on developing ICS’s business potential around the globe through ongoing communication and face-to-face meetings.

Management Information and Billing Systems

ICS operates management information, network and customer billing systems supporting the functions of network and traffic management, customer service and customer billing.

For financial reporting, ICS consolidates information from each of ICS's markets into a single database.

ICS believes that its financial reporting and billing systems are generally adequate to meet its business needs.

However, in the future, ICS may determine that it needs to invest additional capital to purchase hardware and software, license more specialized software and increase its capacity.

Long Distance:

ICS faces significant competition as it attempts to win the business of other telecommunications carriers and resellers.

ICS competes on the basis of price, service quality, financial strength, relationship and presence.

Sales of wholesale long-distance voice minutes are generated by connecting one telecommunications operator to another and charging a fee to do so.

Over-the-top ("OTT"):

OTT applications, such as WhatsApp, Skype, and FaceTime, continue to impact ICS’s long distance business model.

There can be no assurance that:

(1) the current declines in the long-distance business globally driven by OTT application will not increase;

or (2) ICS’s business will not be impacted by the increased consumer adoption of OTT applications globally.

Government Regulation

ICS is subject to varying degrees of regulation in each of the jurisdictions in which it operates.

Local laws and regulations, and the interpretation of such laws and regulations, differ among those jurisdictions.

There can be no assurance that:

(1) future regulatory, judicial and legislative changes will not have a material adverse effect on ICS;

(2) domestic or international regulators or third parties will not raise material issues with regard to its compliance with applicable regulations;

or (3) regulatory activities will not have a material adverse effect on it.

Regulation impacting the telecommunications industry continues to change rapidly in many jurisdictions.

Privacy-related laws and regulations, such as the EU’s GDPR, as well as privatization, deregulation, changes in regulation, consolidation, and technological change have had, and will continue to have, significant effects on the industry.

Although we believe that continuing deregulation with respect to portions of the telecommunications industry will create opportunities for firms such as us, there can be no assurance that deregulation and changes in regulation will be implemented in a manner that would benefit ICS.

The regulatory frameworks in certain jurisdictions in which we provide services as of December 31, 2019 are described below:

United States

In the United States, ICS's services are subject to the provisions of the Communications Act of 1934, as amended (the "Communications Act"), and other federal laws, rules, and orders of the Federal Communications Commission ("FCC") regulations, and the applicable laws and regulations of the various states.

ICS's interstate telecommunications services are subject to various specific common carrier telecommunications requirements set forth in the Communications Act and the FCC’s rules and orders, including operating, reporting and fee requirements.

Both federal and state regulatory agencies have broad authority to impose monetary and other penalties for violations of regulatory requirements.

International Service Regulation

The FCC has jurisdiction over common carrier services linking points in the U.S.

to points in other countries, and ICS provides such services.

Providers of such international common carrier services must obtain authority from the FCC under Section 214 of the Communications Act.

ICS has obtained the authorizations required to use, on a facilities-based and resale basis, various transmission media for the provision of international switched services and international private line services on a non-dominant carrier basis.

The FCC is considering a number of possible changes to its rules governing international common carriers.

We cannot predict how the FCC will resolve those issues or how its decisions will affect ICS's international business.

FCC rules permit non-dominant carriers such as ICS to offer some services on a detariffed basis, where competition can provide consumers with lower rates and choices among carriers and services.

Domestic Service Regulation

With respect to ICS's domestic U.S.

telecommunications services, ICS is considered a non-dominant interstate carrier subject to regulation by the FCC.

FCC rules provide ICS significant authority to initiate or expand its domestic interstate operations, but ICS is required to obtain FCC approval to assume control of another telecommunications carrier or its assets, to transfer control of ICS's operations to another entity, or to discontinue service.

ICS is also required to file various reports and pay various fees and assessments to the FCC and various state commissions.

Among other things, interstate common carriers must offer service on a nondiscriminatory basis at just and reasonable rates.

The FCC has jurisdiction to hear complaints regarding ICS's compliance or non-compliance with these and other requirements of the Communications Act and the FCC’s rules.

Among other regulations, ICS is subject to the Communications Assistance for Law Enforcement Act ("CALEA") and associated FCC regulations which require telecommunications carriers to configure their networks to facilitate law enforcement authorities to perform electronic surveillance.

In April 2019, FCC rules relating to the completion of calls to rural areas became effective.

These rules require certain providers of retail long distance voice service to generate and retain various records regarding completion of calls to rural areas.

Specifically, the rules require those providers to collect and retain information on long-distance call attempts such as, but not limited to, the called number, the date and time of the call, and the use of an intermediate provider.

The rules also prohibit false audible ringing (the premature triggering of audible ring tones to the caller before the call setup request has reached the terminating service provider).

While ICS is not directly subject to these rules, ICS may function as an intermediate provider within the meaning of these rules, which may require ICS to provide information to its customers regarding calls that it carries on their behalf.

In addition, under Section 262 to the Communications Act of 1934, intermediate providers (such as ICS) must register with the FCC and meet certain quality standards (now embodied in the FCC’s rules).

Interstate and international telecommunications carriers are required to contribute to the federal Universal Service Fund ("USF").

Carriers providing wholesale telecommunications services are not required to contribute with respect to services sold to customers that provide a written certification that the customers themselves will make the required contributions.

If the FCC or the USF Administrator were to determine that the USF reporting for the Company, including ICS, is not accurate or in compliance with FCC rules, ICS could be subject to additional contributions, as well as to monetary fines and penalties.

In addition, the FCC may revise its USF contribution mechanisms and the services considered when calculating the contribution.

ICS cannot predict the outcome of any such revisions or their potential effect on ICS's contribution obligations.

Some changes to the USF under consideration by the FCC may affect certain entities more than others, and ICS may be disadvantaged as compared to its competitors as a result of FCC decisions regarding USF.

In addition, the FCC may extend the obligation to contribute to the USF to certain services that ICS offers but that are not currently assessed USF contributions.

FCC rules require providers that originate interstate or intrastate traffic on or destined for the public switched telephone network ("PSTN") to transmit the telephone number associated with the calling party to the next provider in the call path.

Intermediate providers, such as ICS, must pass calling party number ("CPN") or charge number ("CN") signaling information they receive from other providers unaltered, to subsequent providers in the call path.

While ICS believes that it is in compliance with this rule, to the extent that it passes traffic that does not have appropriate CPN or CN information, ICS could be subject to fines, cease and desist orders, or other penalties.

Insurance Segment (Continental Insurance Group Ltd.)

On December 24, 2015, we completed the acquisitions of United Teacher Associates Insurance Company ("UTA") and Continental General Insurance Company ("CGI") (together the "Insurance Company") for aggregate consideration of approximately $18.6 million.

The operations of the Insurance Company were consolidated into the insurance operating segment, CIG.

The Insurance Company filed applications with the Ohio Department of Insurance ("ODOI") and the Texas Department of Insurance ("TDOI") to redomesticate CGI from Ohio to Texas.

