Document and Entity Information
Document and Entity Information | 21 Months Ended |
Sep. 30, 2020 | |
Document and Entity Information [Abstract] | |
Document Type | S-1/A |
Entity Registrant Name | MIDWEST HOLDING INC. |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | false |
Entity Central Index Key | 0000355379 |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | |||
Investments, available for sale, at fair value fixed maturities (amortized cost: $252,836,485, $116,676,312 and $19,226,841, respectively) (See Note 6) | $ 250,542,950 | $ 117,241,861 | $ 17,384,183 |
Mortgage loans on real estate, held for investment | 61,464,515 | 13,810,041 | |
Derivatives instruments (See Note 7) | 7,664,006 | 575,294 | |
Other invested assets | 14,808,870 | 2,468,947 | |
Preferred stock | 500,000 | ||
Investment escrow | 3,899,986 | ||
Notes receivable | 5,516,302 | ||
Policy loans | 147,309 | 106,014 | 43,843 |
Total investments | 340,143,952 | 138,602,143 | 17,428,026 |
Cash and cash equivalents | 136,431,785 | 43,716,205 | 2,832,567 |
Deferred acquisition costs, net | 6,398,870 | ||
Premiums receivable | 356,613 | 355,959 | 346,870 |
Accrued investment income | 4,946,936 | 1,511,200 | 200,708 |
Reinsurance recoverables (See Note 10) | 42,091,115 | 30,579,524 | 23,100,644 |
Intangible assets | 700,000 | 700,000 | 700,000 |
Property and equipment, net | 91,822 | 85,395 | 91,414 |
Operating lease right of use assets | 378,682 | 470,132 | 592,065 |
Other assets | 4,006,709 | 241,580 | 261,884 |
Assets associated with business held for sale (See Note 4) | 1,102,777 | 3,653,748 | 20,937,071 |
Total assets | 536,649,261 | 219,915,886 | 66,491,249 |
Liabilities: | |||
Benefit reserves | 16,433,533 | 16,319,912 | 16,012,655 |
Policy claims | 98,736 | 225,228 | 270,785 |
Deposit-type contracts (See note 13) | 455,429,384 | 171,168,785 | 7,234,927 |
Advance premiums | 723 | 261 | 490 |
Long-term debt | 18,938,705 | ||
Deferred gain on coinsurance transactions | 15,739,264 | 7,578,195 | 3,899,999 |
Lease liabilities (See Note 15): | |||
Finance lease | 1,860 | 9,299 | |
Operating lease | 428,851 | 524,248 | 646,519 |
Other liabilities | 22,329,494 | 6,291,782 | 1,062,087 |
Liabilities associated with business held for sale (See Note 4) | 1,111,113 | 3,646,867 | 21,052,733 |
Total liabilities | 511,571,098 | 205,757,138 | 69,128,199 |
Contingencies and Commitments (See Note 14) | |||
Preferred stock, Series C, $0.001 par value; authorized 1,500,000 shares as of December 31, 2018; none issued and outstanding as of September 30, 2020 and December 31, 2019 | 1,500,000 | ||
Stockholders' Equity: | |||
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 2,718,967 issued and outstanding as of September 30, 2020, 2,042,670 as of December 31, 2019 and 41,601 issued and outstanding on December 31, 2018; non-voting common stock, $0.001 par value; 2,000,000 shares authorized, no shares issued and outstanding at September 30, 2020, December 31, 2019 and December 31, 2018 | 2,719 | 2,042 | 41 |
Additional paid-in capital | 69,114,515 | 54,494,355 | 33,029,075 |
Treasury stock | (175,333) | ||
Accumulated deficit | (41,607,833) | (41,081,710) | (35,348,052) |
Accumulated other comprehensive (loss) income (See Note 1) | (2,255,905) | 619,584 | (1,818,014) |
Total Midwest Holding Inc.'s stockholders' equity | 25,078,163 | 14,034,271 | (4,136,950) |
Noncontrolling interest | 124,477 | ||
Total stockholders' equity | 25,078,163 | 14,158,748 | (4,136,950) |
Total liabilities, mezzanine, and stockholders' equity | $ 536,649,261 | $ 219,915,886 | $ 66,491,249 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2020 | Aug. 10, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | ||||
Cost or Amortized Cost | $ 252,836,485 | $ 116,676,312 | $ 19,226,841 | |
Stockholders' Equity: | ||||
Preferred stock, par value | $ 0.001 | |||
Preferred stock, shares authorized | 2,000,000 | 2,000,000 | ||
Common stock, par value (in dollars per share) | $ 0.001 | |||
Common stock, shares authorized | 20,000,000 | |||
Common stock, shares outstanding | 45,746 | |||
Series C Preferred Stock [Member] | ||||
Stockholders' Equity: | ||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |
Preferred stock, shares issued | 0 | 0 | 1,500,000 | |
Preferred stock, shares outstanding | 0 | 0 | 1,500,000 | |
