3.	Derivative Instruments

Interest rate swaps are used by the Company primarily to reduce risks from changes in interest rates. Under the terms of the interest rate swaps, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount.

The Company accounts for the interest rate swaps as non-hedge instruments and recognizes the fair value of the interest rate swaps in other assets or other liabilities on the consolidated balance sheets with the changes in fair value recognized as net realized investment gains in the consolidated statement of operations. The estimated fair value of the interest rate swaps, which is primarily derived from the forward interest rate curve, is based on the valuation received from a third party financial institution.

The following table summarizes information on the location and the gross amount of the derivatives’ fair value on the consolidated balance sheets as of September 30, 2014 and December 31, 2013:


(Dollars in thousands)		September 30, 2014					December 31, 2013
Derivatives Not Designated as Hedging Instruments under ASC 815	Balance Sheet Location	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest rate swap agreements	Other liabilities	$	200,000	$	(7,780	)		—		—
Interest rate swap agreements	Other assets		—		—		$	200,000	$	1,668

The following table summarizes the net losses included in the consolidated statement of operations for changes in the fair value of the derivatives and the periodic net interest settlements under the derivatives for the quarters and nine months ended September 30, 2014 and 2013:

Quarters Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

Statement of Operations Line

2014

2013

2014

2013

Interest rate swap agreements

Other net realized investment
gains

(1,192

)

N/A

(13,552

)

N/A

As of September 30, 2014, the Company is due receivables of $4.8 million for collateral posted and $10.0 million for margin calls made in connection with the interest rate swaps. These amounts are included in other assets on the consolidated balance sheets.