In conjunction with the redomestication, the Insurance Company filed a request with the TDOI to merge UTA and CGI (with CGI as the surviving entity), which was approved as of December 31, 2016.

On August 9, 2018, CGI completed the acquisition of KMG America Corporation ("KMG"), the parent company of Kanawha Insurance Company ("KIC"), Humana’s long-term care insurance subsidiary for consideration of ten thousand dollars.

As a condition to the approval of the acquisition by the South Carolina Department of Insurance, CGI agreed to redomesticate KIC from South Carolina to Texas and simultaneously merge KIC with and into CGI, with CGI surviving (the "Merger"), and to maintain an authorized control level risk-based capital ratio of no less than 450 percent for two years following the closing.

Similarly, CGI agreed with the Texas Commissioner of Insurance that it will maintain a total adjusted capital to authorized control risk-based capital level of no less than 450 percent for two years from the date of the Merger and of no less than 400 percent for the subsequent three years.

In connection with the 2015 and 2018 acquisitions, HC2 agreed to certain restrictions on the involvement of employees of HC2, including Mr.

Falcone, in the day-to-day operations of CGI.

For example, HC2's board members, including Mr.

Falcone may not currently serve as directors or officers of CGI.

However, HC2 is entitled to have a representative on the CIG board, and a subsidiary under the control of HC2 serves as the investment adviser of CGI.

CIG currently provides long-term care, life, annuity, and other accident and health coverage to approximately 132,000 individuals through CGI.

The benefits provided by CIG's insurance operations help protect policy and certificate holders from the financial hardships associated with illness, injury, loss of life, or income discontinuation.

CIG has a concentrated focus on long-term care insurance and is committed to the continued delivery of best-practice services as established by CIG’s insurance operations to its policy and certificate holders.

Through investments in technology, a commitment to attracting, developing and retaining best-in-class insurance professionals, a dedication to continuing process improvements, and a focus on strategic growth, we believe CIG is well equipped to maintain and improve the level of service provided to its customers and assume a leading role in the long-term care industry.

CIG’s plan is to leverage its existing platform and industry expertise to identify strategic growth opportunities for managing closed blocks of long-term care business.

Growth opportunities are expected to come from:

• Future acquisitions of long-term care businesses and/or closed blocks of long-term care policies;

• Reinsurance arrangements;

• Third party administration arrangements.

Long-Term Care Insurance

CIG's long-term care insurance products pay a benefit that is either a specified daily indemnity amount or reimbursement of actual charges up to a daily maximum for long-term care services provided in the insured’s home or in assisted living or nursing facilities.

Benefits begin after a waiting period, usually 90 days or less, and are generally paid for a period of three years, six years, or the policy holder's lifetime.

Substantially all of the in-force long-term care insurance policies were sold after 1995, with all sales then being discontinued in January 2010.

Policies were issued in all states except for New York, with Texas being the largest issue state with approximately 20% of the business.

The existing block of policies includes both individual and group products, but all individuals were individually underwritten.

CIG's long-term care insurance products were sold on a guaranteed renewable basis which allows us to re-price in-force policies, subject to regulatory approval.

Profitability of CIG's long-term care block is affected by premium rate increases, persistency, investment returns, claims experience, and the level of administrative expenses.

As part of CIG's strategy for its long-term care insurance business, management has been implementing, and expects to continue to pursue, significant premium rate increases on its blocks of business as actuarially justified.

Premium rates vary by age and are based on assumptions concerning morbidity, mortality, persistency, administrative expenses, and investment yields.

CIG develops its assumptions based on its own claims and persistency experience and published industry tables.

Life Insurance and Annuities

CIG's life insurance products include Traditional, Term, Universal, and Interest Sensitive Life Insurance.

Its annuity products include Flexible and Single Premium Deferred Annuities.

CIG's life insurance business provides a personal financial safety net for individuals and their families.

These products provide protection against financial hardship after the death of an insured.

Some of these products also offer a savings element that can help accumulate funds to meet future financial needs.

Annuities are long-term retirement saving instruments that benefit from income accruing on a tax-deferred basis.

The issuer of the annuity collects premiums, credits interest or earnings on the policy and pays out a benefit upon death, surrender or annuitization.

All life insurance and annuity products are closed to new business.

The life insurance products were issued with both full and simplified underwriting.

Other Accident & Health

CIG’s accident and health products, other than Long-Term Care Insurance, include accidental death, accidental death & dismemberment disability income, hospital expense, hospital indemnity, and major medical individual insurance policies.

These products provide from partial reimbursement to full reimbursement of covered medical and related expenses.

All products were sold prior to the introduction of the Affordable Care Act and these product lines are closed to new business.

If not otherwise exempted from the requirements of the Affordable Care Act, the policies are grandfathered under the Affordable Care Act and not subject to the requirements of the Affordable Care Act.

A limited number of these policies were guaranteed issued, although the majority of the policies were issued with individual underwriting.

CIG's long-term care insurance policies were marketed and sold to individuals between 1986 and 2010 for the purpose of providing defined levels of protection against the significant and escalating costs of long-term care services provided in the insured’s home or in assisted living or nursing facilities.

Though CIG no longer actively markets new insurance products, it continues to service and receive net renewal premiums on its in-force Long-Term Care, Life, Annuity, and Other Accident & Health blocks for approximately 132,000 lives.

Employees and Operations

As of December 31, 2019, CIG employed 130 people full-time and 2 part-time, the majority of whom are employed on a salaried basis with some on an hourly basis.

Besides nine remote employees working in various states, all other employees work out of the home office located in Austin, Texas.

CIG considers its relations with its employees to be satisfactory and has never experienced a work stoppage or other labor disturbance.

All operating centers maintain a cost effective and efficient operating model.

Transition Services and Administrative Services Agreement

Upon the purchase of the Insurance Company on December 24, 2015, a transition services agreement (the "Transition Services Agreement") was entered into with the prior owner, Great American Financial Resources ("Great American") in Cincinnati, Ohio, pursuant to which Great American agreed to continue to perform certain business functions such as IT, finance, investment, and accounting for a period of 12 to 16 months to allow us time to secure the resources needed to take over those duties.

IT, finance, investment and accounting roles were filled and/or outsourced in fiscal year 2016, and services received under the Transition Services Agreement ended on March 31, 2017.

Simultaneously, an Administrative Services Agreement (the "Administrative Services Agreement") was entered into with Great American, pursuant to which Great American Life Insurance Company ("GALIC") agreed to continue to administer the Insurance Company’s life and annuity businesses for a period of no less than five years.

Effective July 1, 2019, the Insurance Company and GALIC entered into Amendment No.

1 to Administrative Services Agreement which removed the five-year duration clause effectively extending the duration of the Administrative Services Agreement.

The KIC acquisition included the assumption of numerous existing, or the establishment of new, third party administrator (TPA) agreements to continue to provide services and perform processes critical (actuarial, claims processing, rate increase work etc.) to KIC’s ability to continue producing outputs.

All of KIC’s insurance contracts are currently administered by these TPAs.

CGI is planning to bring the majority of the KIC Life & Annuity blocks in-house as part of its 2020 strategic initiatives.