Preferred stock, shares authorized | 1,500,000 | |||
Voting Common Stock Member | ||||
Stockholders' Equity: | ||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 20,000,000 | 22,000,000 | 20,000,000 | 20,000,000 |
Common stock, shares issued | 2,718,967 | 500 | 2,042,670 | 41,601 |
Common stock, shares outstanding | 2,718,967 | 500 | 2,042,670 | 41,601 |
Nonvoting Common Stock [Member] | ||||
Stockholders' Equity: | ||||
Common stock, par value (in dollars per share) | $ 0.001 | |||
Common stock, shares authorized | 2,000,000 | |||
Common stock, shares issued | 0 | |||
Common stock, shares outstanding | 0 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) Income (Unaudited) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues | ||||
Insurance premiums | $ 24 | $ (152) | $ (152) | $ 135,387 |
Investment income, net of expenses | 1,277,337 | 330,910 | 120,581 | 515,888 |
Net realized gains on investments (See Note 6) | 7,829,105 | 9,315 | 353,602 | 47,824 |
Amortization of deferred gain on reinsurance | 814,163 | 2,465,678 | 2,643,801 | 117,871 |
Miscellaneous income | 1,493,252 | 214,633 | 281,956 | 58,842 |
Total revenues | 11,413,881 | 3,020,384 | 3,399,788 | 875,812 |
Expenses: | ||||
Interest credited | 463,826 | 42,895 | 6,584 | 47,936 |
Benefits | (5,904) | 1,872 | 34,436 | 93,646 |
Increase in benefit reserves | 34,500 | 34,500 | (27,121) | |
Amortization of deferred acquisition costs | 376,179 | 88,503 | ||
Salaries and benefits | 3,623,605 | 1,782,708 | 2,701,314 | 2,160,853 |
Other operating expenses | 5,337,188 | 4,898,134 | 5,997,955 | 3,637,748 |
Total expenses | 9,794,894 | 6,848,612 | 8,774,789 | 5,913,062 |
Gain (loss) from continuing operations before taxes (See Note 9) | 1,618,987 | (3,828,228) | (5,375,001) | (5,037,250) |
Income tax expense | (2,145,110) | (114,642) | (234,180) | |
Net loss from continued operations | (526,123) | (3,942,870) | (5,609,181) | (5,037,250) |
Loss from discontinued operations | (28,284) | |||
Net loss | (526,123) | (3,942,870) | (5,609,181) | (5,065,534) |
Less: Gain attributable to noncontrolling interest | (46,814) | (124,477) | ||
Net loss attributable to Midwest Holding Inc. | (526,123) | (3,989,684) | (5,733,658) | (5,065,534) |
Comprehensive (loss) income: | ||||
Unrealized gains (losses) on investments arising during period, net of tax | 4,953,616 | 2,223,929 | 2,645,015 | (1,258,971) |
Unrealized losses on foreign currency | 146,185 | |||
Less: reclassification adjustment for net realized (gains) losses on investments | (7,829,105) | (9,315) | (353,602) | (47,824) |
Other comprehensive (loss) income | (2,875,489) | 2,214,614 | 2,437,598 | (1,306,795) |
Comprehensive loss | $ (3,401,612) | $ (1,775,070) | $ (3,296,060) | $ (6,372,329) |
Net loss per common share | ||||
Basic | $ (0.220) | $ (4.710) | $ (4.990) | $ (121.770) |
Diluted | $ (0.210) | $ (4.490) | $ (4.980) | $ (2.540) |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | AOCI | Noncontrolling Interests | Treasury Stock | Total |
Balance at Dec. 31, 2017 | $ 41 | $ 33,029,075 | $ (30,282,518) | $ (511,219) | $ 2,235,379 | ||
Net income (loss) | (5,065,534) | (5,065,534) | |||||
Unrealized gains (losses) on investments | (1,306,795) | (1,306,795) | |||||
Balance at Dec. 31, 2018 | 41 | 33,029,075 | (35,348,052) | (1,818,014) | (4,136,950) | ||
Net income (loss) | (3,989,684) | (3,989,684) | |||||
Xenith note interest waived | 845,536 | 845,536 | |||||
Xenith note conversion | 1,855 | 19,098,145 | 19,100,000 | ||||
Class C preferred stock conversion | 146 | 1,499,854 | 1,500,000 | ||||
Change in equity of noncontrolling interests | $ 48,661 | 48,661 | |||||
Unrealized gain(losses) on foreign currency | 2,214,614 | 2,214,614 | |||||
Balance at Sep. 30, 2019 | 2,042 | 54,472,610 | (39,337,736) | 396,600 | 48,661 | 15,582,177 | |
Balance at Dec. 31, 2018 | 41 | 33,029,075 | (35,348,052) | (1,818,014) | (4,136,950) | ||
Net income (loss) | (5,733,658) | (5,733,658) | |||||
Xenith note interest waived | 845,536 | 845,536 | |||||
Xenith note conversion | 1,855 | 19,098,145 | 19,100,000 | ||||
Class C preferred stock conversion | 146 | 1,499,854 | 1,500,000 | ||||
Employee stock options | 21,745 | 21,745 | |||||
Change in equity of noncontrolling interests | 124,477 | 124,477 | |||||
