Note 4 - Debt

The Company designates debt obligations as either short-term or long-term based on maturity date at issuance. Total amortized cost of Long-term Debt, Current and Non-current, outstanding at March 31, 2017 and December 31, 2016 was:



(Dollars in Millions)	Mar 31, 2017		Dec 31, 2016
Senior Notes:
6.00% Senior Notes due May 15, 2017	$	359.9	$	359.8
4.35% Senior Notes due February 15, 2025	247.8		247.7
7.375% Subordinated Debentures due February 27, 2054	144.1		144.1
Total Long-term Debt, Current and Non-current, Outstanding	$	751.8	$	751.6

There were no outstanding borrowings at either March 31, 2017 or December 31, 2016 under Kemper’s $225.0 million, unsecured, revolving credit agreement which expires June 2, 2020.

Kemper’s subsidiaries, Trinity Universal Insurance Company (“Trinity”) and United Insurance Company of America (“United Insurance”), are members of the Federal Home Loan Bank (“FHLB”) of Dallas and Chicago, respectively. During the first three months of 2016, Trinity borrowed and repaid $10.0 million, respectively, under its agreement with the FHLB of Dallas. United Insurance did not borrow under its agreement with the FHLB of Chicago during the first three months of 2016. Trinity and United Insurance did not borrow under their respective agreements during the first three months of 2017. There were no advances from the FHLB of Dallas or Chicago outstanding at either March 31, 2017 or December 31, 2016.

The Company anticipates issuing debt in the second quarter of 2017 to refinance a portion of its Senior Notes due May 15, 2017. In anticipation of the debt issuance and for risk management purposes, during the fourth quarter of 2016, the Company entered into a derivative transaction to hedge the risk of changes in the debt cash flows attributable to changes in the benchmark U.S. Treasury interest rate during the period leading up to the probable debt issuance (“Treasury Lock”). The Treasury Lock was formally designated as a cash flow hedge at inception and qualified for hedge accounting treatment. As such, the effective portion of the gain or loss on the derivative instrument is reported as a component of Other Comprehensive Income and will be amortized into earnings in the same periods that the hedged items affect earnings. The amortization will be included in Interest and Other Expenses, which is the same line item associated with the forecasted transaction. The ineffective portion of the change in fair value of the derivative instrument, if any, is recognized immediately in earnings. The Treasury Lock was in a loss position of $0.4 million at March 31, 2017 and, accordingly, such loss has been included in Other Liabilities in the Condensed Consolidated Balance Sheet at such date. The Treasury Lock was in a gain position of $1.6 million at December 31, 2016 and, accordingly, such gain has been included in Other Assets in the Condensed Consolidated Balance Sheet at such date. As there has been no hedge ineffectiveness since inception, the change in fair value has been included in entirety in Other Comprehensive Income. As the hedged transaction has yet to occur, no amounts have been reclassified from Other Comprehensive Income into earnings. If debt is issued in the second quarter of 2017 and its terms are consistent with

Note 4 - Debt (continued)

what has been anticipated, the Company expects to reclassify less than $0.1 million of net losses on derivative instruments from AOCI to earnings for the year ended December 31, 2017 as interest expense on the debt is recognized.

Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, was $10.9 million and $11.2 million for the three months ended March 31, 2017 and 2016, respectively. Interest paid, including facility fees, was $8.3 million for the both the three months ended March 31, 2017 and the three months ended March 31, 2016.