CIG reinsures through cession agreements a significant portion of its insurance business with unaffiliated reinsurers.

In a reinsurance transaction, a reinsurer agrees to indemnify another insurer for part or all of its liability under a policy or policies it has issued for an agreed upon premium.

CIG participates in reinsurance cession activities in order to minimize exposure to significant risks, limit losses, and provide additional capacity for future growth.

CIG also obtains reinsurance to meet certain capital requirements.

Under the terms of the reinsurance agreements, the reinsurer agrees to reimburse CIG for the ceded amount in the event a claim is paid.

Cessions under reinsurance agreements do not discharge CIG's obligations as the primary insurer.

If the assuming reinsurer in a reinsurance agreement is unable to meet its obligations, CIG remains contingently liable.

In the event that reinsurers do not meet their obligations under the terms of the reinsurance agreement, reinsurance recoverable balances could become uncollectible.

CIG evaluates the financial condition of reinsurers to whom CIG cedes business and monitors concentration of credit risk to minimize our exposure.

CIG may also require acceptable collateral to support reinsurance recoverable balances.

The collectability of CIG’s reinsurance recoverable is primarily a function of the solvency of the individual reinsurers.

Although CIG has controls to minimize its exposure, the insolvency of a reinsurer or the inability or unwillingness of a reinsurer to comply with the terms of a reinsurance contract could have a material adverse effect on CIG’s results of operations.

CIG has various quota share reinsurance agreements in place for its long-term care business, with ceded reinsurance totaling $523 million in active life reserves and $124 million disabled life reserves.

Amounts recoverable from reinsurers are estimated in a manner consistent with the gross liability associated with the reinsured policy.

Reserves for Policy Contracts and Benefits

The applicable insurance laws under which insurance companies operate require that they report, as liabilities, policy reserves to meet future obligations on their outstanding policies.

These reserves are the amounts which, with the additional premiums to be received and interest thereon compounded annually at certain assumed rates, are calculated to be sufficient to meet the various policy and contract obligations as they mature.

These laws specify that the reserves shall not be less than reserves calculated using certain specified mortality and morbidity tables, interest rates, and methods of valuation required for statutory accounting.

CIG calculates reserves in conformity with accounting principles generally accepted in the United States of America ("U.S.

GAAP"), which calculations can differ from those specified by the laws of the various states and reported in the statutory financial statements.

These differences result from the use of mortality and morbidity tables and interest assumptions which CIG believes are more representative of the expected experience for these policies than those required for statutory accounting purposes and also result from differences in actuarial reserving methods.

The assumptions CIG uses to calculate its reserves are intended to represent an estimate of experience for the period that policy benefits are payable.

If actual experience is more favorable than our reserve assumptions, then reserves should be adequate to provide for future benefits and expenses.

If experience is less favorable than the reserve assumptions, additional reserves may be required.

The key experience assumptions include claim incidence rates, claim resolution rates, mortality and morbidity rates, policy persistency, interest rates, crediting spreads, and premium rate increases.

CIG periodically reviews its experience and updates its policy reserves and reserves for all claims incurred, as it believes appropriate.

The statements of income include the annual change in reserves for future policy and contract benefits.

The change reflects a normal accretion for premium payments and interest buildup and decreases for policy terminations such as lapses, deaths, and benefit payments.

If policy reserves using best estimate assumptions as of the date of a test for loss recognition are higher than existing policy reserves net of any deferred acquisition costs, the increase in reserves necessary to recognize the deficiency is also included in the change in reserves for future policy and contract benefits.

For further discussion of reserves, refer to the risks related to the Insurance Segment within "Risk Factors" contained herein in Item 1A, the discussion of the Insurance segment operating results included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained herein in Item 7, and Note 2.

Summary of Significant Accounting Policies and Note 12.

Life, Accident and Health Reserves of the "Notes to Consolidated Financial Statements."

CIG manages its cash and invested assets using an approach that is intended to balance quality, diversification, asset/liability matching, liquidity needs and investment return.

The goals of the investment process are to optimize after-tax, risk-adjusted investment income and after-tax, risk-adjusted total return while managing the assets and liabilities on a cash flow and duration basis.

CIG’s liabilities are primarily supported by investments in investment grade, fixed maturity securities reflected on the Company’s consolidated balance sheets.

The Company filed an Investment Management Agreement Form D application with the TDOI to appoint CIG, an affiliate, as investment manager effective January 1, 2017.

The TDOI issued a "no action" letter dated December 19, 2016 with regard to the Form D application.

CIG's insurance company subsidiary is subject to regulations in the jurisdictions where it does business.

In general, the insurance laws of the various states establish regulatory agencies with broad administrative powers governing, among other things, premium rates, solvency standards, licensing of insurers, agents and brokers, trade practices, forms of policies, maintenance of specified reserves and capital for the protection of policyholders, deposits of securities for the benefit of policyholders, investment activities and relationships between insurance subsidiaries and their parents and affiliates.

Material transactions between insurance subsidiaries and their parents and affiliates generally must receive prior approval of the applicable insurance regulatory authorities and be disclosed.

In addition, while differing from state to state, these regulations typically restrict the maximum amount of dividends that may be paid by an insurer to its stockholders in any twelve-month period without advance regulatory approval.

Such limitations are generally based on net earnings or statutory surplus.

Our insurance subsidiary is examined periodically by its state of domicile and by other states in which it is licensed to conduct business.

The domestic examinations have traditionally emphasized financial matters from the perspective of protection of policyholders, but they can and have covered other subjects that an examining state may be interested in reviewing, such as market conduct issues.

Examinations in other states more typically focus on market conduct, such as a review of sales practices, including the content and use of advertising materials and the licensing and appointing of agents and brokers, as well as underwriting, claims, and customer service practices, and identification and handling of unclaimed property to determine compliance with state laws.

Our insurance subsidiary is also subject to assessments by state insurance guaranty associations to cover the proportional cost of insolvent or failed insurers.

Financial impact of annual guaranty assessments for CGI has not been material.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), among other things, established a Federal Insurance Office ("FIO") within the U.S.

The Dodd-Frank Act requires the promulgation of regulations for the FIO to carry out its mandate to focus on systemic risk oversight.

The FIO gathered information regarding the insurance industry and submitted a report to Congress in December 2013.

The report concluded that a hybrid approach to regulation, involving a combination of state and federal government action, could improve the U.S.

insurance system by attaining uniformity, efficiency and consistency, particularly with respect to solvency and market conduct regulation.

The FIO has issued additional reports since that time on various aspects of the insurance sector and insurance regulation.

Legislative proposals currently before Congress, as well as a 2017 report from the Trump Administration, call for refinements of the FIO’s mission including more coordination with state regulators.

We cannot predict the extent to which any of these matters might result in changes to the current state-based system of insurance industry regulation or ultimately impact the Company’s operations.

Risk-based capital ("RBC') standards for U.S.

life insurance companies are prescribed by the National Association of Insurance Commissioners ("NAIC").

The domiciliary state of our insurance subsidiary has adopted a version of the NAIC RBC for Insurers Model Act, which prescribes a system for assessing the adequacy of statutory capital and surplus for all life and health insurers.

The basis of the system is a risk-based formula that applies prescribed factors to the various risk elements in a life and health insurer's business to report a minimum capital requirement proportional to the amount of risk assumed by the insurer.

The life and health RBC formula is designed to measure annually (i) the risk of loss from asset defaults and asset value fluctuations, (ii) the risk of loss from adverse mortality and morbidity experience, (iii) the risk of loss from mismatching of asset and liability cash flow due to changing interest rates, and (iv) business risks.

The formula is used as an early warning tool to identify companies that are potentially inadequately capitalized.

The formula is intended to be used as a regulatory tool only and is not intended as a means to rank insurers generally.

The RBC ratio for our insurance subsidiary remains in line with our expectations and is significantly above the level that would require state regulatory action.

The NAIC has also issued a proposal to implement a new and more granular RBC structure for fixed income asset capital charges.

The proposed structure will expand the fixed income asset designations from six to 20 categories and will revise factor values.

The new structure related to fixed income assets is not in effect for year end 2019.

CIG will continue to monitor the NAIC's activities on this issue.

CIG competes with financial services firms with respect to the acquisition of insurance companies and/or blocks of insurance businesses through merger, stock purchase, or reinsurance transactions or otherwise.

Life Sciences Segment (Pansend Life Sciences, LLC)

Pansend focuses on the development of innovative technologies and products in the healthcare industry.

As of December 31, 2019, Pansend has invested in four companies:

• R2 Technologies, Inc., ("R2"), a company developing medical devices for the treatment of aesthetic and medical skin conditions.

In July 2017, R2 received notification from the United States Food and Drug Administration of market clearance of R2's second generation device, the Dermal Cooling System.

The Dermal Cooling System is a cryosurgical instrument intended for use in dermatologic procedures for the removal of benign lesions of the skin, based on exclusive licensing rights to a novel technology developed at Massachusetts General Hospital and Harvard Medical School;

• Genovel Orthopedics, Inc.

("Genovel"), a company developing novel partial and total knee replacements for the treatment of osteoarthritis of the knee based on patent-protected technology invented at New York University School of Medicine;

As of December 31, 2020, Pansend is currently invested in four companies:

R2 Technologies, Inc.

("R2"), a company developing and commercializing breakthrough aesthetic medical and non-medical devices in the aesthetic dermatology market.

Founded in 2014 by Pansend and Blossom Innovations, LLC, R2 exclusively licenses intellectual property developed at Massachusetts General Hospital and Harvard Medical School.

Skin lightening and brightening is a large and fast growing segment of aesthetic dermatology.

Current lightening products and/or procedures may be ineffective, unpredictable or even harmful, and patients often must compensate for lack of efficacy by using makeup or concealers.

R2 has developed breakthrough CryoAesthetic technologies that uniquely deliver in-office treatments that provide patients skin lightening, brightening, skin tone evening and reduction or elimination of hyperpigmentation.

R2 uses patented CryoAesthetic technology, which is the use of controlled cooling to suppress melanin, inflammation and discomfort by precisely controlling time and temperature to deliver an effective treatment with no social downtime.

In 2019, R2 closed its Series B “Commercialization” round with its strategic partner, Huadong Medicine Company, Ltd., (“Huadong”) and, in exchange for a staged $30 million investment, entered into an exclusive distribution agreement with Huadong for the Asia-Pacific region.

As a part of this agreement, Huadong’s existing sales force will be responsible for sales and marketing in the Asia-Pacific region, and R2 will receive a share of the residual profits from such sales.

As of December 31, 2020, R2 received two $10 million staged investments from Huadong based on the completion of certain pre-determined milestones at a post-money valuation of approximately $90 million.

On February 3, 2021, the Company announced that R2 received its third and final $10 million staged investment at a pre-determined post-money valuation of approximately $113 million.

R2 currently has three products in various stages of commercialization and development:

Glacial Rx – Launching in the first quarter of 2021 in the United States after receiving U.S.

Food and Drug Administration (“FDA”) clearance, the Glacial Rx system removes benign lesions of the skin (such as those caused by aging, sun damage and/or genetics), leaving the skin with a smoother and brighter appearance with little to no pain and downtime for the patient.

The Glacial Rx system will be sold to dermatologists and plastic surgeons and operated by trained healthcare professionals.

Glacial Spa – Launching in the first half of 2021 in China after receiving China Non-Medical Classification, the Glacial Spa is a cooling experience used to even skin tone, and brighten and lighten skin.

The Glacial Spa system will be sold by Huadong’s existing sales force to spas and operated by a trained aesthetician.

Glacial AI – Currently undergoing research and development, the Glacial AI is an autonomous cooling device focused on whole-body skin lightening and brightening.

MediBeacon, Inc.

("MediBeacon"), a company developing a proprietary non-invasive real-time monitoring system for the evaluation of kidney function.

This system (known as the MediBeacon Optical Renal Function Monitor system) uses an optical skin sensor combined with a proprietary agent that glows in the presence of light.

It will be the first and only, non-invasive system to enable real-time, direct monitoring of renal function at point-of-care.

On March 2, 2017, MediBeacon announced the successful completion of a real-time, point of care renal function clinical study on subjects with impaired kidney function at Washington University in St.

On June 8, 2016, MediBeacon announced the completion of the acquisition of Mannheim Pharma & Diagnostics, a life science company based in Mannheim, Germany.

Recently, MediBeacon announced a collaborative research project with scientists at Washington University School of Medicine in St.

Louis, Missouri in a research project aimed at improving the understanding of childhood malnutrition and its related problems, including stunted growth.

The work is funded by a Grand Challenges Explorations Phase II grant from the Bill & Melinda Gates Foundation to Washington University.

It is a follow-up grant to work carried out through a Phase I Grand Challenges Explorations Award made in 2014.

MediBeacon was also recently the recipient of a Small Business Innovation Research grant supported by the National Eye Institute of the National Institutes of Health (NIH).

With this support, MediBeacon is pursuing research into the use of a MediBeacon fluorescent tracer agent to visualize vasculature in the eye.

The focus of the NIH-supported project is to determine if a specific proprietary MediBeacon tracer agent when administered has the potential to provide additional clinical value versus the existing standard of care.

Further, on October 22, 2018, the U.S.

Food and Drug Administration (FDA) granted Breakthrough Device designation to the MediBeacon's Transdermal GFR Measurement System (TGFR).

The device is intended to measure Glomerular Filtration Rate (GFR) in patients with impaired or normal renal function;

• Triple Ring Technologies, a research and development engineering company specializing in medical devices, homeland security, imaging sensors, optics, fluidics, robotics and mobile healthcare.

Broadcasting Segment (HC2 Broadcasting Holdings, Inc.)

MediBeacon, Inc.

("MediBeacon") develops proprietary non-invasive real-time monitoring system for the evaluation of kidney function.

Current methods to evaluate kidney function are indirect estimates that may be inaccurate and are not real-time.

Chronic kidney disease is estimated to affect more than 850 million people worldwide.

MediBeacon’s Transdermal GFR Measurement System (“TGFR”), which uses an optical skin sensor combined with Lumitrace, a proprietary agent that glows in the presence of light, will be the first non-invasive system to enable real-time, direct monitoring of kidney function at point-of-care.

On October 22, 2018, the FDA granted Breakthrough Device designation to the TGFR for the measurement of Glomerular Filtration Rate (“GFR”) in patients with impaired or normal kidney function.

Under the Breakthrough Device program, the FDA works with companies to expedite regulatory review in order to give patients more timely access to innovative diagnostic and therapeutic technologies.

MediBeacon is expected to begin its U.S.

pivotal study in the second half of 2021.

In 2019, MediBeacon closed its Series B financing round with its strategic partner, Huadong, providing Huadong with exclusive rights to MediBeacon’s portfolio of assets in Greater China in exchange for a staged $30 million investment.

Further, Huadong will be responsible for funding clinical trials, commercial and regulatory activities in 25 countries in the Asia-Pacific region, including Greater China.

In exchange, MediBeacon will receive royalty payments on net sales of the TGFR system.

As of December 31, 2020, MediBeacon has received $15 million from Huadong at a pre-money valuation of approximately $300 million.

Contingent upon the regulatory approval of the TGFR system by the FDA, Huadong will make a second $15 million investment at a pre-money valuation of approximately $400 million.

In 2020, Huadong amended its commercial agreement, which will provide an additional $20 million pre-payment of future China royalties over the next two years to pursue Class 1 status in China, allowing the device to immediately enter the Chinese hospital system.

As of December 31, 2020, MediBeacon has received approximately $10 million to include China in MediBeacon's global pivotal study.

MediBeacon is also exploring additional clinical applications of the patented Lumitrace technology, including:

Gastrointestinal permeability, which has the potential to transform management of autoimmune and inflammatory diseases, including Crohn’s disease.

Grants from the Bill and Melinda Gates Foundation, in collaboration with scientists at Washington University School of Medicine in St.

Louis and the Mayo Clinic, have supported MediBeacon’s research in this area.

During 2020, the first in-human clinical studies were conducted to establish the feasibility of fluorescent tracer agent-based systems to quantify the permeability of the gastrointestinal tract in patients with active Crohn’s disease.

Ocular angiography, which has the potential to diagnose and monitor vasculature leakage in the eye, a key factor in diagnosing and monitoring various diseases, including macular degeneration, diabetic retinopathy and retinal vasculitis while avoiding current potential clinical side effects such as allergic reactions, nausea and vomiting.

MediBeacon was the recipient of a Small Business Innovation Research grant supported by the National Eye Institute of the National Institutes of Health (NIH).

With this support, MediBeacon is pursuing research into the use of a MediBeacon fluorescent tracer agent to visualize vasculature in the eye, having recently received FDA approval in 2020 to begin clinical studies.

Surgical visualization feasibility, which has the potential to be used in open, laparoscopic and robotic surgeries to identify critical structures, tumor margins and blood flow in tissues in real-time.

Clinical research in this area is still underway.

Genovel Orthopedics, Inc.

("Genovel") is a medical device company developing novel partial and total knee replacements for the treatment of osteoarthritis of the knee based on patented technology developed at New York University School of Medicine.

Triple Ring Technologies

Triple Ring Technologies is a research and development engineering company specializing in medical devices, homeland security, imaging sensors, optics, fluidics, robotics and mobile healthcare.

Spectrum Segment (HC2 Broadcasting Holdings, Inc.)

HC2 Broadcasting Holdings Inc., ("HC2B" and together with its subsidiaries, "HC2 Broadcasting"), a majority-owned subsidiary of HC2 Holdings, Inc., is an owner and operator of broadcast TV stations throughout the U.S.

HC2 Broadcasting was formed in late 2017 and has grown principally through acquisitions, with over 30 completed through December 31, 2019.

HC2 Broadcasting’s objective is to build a comprehensive, nationwide over-the-air ("OTA") broadcast TV distribution platform that will reach the majority of the U.S.

population when fully built, creating an avenue for high-end content providers to deliver their product OTA to more homes and, ultimately, mobile devices.

HC2 Broadcasting’s stations will be interconnected to an internet protocol network backbone, which will allow HC2 Broadcasting to monitor and operate the stations remotely, resulting in significant cost efficiencies and redundancy.

and an avenue for high-end content providers to deliver their product OTA to more homes and, ultimately, mobile devices.

HC2 Broadcasting’s stations are interconnected to an internet protocol network backbone, which allows HC2 Broadcasting to monitor and operate the stations remotely, resulting in significant cost efficiencies.

As of December 31, 2020, HC2 Broadcasting operated approximately 221 stations, including 6 Full-Power stations, 49 Class A stations and 166 LPTV stations.

By end of 2020, HC2 Broadcasting expects to operate over 250 stations, collectively able to broadcast over 1,500 sub-channels and reaching 100 markets between the U.S.

and Puerto Rico, including 34 of the top 35 markets with over 100 stations concentrated in the top 35 markets.

HC2 Broadcasting stations are collectively able to broadcast over 1,500 sub-channels and reach 94 markets in the U.S.

and Puerto Rico, including 34 of the top 35 markets.

HC2B has approximately 100 stations concentrated in the top 35 markets.

HC2 Broadcasting also owns approximately 200 construction permits for broadcast stations, a portion of which are expected to be selectively built and licensed over the next 24 months, increasing HC2 Broadcasting’s footprint to approximately 130 markets.

In December 2017, HC2 Broadcasting also acquired Azteca America, formerly the US subsidiary of TV Azteca, S.A.B.

("TV Azteca"), Mexico’s second largest broadcast network.

HC2 Broadcasting includes Azteca America,.

Azteca America airs Spanish language programming targeting U.S.

The majority of the network’s programming is provided by the former parent company under a multi-year Programming Licensing Agreement ("PLA").

The majority of the network’s programming is provided by TV Azteca, S.A.B.

("TV Azteca"), Mexico’s second largest broadcast network, under a multi-year Programming Licensing Agreement ("PLA").

As of December 31, 2020, Azteca America was carried on approximately 85 HC2 Broadcasting stations.