Unrealized gains (losses) on investments | 2,291,413 | 2,291,413 | |||||
Unrealized gain(losses) on foreign currency | 146,185 | 146,185 | |||||
Balance at Dec. 31, 2019 | 2,042 | 54,494,355 | (41,081,710) | 619,584 | 124,477 | 14,158,748 | |
Net income (loss) | (526,123) | (526,123) | |||||
Capital raise, net of $285,468 related expenses | 677 | 14,940,856 | 14,941,533 | ||||
Reverse stock split fractions retire | $ (175,333) | (175,333) | |||||
Employee stock options | 54,827 | 54,827 | |||||
Purchase of remaining 49% of 1505 Capital LLC | (375,523) | $ (124,477) | (500,000) | ||||
Unrealized gains (losses) on investments | (2,875,489) | (2,875,489) | |||||
Balance at Sep. 30, 2020 | $ 2,719 | $ 69,114,515 | $ (41,607,833) | $ (2,255,905) | $ (175,333) | $ 25,078,163 |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Consolidated Statements of Stockholders' Equity | |
Issuance costs | $ 285,468 |
Ownership percentage acquired | 49.00% |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOW - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash Flows from Operating Activities: | ||||
Net (loss) income | $ (526,123) | $ (3,989,684) | $ (5,733,658) | $ (5,065,534) |
Adjustments to arrive at cash provided by operating activities: | ||||
Net premium and discount on investments | (18,425) | 80,563 | 113,880 | 102,285 |
Depreciation and amortization | 44,491 | 44,820 | 58,761 | 147,761 |
Stock options | 29,805 | 21,745 | ||
Net transfers to noncontrolling interest | 124,477 | |||
Amortization of deferred acquisition costs | 376,179 | 88,503 | ||
Deferred acquisition costs capitalized | (6,784,482) | (2,395,710) | ||
Net realized (gains) losses on investments | (7,829,105) | 13,654 | (353,602) | 334,928 |
Deferred coinsurance ceding commission | 8,161,069 | 2,821,255 | 3,678,196 | 2,944,572 |
Notes payable interest accrued | 845,536 | 845,536 | ||
Commutation of assumed business | (2,544,929) | |||
Changes in operating assets and liabilities: | ||||
Reinsurance recoverables | (7,142,030) | (1,002,794) | (7,478,880) | (707,419) |
Interest and dividends due and accrued | (3,435,736) | (554,489) | (1,310,492) | 22,458 |
Premiums receivable | (654) | 733 | (9,089) | 21,507 |
Policy liabilities | 6,429,321 | 76,877,920 | 2,963,219 | 254,614 |
Other assets and liabilities | 13,537,739 | 6,170,613 | 4,745,274 | 175,344 |
Other assets and liabilities - discontinued operations | 15,217 | (117,392) | (122,543) | (16,055,335) |
Net cash provided by or (used in) operating activities | 2,857,266 | 78,883,528 | (2,457,176) | (20,369,748) |
Securities available for sale: | ||||
Purchases | (158,933,312) | (50,253,728) | (103,078,444) | (8,382,284) |
Proceeds from sale or maturity | 24,050,257 | 2,488,387 | 5,780,475 | 10,243,118 |
Mortgage loans on real estate, held for investment purchases | ||||
Purchases | (52,502,957) | (10,098,478) | (15,036,179) | |
Proceeds from sale | 8,918,066 | 1,226,138 | ||
Purchases of derivatives | (5,064,964) | (490,831) | ||
Other invested assets | ||||
Purchases | (26,787,844) | (2,976,375) | (20,533,761) | (100,000) |
Proceeds from sale | 13,670,948 | 14,849,555 | 104,892 | |
Preferred stock purchased | (500,000) | (500,000) | ||
Notes receivable | (5,516,302) | |||
Net change in policy loans | (41,295) | 941 | (62,171) | 9,630 |
Net purchases of property and equipment | (44,263) | (17,349) | (45,634) | (12,747) |
Net cash (used in) or provided by investing activities | (202,251,666) | (61,356,602) | (117,890,852) | 1,862,609 |
Cash Flows from Financing Activities: | ||||
Finance lease | (111) | (333) | (444) | (444) |
Proceeds from issuance of preferred stock | 1,500,000 | |||
Proceeds from issuance of notes payable | 18,938,705 | |||
Capital contribution | 14,941,533 | |||
Repurchase of common stock | (150,311) | |||
1505 Capital LLC purchase | (500,000) | 48,661 | ||
Receipts on deposit-type contracts | 279,537,157 | 4,088,640 | 161,392,700 | 650 |
Withdrawals on deposit-type contracts | (1,718,288) | (126,852) | (160,590) | (50,732) |
Net cash provided by financing activities | 292,109,980 | 4,010,116 | 161,231,666 | 20,388,179 |
Net increase in cash and cash equivalents | 92,715,580 | 21,537,042 | 40,883,638 | 1,881,040 |
Cash and cash equivalents: | ||||
Beginning | 43,716,205 | 2,832,567 | 2,832,567 | 951,527 |
