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 September 30, 2017 and December 31, 2016 was:



(Dollars in Millions)	Sep 30, 2017		Dec 31, 2016
Senior Notes:
6.00% Senior Notes due May 15, 2017	$	—	$	359.8
4.35% Senior Notes due February 15, 2025	448.1		247.7
7.375% Subordinated Debentures due February 27, 2054	144.1		144.1
Total Long-term Debt, Current and Non-current, Outstanding	$	592.2	$	751.6

There were no outstanding borrowings at either September 30, 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. There were no advances from the FHLB of Dallas or Chicago outstanding at either September 30, 2017 or December 31, 2016.

On February 24, 2015, Kemper issued $250 million of its 4.350% Senior Notes due February 15, 2025 (the “2025 Senior Notes”). On June 12, 2017, Kemper issued an additional $200 million of its 2025 Senior Notes. The net proceeds of the additional issuance were $200.2 million, net of discount and transaction costs for an effective yield of 4.16%. The additional notes are fungible with the initial notes issued, and together are treated as part of a single series for all purposes under the indenture governing the 2025 Senior Notes. The 2025 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time at Kemper’s option at specified redemption prices. Kemper is using the net proceeds from the additional issuance for general corporate purposes.

During the fourth quarter of 2016, in anticipation of a debt issuance in the second quarter of 2017 and for risk management purposes, 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. In the second quarter of 2017, the Company de-designated a portion of the cash flow hedge because the anticipated principal issuance was less than the notional amount of the Treasury Lock and recorded a pre-tax charge of $1.1 million in Other Expenses. The effective portion of the loss on the derivative instrument upon discontinuance was $4.5 million and is reported as a component of Other Comprehensive Income before Income Taxes. Beginning with the additional issuance of the 2025 Senior Notes described in the preceding paragraph, such loss is being amortized into earnings and reported in Interest Expense in the same periods that the hedged items affect earnings. Amortization, reported in Interest Expense, was $0.1 million for the nine and three months ended September 30, 2017. The Company expects to reclassify $0.4 million of net losses on derivative instruments from AOCI to earnings for the twelve months ended September 30, 2018 as interest expense on the debt is recognized. 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.

Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, was $26.9 million and $7.8 million for the nine and three months ended September 30, 2017, respectively. Interest paid, including facility fees, was $31.8 million and $12.7 million for the nine and three months ended September 30, 2017, respectively. Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, was $33.4 million and $11.1 million for the nine and three months ended September 30, 2016, respectively. Interest paid, including facility fees, was $30.5 million and $8.5 million for the nine and three months ended September 30, 2016, respectively.