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WKOB-LD LPTV Station

W28ES-D LPTV Station

W02CY-D LPTV Station

Los Angeles, CA 2 KSKJ-CD Class A Station

KHIZ-LD LPTV Station

KYAN-LD LPTV Station

KVTU-LD LPTV Station

Chicago, IL 3 WPVN-CD Class A Station

W31EZ-D LPTV Station

Philadelphia, PA 4 WPSJ-CD Class A Station

WZPA-LD LPTV Station

WDUM-LD LPTV Station

W36DO-D LPTV Station

Worth, TX 5 KAZD Full-Power Station

KNAV-LP LPTV Station

W25FG-LD LPTV Station

Worth, TX 5 KNAV-LP LPTV Station

KODF-LD LPTV Station

KHPK-LD LPTV Station

K07AAD-D LPTV Station

KPFW-LD LPTV Station

KJJM-LD LPTV Station

San Francisco - Oakland - San Jose, CA 6 KEMO-TV Full-Power Station

KQRO-LD LPTV Station

KFTY-LD LPTV Station

Houston, TX 8 KYAZ Full-Power Station

Houston, TX 8 KUGB-CD Class A Station

KUVM-CD Class A Station

KUGB-CD Class A Station

KUVM-LD LPTV Station

KEHO-LD LPTV Station

KBMN-LD LPTV Station

Boston, MA 9 WLEK-LD LPTV Station

Atlanta, GA 10 WYGA-CD Class A Station

WUVM-LP LPTV Station

WDWW-LD LPTV Station

WUEO-LD LPTV Station

WIEF-LD LPTV Station

Phoenix - Prescott, AZ 11 KMOH-TV Full-Power Station

KPDF-CD Class A Station

WUVM-LP LPTV Station

Phoenix - Prescott, AZ 11 KPDF-CD Class A Station

K18JL-D LPTV Station

KTVP-LD LPTV Station

KEJR-LD LPTV Station

Tampa - St Petersburg - Sarasota, FL 12 WXAX-CD Class A Station

WTAM-LD LPTV Station

W16DQ-D LPTV Station

W15CM-D LPTV Station

Seattle, WA 13 KUSE-LD LPTV Station

Detroit, MI 14 WDWO-CD Class A Station

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KJNK-LD LPTV Station

KMBD-LD LPTV Station

KMQV-LD LPTV Station

KWJM-LD LPTV Station

K28PQ-D LPTV Station

Lauderdale, FL 16 W16CC-D LPTV Station

Denver, CO 17 K05MD-D LPTV Station

Orlando - Daytona Beach - Melbourne, FL 18 WFEF-LD LPTV Station

Cleveland - Akron - Canton, OH 19 WQDI-LD LPTV Station

Denver, CO 17 KRDH-LD LPTV Station

Orlando - Daytona Beach - Melbourne, FL 18 WATV-LD LPTV Station

WFEF-LD LPTV Station

Cleveland - Akron - Canton, OH 19 WUEK-LD LPTV Station

WQDI-LD LPTV Station

KONV-LD LPTV Station

WUEK-LD LPTV Station

WEKA-LD LPTV Station

Sacramento - Stockton - Modesto, CA 20 KBTV-CD Class A Station

KFTY-LD LPTV Station

KFMS-LD LPTV Station

KAHC-LD LPTV Station

K04QR-D LPTV Station

KBIS-LD LPTV Station

KFMS-LD LPTV Station

KFKK-LD LPTV Station

KBIS-LD LPTV Station

K12XJ-D LPTV Station

Charlotte, NC 21 W15EB-D Class A Station

WVEB-LD LPTV Station

WHEH-LD LPTV Station

WVEB-LD LPTV Station

Portland, OR 22 KOXI-CD Class A Station

Louis, MO 23 K25NG-D Class A Station

KBGU-LP LPTV Station

KPTN-LD LPTV Station

KBGU-LD LPTV Station

WODK-LD LPTV Station

KPTN-LD LPTV Station

W09DL-D LPTV Station

WLEH-LD LPTV Station

Pittsburgh, PA 24 WWLM-CD Class A Station

Pittsburgh, PA 24 WWKH-CD Class A Station

WJMB-CD Class A Station

WMVH-CD Class A Station

WWLM-CD Class A Station

WKHU-CD Class A Station

WWKH-CD Class A Station

Indianapolis, IN 25 WSDI-LD LPTV Station

Indianapolis, IN 25 WUDZ-LD LPTV Station

WSDI-LD LPTV Station

WQDE-LD LPTV Station

Baltimore, MD 26 WQAW-LP LPTV Station

Nashville, TN 28 WJFB Full-Power Station

Raleigh - Durham - Fayetteville, NC 27 WIRP-LD LPTV Station

WNCB-LD LPTV Station

Nashville, TN 28 WCTZ-LD LPTV Station

WKUW-LD LPTV Station

WCTZ-LD LPTV Station

San Diego, CA 29 KSKT-CD Class A Station

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KBTU-LD LPTV Station

San Antonio, TX 31 K25OB-D Class A Station

KVDF-CD Class A Station

San Antonio, TX 31 KVDF-CD Class A Station

K17MJ-D LPTV Station

KSAA-LP LPTV Station

KOBS-LD LPTV Station

KISA-LD LPTV Station

KSSJ-LD LPTV Station

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Columbus, OH 34 WDEM-CD Class A Station

Milwaukee, WI 35 WTSJ-LD LPTV Station

West Palm Beach - Ft.

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WDOX-LD LPTV Station

Las Vegas, NV 39 K36NE-D Class A Station

KNBX-CD Class A Station

WXOD-LD LPTV Station

Las Vegas, NV 39 KNBX-CD Class A Station

KHDF-CD Class A Station

KVPX-LD LPTV Station

K36NE-D Class A Station

KEGS-LD LPTV Station

KVPX-LD LPTV Station

Austin, TX 40 KGBS-CD Class A Station

KVAT-LD LPTV Station

Jacksonville, FL 41 WJXE-LD LPTV Station

Jacksonville, FL 41 WODH-LD LPTV Station

WKBJ-LD LPTV Station

WRCZ-LD LPTV Station

WJXE-LD LPTV Station

Oklahoma City, OK 43 KOHC-CD Class A Station

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Birmingham - Anniston - Tuscaloosa, AL 44 WUOA-LD LPTV Station

Albuquerque - Santa Fe, NM 46 KQDF-LP LPTV Station

Louisville, KY 48 W27DH-D LPTV Station

Albuquerque - Santa Fe, NM 46 KWPL-LD LPTV Station

KQDF-LP LPTV Station

New Orleans, LA 50 WTNO-LP Class A Station

WQDT-LD LPTV Station

Memphis, TN 51 W15EA-D Class A Station

WPED-LD LPTV Station

WQEK-LD LPTV Station

KPMF-LD LPTV Station

WQEO-LD LPTV Station

Buffalo, NY 52 WVTT-CD Class A Station

WWHC-LP LPTV Station

Myers - Naples, FL 53 WGPS-LP LPTV Station

Myers - Naples, FL 53 WGPS-LD LPTV Station

Richmond - Petersburg, VA 54 WUDW-LD LPTV Station

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WWBK-LD LPTV Station

Fresno - Visalia, CA 55 KZMM-CD Class A Station

K17JI-D Class A Station

Mobile, AL - Pensacola, FL 57 WEDS-LD LPTV Station

Fresno - Visalia, CA 55 K17JI-D Class A Station

KZMM-CD Class A Station

Mobile, AL - Pensacola, FL 57 WWBH-LP LPTV Station

WEDS-LD LPTV Station

Tulsa, OK 58 KZLL-LD LPTV Station

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Little Rock - Pine Bluff, AR 62 KWMO-LD LPTV Station

