Derivatives

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 7 - Derivatives

The Company’s earnings, cash flows, and financial position are subject to fluctuations due to changes in prevailing interest rates.

The Company entered into derivative agreements with maturity dates throughout 2024. Derivative instruments are carried at fair value on the Condensed 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

Note 7 - Derivatives (Continued)

derivatives are recorded on the Condensed Consolidated Statements of Income (Loss) within Net Realized Investment Gains or Accumulated Other Comprehensive Loss along with the corresponding change in the designated hedge assets.

Interest Rate Risk

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

Ultra-Long Treasury Futures

The Company enters into exchange-traded ultra-long Treasury futures (“Treasury Futures”) in order to manage exposure to upcoming changes in the benchmark (Treasury) interest rate of forecasted transactions. These derivatives expire quarterly. As of March 31, 2024, all Treasury Futures held by the Company qualified for hedge accounting as a cash flow hedge. There were treasury futures that expired during the three months ended March 31, 2024, that did not qualify for hedge accounting. These positions are shown in the Treasury Futures section below.

Primary Risks Managed by Derivatives

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


		March 31, 2024						December 31, 2023
(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:

Treasury Futures	Interest Rate Risk	$	74.9	$	1.2	$	—	$	—	$	—	$	—

Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Treasury Futures	Interest Rate Risk	$	—	$	—	$	—	$	149.7	$	14.7	$	—

Effects of Derivatives on the Statements of Income (Loss) and Comprehensive Income (Loss)

Cash Flow Hedges

The below table reflects the amounts of Gains (Losses) deferred into AOCI, net changes in amounts in AOCI associated with current hedging transactions, amounts subsequently reclassified into Net Income (Loss) through Net Realized Investment Gains (Losses) for derivatives qualifying as cash flow hedges for the three months ended March 31, 2024 and 2023.


	Three Months Ended
(Dollars in Millions)		Mar 31, 2024		Mar 31, 2023
Beginning of Year		$	—	$	(0.4)
Gains (Losses) Deferred in AOCI		1.5		(0.4)
Net Change in AOCI with Current Period Hedging Transactions		(1.3)		—
Gains (Losses) Reclassified into Income		—		(0.5)
Net Comprehensive Gains (Losses) from Cash Flow Hedges		$	0.2	$	(1.3)