Ending | 136,431,785 | 24,369,609 | 43,716,205 | 2,832,567 |
Supplemental Disclosure of Non-Cash Information | ||||
Settlement of real estate and surplus notes: | 493,648 | |||
Book value of real estate settled | (876,400) | |||
Book value of surplus notes (including interest) | 382,752 | |||
Book value of note payable | (19,100,000) | (19,100,000) | ||
Common stock | 927,680 | 927,680 | ||
Additional paid in capital | 18,172,320 | 18,172,320 | ||
Conversion of preferred stock | ||||
Book value of preferred stock | (1,500,000) | (1,500,000) | ||
Common stock | 72,855 | 72,855 | ||
Additional paid in capital | 1,427,145 | 1,427,145 | ||
Total | $ 0 | $ 0 | $ 0 | $ 0 |
Nature of Operations and Summar
Nature of Operations and Summary of Significant Accounting Policies | 21 Months Ended |
Sep. 30, 2020 | |
Nature of Operations and Summary of Significant Accounting Policies | |
Nature of Operations and Summary of Significant Accounting Policies | Note 1. Nature of Operations and Summary of Significant Accounting Policies Nature of operations: Midwest Holding Inc. (“Midwest,” “the Company,” “we,” “our,” or “us”) was incorporated in Nebraska on October 31, 2003 for the primary purpose of operating a financial services company. The Company redomesticated from the State of Nebraska to the state of Delaware on August 27, 2020. The Company is in the life and annuity insurance business and operates through its wholly owned subsidiaries, American Life & Security Corp. (“American Life”), 1505 Capital LLC (“1505 Capital”). and through its sponsored captive reinsurance company, Seneca Reinsurance Company, LLC (“Seneca Re”) American Life is a Nebraska-domiciled life insurance company, which is also commercially domiciled in Texas, that is currently licensed to sell, underwrite, and market life insurance and annuity products in 20 states and the District of Columbia. As discussed in Note 3, on June 28, 2018, the Company underwent a change in control as a result of the closing of a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement (the “Xenith Agreement”) with a then non-affiliated third party, Xenith Holdings LLC (“Xenith”). Xenith was a wholly controlled subsidiary of Vespoint LLC (“Vespoint”), which was also the manager of Xenith. Vespoint is owned and managed by investment funds controlled by Michael Minnich and A. Michael Salem. Pursuant to the Xenith Agreement, the Company issued Series C Preferred Stock and convertible senior secured notes to Xenith between June and December 2018. Of the funds received from Xenith, we contributed $20.5 million to American Life through capital contributions. At the closing of the Xenith Agreement, Messrs. Minnich and Salem were subsequently appointed as executive officers of American Life and later as our Executive Chairman and Chief Executive Officer, respectively, in 2019. On April 2, 2019, we obtained a 51% ownership in 1505 Capital, a Delaware limited liability company, that was established in 2018 to provide financial and investment advisory and management services to clients and related investment activities. On June 15, 2020, we purchased the remaining 49% ownership in 1505 Capital for $500,000. 1505 Capital’s financial results have been consolidated with the Company’s since the date of its acquisition. Effective March 12, 2020, Seneca Reinsurance Company, LLC (“Seneca Re”), a Vermont limited liability company, was formed by Midwest to operate as a sponsored captive insurance company for the purpose of insuring and reinsuring various types of risks of its participants through one or more protected cells and to conduct any other business or activity that is permitted for sponsored captive insurance companies under Vermont insurance regulations. On March 30, 2020, Seneca Re received its Certification of Authority to transact the business of a captive insurance company. On May 12, 2020, Midwest contributed $300,000 to Seneca Re for a 100% ownership interest. As of September 30, 2020, Seneca Re had established Protected Cell‑2020‑01 (“SRC1”) and Cell-2020-02 (“SRC2”). Midwest contributed $3,000,000 to capitalize SRC1 and Crestline Management, L.P. (“Crestline”), a Delaware limited partnership, contributed $40.0 million to capitalize to SRC2. Crestline owns approximately 16% of our