K23OW-D LPTV Station

KENH-LD LPTV Station

K23OW-D LPTV Station

Des Moines - Ames, IA 68 KAJR-LD LPTV Station

KCYM-LD LPTV Station

KRPG-LD LPTV Station

KCYM-LD LPTV Station

Omaha, NE 71 KAJS-LD LPTV Station

KQMK-LD LPTV Station

Wichita - Hutchinson, KS 72 KFVT-LD LPTV Station

Springfield, MO 73 KFKY-LD LPTV Station

KCNH-LD LPTV Station

Charleston - Huntington, WV 74 WOCW-LD LPTV Station

Columbia, SC 75 WDYH-LD LPTV Station

Rochester - Mason City - Austin, NY 76 WGCE-CD Class A Station

Flint - Saginaw - Bay City, MI 77 WFFC-LD LPTV Station

WFKB-LD LPTV Station

W35DQ-D LPTV Station

Flint - Saginaw - Bay City, MI 77 W35DQ-D LPTV Station

WFFC-LD LPTV Station

Huntsville - Decatur - Florence, AL 78 W34EY-D Class A Station

1 unchanged sentence

WZCK-LD LPTV Station

Waco - Temple - Bryan, TX 82 KAXW-LD LPTV Station

KZCZ-LD LPTV Station

Waco - Temple - Bryan, TX 82 KZCZ-LD LPTV Station

KAXW-LD LPTV Station

Harlingen - Weslaco - Brownsville - McAllen, TX 83 KRZG-CD Class A Station

KNWS-LP LPTV Station

KAZH-LP LPTV Station

KNWS-LP LPTV Station

Paducah, KY - Cape Girardeau, MO - Harrisburg, IL 84 W29CI-D Class A Station

Champaign - Springfield - Decatur, IL 88 WCQA-LD LPTV Station

Champaign - Springfield - Decatur, IL 88 W23EW-D LPTV Station

WCQA-LD LPTV Station

Savannah, GA 89 WUET-LD LPTV Station

WDID-LD LPTV Station

Cedar Rapids - Waterloo - Iowa City, IA 90 KWKB Full-Power Station

KFKZ-LD LPTV Station

Charleston, SC 91 WBSE-LD LPTV Station

Chattanooga, TN 92 WYHB-CD Class A Station

Myrtle Beach - Florence, SC 97 WLDW-LD LPTV Station

Smith - Fayetteville - Springdale - Rogers, AR 101 KAJL-LD LPTV Station

KFLU-LD LPTV Station

Baton Rouge, LA 94 K29LR-D LPTV Station

K27NB-D LPTV Station

South Bend - Elkhart, IN 98 KPDS-LD LPTV Station

Smith - Fayetteville - Springdale - Rogers, AR 101 KFLU-LD LPTV Station

KAJL-LD LPTV Station

Boise, ID 102 K31FD-D Class A Station

K17ED-D Class A Station

KBKI-LD LPTV Station

KFLL-LD LPTV Station

Evansville, IN 105 WUCU-LD LPTV Station

KBKI-LD LPTV Station

Augusta, GA - Aiken, SC 108 WIEF-LD LPTV Station

Wayne, IN 110 WFWC-CD Class A Station

WCUH-LD LPTV Station

W30EH-D LPTV Station

W25FH-D LPTV Station

WODP-LD LPTV Station

Tyler - Longview- Nacogdoches, TX 114 KDKJ-LD LPTV Station

W25FH-D LPTV Station

W30EH-D LPTV Station

Tyler - Longview- Nacogdoches, TX 114 KCEB Full-Power Station

KPKN-LD LPTV Station

KDKJ-LD LPTV Station

KBJE-LD LPTV Station

KKPD-LD LPTV Station

KPKN-LD LPTV Station

Yakima - Pasco - Richland - Kennewick, WA 118 K33EJ-D Class A Station

Macon, GA 119 W21DA-D LPTV Station

Bakersfield, CA 125 K08MM-D Class A Station

Macon, GA 119 W28EU-D LPTV Station

Montgomery - Selma, AL 122 WQAP-LD LPTV Station

WDSF-LD LPTV Station

Lafayette, LA 123 K21OM-D LPTV Station

Bakersfield, CA 125 KTLD-CD Class A Station

KXBF-LD LPTV Station

Santa Barbara - San Luis Obispo, CA 126 KVMM-CD Class A Station

Santa Barbara - San Luis Obispo, CA 126 KSBO-CD Class A Station

KQMM-CD Class A Station

KVMM-CD Class A Station

KDFS-CD Class A Station

KSBO-CD Class A Station

KLDF-CD Class A Station

KQMM-CD Class A Station

KZDF-LP LPTV Station

Wilmington, NC 127 WQDH-LD LPTV Station

Corpus Christi, TX 128 KCCX-LP LPTV Station

KYDF-LP LPTV Station

K20JT-D LPTV Station

K29IP-D LPTV Station

Corpus Christi, TX 128 KYDF-LD LPTV Station

K21OC-D LPTV Station

K32OC-D LPTV Station

KCCX-LD LPTV Station

Columbus, GA - Opelika - Auburn, AL 130 W29FD-D LPTV Station

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Palm Springs, CA 141 K21DO-D Class A Station

Lubbock, TX 142 KNKC-LD LPTV Station

Beaumont - Port Arthur, TX 143 KBMN-LD LPTV Station

Joplin, MO - Pittsburg, KS 153 KPJO-LD LPTV Station

KRLJ-LD LPTV Station

Lubbock, TX 142 K24GP LPTV Station

KNKC-LD LPTV Station

Topeka, KS 144 K35KX-D LPTV Station

Joplin, MO - Pittsburg, KS 153 KRLJ-LD LPTV Station

KPJO-LD LPTV Station

Biloxi-Gulfport, MS 155 W33EG-D LPTV Station

Quincy, IL - Hannibal, MO - Keokuk, IA 174 WVDM-LD LPTV Station

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WCZU-LD LPTV Station

Charlottesville, VA 182 WUDJ-LD LPTV Station

Puerto Rico NA WOST Full-Power Station

WQQZ-CD Class A Station

WWKQ-LD LPTV Station

W20EJ-D LPTV Station

WWKQ-LD LPTV Station

W27DZ-D LPTV Station

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(b) WTXX-LD is an LPTV license broadcasting on full-power station WEDW, pursuant to a channel-sharing agreement.

The station is currently broadcasting from Bridgeport, CT.

An application for a DTS installation is pending approval by the FCC, enabling the station to broadcast from the Empire State Building in midtown Manhattan once approved.

The station is currently broadcasting from Stamford, CT.

A DTS installation is underway that will enable the station to broadcast from Manhattan, NY.

Broadcast Operations

2 unchanged sentences

The programming Broadcasting distributes includes networks targeting shopping, weather, sports and entertainment programming, as well as religious networks and networks targeting select ethnic groups.

Broadcast station revenue is generated primarily from the sale of television airtime in return for a fixed fee or a portion of the related ad sales.

In a typical broadcast station revenue agreement, the owner of a station makes available, for a fee, airtime on a station subchannel to a third party.

The third party broadcasts during that airtime and collects revenue from advertising aired during such content.

