The Company’s earnings, cash flows, and financial position are subject to fluctuations due to changes in prevailing interest rates. From time to time, the Company uses derivative financial instruments to reduce fluctuations of earnings related to interest rate exposure.

The Company entered into derivative agreements with maturity dates throughout 2022 and future periods. Derivative instruments are carried at fair value on the Consolidated Balance Sheets. Derivative instruments in a gain position are presented within Other Investments and those in a loss position are included in Accrued Expenses and Other Liabilities. Changes in the fair values of derivatives are recorded on the Consolidated Statements of (Loss) Income within Net Realized Investment Gains or Accumulated Other Comprehensive (Loss) Income along with the corresponding change in the designated hedge assets.

The Company’s debt securities valuations utilize the Treasury designated benchmark rate, exposing the Company to variability due to changes in interest rates.

The Company has entered into interest swap lock agreements classified as cash flow hedges to manage exposure to changes in future purchase prices of fixed maturity securities attributable to changes in the benchmark (Treasury) interest rate. The Company assesses the effectiveness of cash flow hedges using the hypothetical derivative method. Based on the results of the assessment, the hedge is determined to be highly effective.

During 2022 the Company entered into Treasury Lock agreements classified as fair value hedges to manage exposure to changes in the fair value of designated assets. These agreements matured in the third quarter of 2022. The results are shown in the Fair Value Hedges section below. The Company assesses the effectiveness of fair value hedges using the dollar-offset method. Based on the results of the assessment, the hedge is determined to be highly effective.

During 2022 the Company entered into a Reverse Treasury Lock agreement to manage reinvestment risk on future purchases of fixed maturity securities. The Reverse Treasury Lock agreement did not qualify for hedge accounting. The results are shown in the Reverse Treasury Lock section below.

The following table presents the derivative instruments, primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives:


		Dec 31, 2022						Dec 31, 2021
(Dollars in Millions)				Estimated Fair Value						Estimated Fair Value
Derivative Instrument	Primary Underlying Risk Exposure	Gross Notional Amount		Assets		Liabilities		Gross Notional Amount		Assets		Liabilities

Derivatives Designated as Hedging Instruments:
Interest Swap Lock	Interest Rate Risk	$	5.0	$	—	$	0.4	$	—	$	—	$	—

Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Reverse Treasury Lock	Interest Rate Risk	$	100.0	$	1.7	$	—	$	—	$	—	$	—

The below table reflects the amounts of Losses deferred into AOCI and subsequently reclassified into Net (Loss) Income through Net Realized Investment Gains for derivatives qualifying as cash flow hedges for the years ended December 31, 2022 and 2021:


	Year Ended
(Dollars in Millions)	Dec 31, 2022		Dec 31, 2021
Amount of Losses Deferred in AOCI	$	(0.4)	$	—
Amount of Losses Reclassified into Income	—		—
Net Comprehensive Loss from Cash Flow Hedges	$	(0.4)	$	—

The below table reflects the effects of changes in the designated hedged asset’s impacts on AOCI and Net Realized Investment Gains as well as the derivative instruments designated as fair value hedges impact on Net Realized Investment Gains for the years ended December 31, 2022 and 2021:


	Year Ended
(Dollars in Millions)	Dec 31, 2022		Dec 31, 2021
Increase in Derivative Instruments Designated as Fair Value Hedges	$	1.1	$	—
Decrease in Fair Value of Hedged Assets Reclassified from AOCI	(1.1)		—
Net Gain from Hedging Activity	$	—	$	—

A portion of the Company’s derivatives were not designated or did not qualify as part of a hedging relationship at both December 31, 2022 and 2021. The changes in value of the derivatives not qualifying for hedge accounting are recognized in Net Realized Investment Gains on the Consolidated Statements of (Loss) Income. The below table reflects the amounts recognized in Net Realized Investment Gains for the years ended December 31, 2022 and 2021: