Notes Payable and Amounts Due Under Repurchase Agreements

9 Months Ended

Sep. 30, 2020

Notes Payable and Amounts Due Under Repurchase Agreements

Notes payable includes the following:


	September 30, 2020		December 31, 2019
	(Dollars in thousands)
Senior notes due 2027
Principal	$	500,000	$	500,000
Unamortized debt issue costs	(4,218)		(4,607)
Unamortized discount	(254)		(277)






	$	495,528	$	495,116

On June 16, 2017, we issued $500 million aggregate principal amount of senior unsecured notes due 2027 which bear interest at 5.0% per year and will mature on June 15, 2027 (the "2027 Notes"). The 2027 Notes were issued at a $0.3 million discount, which is being amortized over the term of the 2027 Notes using the effective interest method. Contractual interest is payable semi-annually in arrears each June 15th and December 15th. The initial transaction fees and costs totaling $5.8 million were capitalized as deferred financing costs and are being amortized over the term of the 2027 Notes using the effective interest method.

As part of our investment strategy, we enter into securities repurchase agreements (short-term collateralized borrowings). When we do borrow cash on these repurchase agreements, we pledge collateral in the form of debt securities with fair values approximately equal to the amount due and we use the cash to purchase debt securities ahead of the time we collect the cash from selling annuity policies to avoid a lag between the investment of funds and the obligation to credit interest to policyholders. We earn investment income on the securities purchased with these borrowings at a rate in excess of the cost of these borrowings. Such borrowings averaged $19.0 million during the nine months ended September 30, 2020, compared to $9.7 million and $39.4 million for the three and nine months ended September 30, 2019. We had no borrowings under repurchase agreements during the three months ended September 30, 2020. The maximum amount borrowed was $186.4 million and $243.6 million during the nine months ended September 30, 2020 and 2019, respectively. The weighted average interest rate on amounts due under repurchase agreements was 1.73% for the nine months ended September 30, 2020, compared to 2.25% and 2.97% for the three and nine months ended September 30, 2019.