Broadcast station revenue is recognized over the life of the contract.

The fees charged can be fixed or variable and the contracts that the Company enters into are generally short-term in nature.

Variable fees are usage/sales-based and are recognized as revenue when the subsequent usage occurs.

Network advertising revenue is generated primarily from the sale of television airtime for advertisements or paid programming.

Network advertising inventory is sold in the upfront and scatter markets and is offered at market rates, based on a number of factors such as available inventory, network programming and ratings, and economic conditions.

In the upfront market, advertisers buy advertising time for the upcoming season in advance.

In the scatter market, advertisers buy advertising time close to the time when the commercials will be run and varies quarter over quarter.

In the upfront market, advertisers buy advertising time for the upcoming season.

In the scatter market, advertisers buy advertising time close to when the commercials will be run and varies quarter over quarter.

In some cases, the network advertising sales are subject to impressions guarantees that require the Company to provide additional advertising time if the guaranteed audience levels are not achieved.

Network advertising revenue is recognized when advertising spots are aired, and as impressions guarantees, if any, are achieved.

Network advertising revenue is recognized when advertising spots are aired, and as impression guarantees, if any, are achieved.

Impressions are defined as the number of times that an advertisement is viewed by users.

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For the local inventory the Company sells national spot advertising and local advertising.

National spot advertising represents time sold to advertisers that advertise in more than one designated market area ("DMA").

National spot advertising represents time sold to advertisers that advertise in more than one DMA.

Local advertising revenue is generated from local merchants and service providers.

National and local advertising spots are generally sold without guaranteed ratings, and revenue is recognized when spots are aired.

In the normal course of business, the Company uses an intermediary or agent in executing transactions with third parties.

When the intermediary or agent is determined to be the Company’s customer, the Company records revenue based on the amount it expects to receive from the agent, net of commissions.

Broadcast station revenue is generated primarily from the sale of television airtime in return for a fixed fee or a portion of the related ad sales recognized by the third party.

In a typical broadcast station revenue agreement, the licensee of a station makes available, for a fee, airtime on its station to a party which supplies content to be broadcast during that airtime and collects revenue from advertising aired during such content.

Broadcast station revenue is recognized over the life of the contract, when the program is broadcast.

The fees that we charge can be fixed or variable and the contracts that the Company enters into are generally short-term in nature.

Variable fees are usage/sales-based and recognized as revenue when the subsequent usage occurs.

Transaction prices are based on the contract terms, with no material judgments or estimates.

Network distribution revenue consists of fees charged and payments received from cable, satellite and other multiple video program distribution (“MVPD”) systems for their retransmission of our network content.

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Network distribution revenue is determined on the contractual rate-per-subscriber negotiated in the agreements, the average number of subscribers that receive content, and the market demand for the content that the Company provides.

Network distribution fees received from cable and satellite MVPDs are recognized as revenue in the period that services are provided.

Network distribution fees received from MVPDs are recognized as revenue in the period that services are provided.

HC2 Broadcasting’s strategy includes the following initiatives:

• HC2 Broadcasting is principally designed to be a nationwide OTA distribution platform, targeting the growing number of OTA households in the U.S.;

• HC2 Broadcasting's vision is to capitalize on the opportunities to bring valuable content to more viewers over-the-air and to position itself for the changing media landscape and to take advantage of the technology advances rapidly underway in the industry.

• As of December 31, 2020, 203 operating stations are connected to HC2 Broadcasting's cloud-based IP backbone, can be operated and monitored remotely, allowing for substantial cost savings and operating efficiencies.

In 2018, FCC deregulation in TV broadcasting has eliminated the need for full time employees and studio facilities in markets where HC2 Broadcasting operates Full-Power and Class A stations, thus allowing HC2 Broadcasting to operate these stations remotely at greater cost efficiency;

• HC2 Broadcasting's major focus is to attract the highest quality content providers looking for nationwide distribution.

With its national footprint and cloud-based infrastructure, HC2 Broadcasting also expects to realize premium pricing for content distribution;

• HC2 Broadcasting's growing revenue source is from providing national carriage to content providers.

Pricing carriage contracts is in part determined by the signal contour of the broadcast station and the number of OTA TV households in a given market, as well as market supply and demand;

• Once all the operating stations are connected to HC2 Broadcasting's cloud-based IP backbone, HC2 Broadcasting's stations can be operated and monitored remotely, allowing for substantial cost savings and operating efficiencies.

Recent FCC deregulation in TV broadcasting has eliminated the need for full time employees and studio facilities in markets where HC2 Broadcasting operates Full-Power and Class A stations, thus allowing HC2 Broadcasting to operate these stations remotely at greater cost efficiency;

• As an anchor network tenant, Azteca America is distributed on the HC2 Broadcasting platform in 60+ markets.

• HC2 Broadcasting's major focus is to attract the highest quality content providers looking for nationwide distribution.

With its national footprint and cloud-based infrastructure, HC2 Broadcasting also expects to realize premium pricing for content distribution;

New Broadcast TV Technology:

In 2017, the FCC approved ATSC 3.0, next generation broadcast standards defining how television signals are broadcast and interpreted.

ATSC 3.0 is an enhancement to previous broadcast standards, providing mobility, addressability, increased capacity, and IP connectivity.

ATSC 3.0 merges linear and non-TV data services alongside OTA and over-the-top ("OTT").

Among the many emerging opportunities are hyper-local news, weather, and traffic;

ATSC 3.0 is an enhancement to previous broadcast standards, providing enhanced picture and audio quality, mobility, addressability, increased capacity, and IP connectivity.

ATSC 3.0 will offer a platform to merge linear programming and non-TV data services alongside OTA and over-the-top ("OTT").

Among the many emerging opportunities will be hyper-local news, weather, and traffic;

dynamic ad insertion;

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and connectivity to automobiles.

In addition, ATSC 3.0 provides new emergency capabilities including advanced alerting functions which can provide evacuation routes and device wake-up features.

All of these features will be available to mobile devices.

In addition, ATSC 3.0 will provide new emergency capabilities including advanced alerting functions which can relay evacuation routes and device wake-up features.

Many of these features will be available to mobile devices.

As of December 31, 2020, HC2 Broadcasting employed approximately 58 people across the U.S.

Operating Segment and Related Information for additional detail regarding HC2 Broadcasting's operating segment and financial information by geographic area.

Operating Segment and Related Information for additional detail regarding our Segment's operations and financial information.

Insurance Segment (Continental Insurance Group Ltd.)

CIG currently provides long-term care, life, annuity, and other accident and health coverage to approximately 124,000 individuals through CGI.

The benefits provided by CIG's insurance operations help protect policy and certificate holders from the financial hardships associated with illness, injury, loss of life, or income discontinuation.

CIG’s plan is to leverage its existing platform and industry expertise to identify strategic growth opportunities for managing closed blocks of long-term care business.

Growth opportunities are expected to come from:

• Future acquisitions of long-term care businesses and/or closed blocks of long-term care policies;

• Reinsurance arrangements;

• Third party administration arrangements;

• Strategically diversifying into other product lines.