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Derivatives | 6 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | 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 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 June 30, 2024, all Treasury Futures held by the Company qualified for hedge accounting as a cash flow hedge. The Company utilizes a rollover hedging strategy that involves continuously establishing short-term derivatives in consecutive contract months to hedge the underlying risk exposure. Under this strategy, the complete set of derivatives are not acquired at hedge inception; rather, short-term derivatives are acquired throughout the hedging period such that maturing derivatives are replaced with new short-term derivatives. There were treasury futures that expired during the six months ended June 30, 2024, that did not qualify for hedge accounting. The following table presents the Company’s Ultra-Long Treasury Futures derivatives, primary underlying risk exposure, gross notional amount, and estimated fair value of these derivatives:
|  |  |  | June 30, 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 |  | $ | 74.4 |  |  | $ | 0.8 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Treasury Futures |  | Interest Rate Risk |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 149.7 |  |  | $ | 14.7 |  |  | $ | — |
The below table reflects the amounts of Gains (Losses) deferred into AOCI before taxes, net changes in amounts in AOCI associated with current hedging transactions, and amounts subsequently reclassified into Net Income (Loss) through Net Investment Income for Ultra-Long Treasury Futures qualifying as cash flow hedges for the three and six months ended June 30, 2024 and 2023.
|  | Three Months Ended |  | Six Months Ended
(Dollars in Millions) |  | Jun 30, 2024 | Jun 30, 2023 |  | Jun 30, 2024 | Jun 30, 2023
Beginning of Period |  | $ | 0.2 |  | $ | (1.3) |  |  | $ | — |  | $ | (0.4) |
(Losses) Gains Deferred in AOCI |  | (5.5) |  | — |  |  | (4.0) |  | — |
Net Change in AOCI with Current Period Hedging Transactions |  | 1.7 |  | — |  |  | 0.4 |  | — |
Gains (Losses) Reclassified into Income |  | — |  | 1.3 |  |  | — |  | 0.4 |
Net Comprehensive Gains (Losses) from Cash Flow Hedges |  | $ | (3.6) |  | $ | — |  |  | $ | (3.6) |  | $ | — |
Note 7 - Derivatives (Continued) Treasury Locks During the fourth quarter of 2016 and the first quarter of 2022, in anticipation of debt issuances shortly thereafter and for risk management purposes, the Company entered into derivative transactions (the “2016 Treasury Lock” and “2022 Treasury Lock,” together the “Treasury Locks”) 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 debt issuance. The Treasury Locks have no remaining gross notional amount or fair value as the hedging relationships have been previously discontinued with the issuance of the associated debt (Senior Notes due February 15, 2025 for the 2016 Treasury Lock and Senior Notes due February 23, 2032 for the 2022 Treasury Lock). The effective portion of the gain (loss) before taxes on the derivative instruments upon discontinuance was $(4.5) million for the 2016 Treasury Lock and $5.9 million on the 2022 Treasury Lock. The gain (loss) upon discontinuance is reported as a component of Accumulated Other Comprehensive Loss. Beginning with the issuance of the associated debt, such gain (loss) is amortized into earnings and reported in Interest and Other Expenses in the same periods that the hedged items affect earnings. Amortization on the 2016 Treasury Lock was $(0.1) million and $(0.3) million for the three and six months ended June 30, 2024 and 2023, respectively. Amortization on the 2022 Treasury Lock was $0.1 million and $0.3 million for the three and six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the remaining amount of derivative gain (loss) before taxes within AOCI to be amortized into earnings is $(1.3) million and $4.5 million on the 2016 Treasury Lock and 2022 Treasury Lock, respectively.

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