voting common stock. On April 24, 2020, Midwest entered into a Securities Purchase Agreement with Crestline Assurance Holdings LLC (“Crestline”), a Delaware limited liability company (“Crestline”) and Xenith, Vespoint LLC, a Delaware limited liability company (“Vespoint”), and Pursuant to the Agreement, Crestline purchased 444,444 shares of the Company’s voting common stock, par value $0.001 per share (“common stock”), at a purchase price of $22.50 per share for $10.0 million. Also, effective as of April 24, 2020, in a separate transaction, Midwest sold 231,655 shares of common stock to various investors at $22.50 per share for $5.227 million. Under the Crestline agreement, the Company contributed $5.0 million to American Life and the remaining proceeds are to be used for general working capital and corporate purposes. Also effective April 24, 2020, American life entered into a Master Letter Agreement with Seneca Re and Crestline regarding a flow of annuity reinsurance and related asset management, whereby Crestline agreed to provide reinsure funding for a quota share percentage of 25% of the liabilities of American Life arising from its multi-year guaranteed annuities ("MYGA") and a quota share percentage of 40% for American Life’s fixed indexed annuity (“FIA”) products. This agreement expires on April 24, 2023. Management evaluates the Company as one reporting segment in the life insurance industry. The Company is primarily engaged in the underwriting and marketing of annuity products and life insurance through American Life and then reinsuring such products with third party reinsurers and, since April 24, 2020, with the Seneca Re entity. The Company’s historical product offerings consisted of a multi-benefit life insurance policy that combined cash value life insurance with a tax deferred annuity and a single premium term life product. These product offerings were underwritten, marketed, and managed as a group of similar products on an overall portfolio basis. American Life presently offers five products, two multi-year guaranteed annuities ("MYGAs”), a fixed indexed annuity (“FIA”), and two bonus plans associated with the FIA product. Basis of presentation: These audited consolidated financial statements for the year ended December 31, 2019 have been prepared in conformity with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. All intercompany accounts and transactions have been eliminated in consolidation and certain immaterial reclassifications have been made to the prior period results to conform to the current period’s presentation with no impact on results of operations or total stockholders’ equity. The accompanying Consolidated Balance Sheets as of December 31, 2018 and 2019 (audited) and September 30, 2020 (unaudited), Consolidated Statements of Comprehensive Loss as of December 31, 2018 and 2019 (audited) and September 30, 2019 and 2020 (unaudited), Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019 and 2018 (audited) and for the nine months ended September 30, 2020 and 2019 (unaudited), Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2019 (audited) and for the nine months ended September 30, 2019 and 2020 (unaudited) have been prepared in accordance with GAAP for interim financial information and rules of the Securities and Exchange Commission (“SEC”), including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the nine months ended September 30, 2020 and September 30, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020. The financial data and other information disclosed in these notes related to the nine months ended September 30, 2019 and 2020 are also unaudited. Investments All fixed maturities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in accumulated other comprehensive income. Declines in the fair value of available-for-sale securities below their amortized cost are evaluated to assess whether any other-than-temporary impairment loss should be recorded. In determining if these losses are expected to be other-than-temporary, the Company considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, the financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost. The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the statement of comprehensive income as an other-than-temporary impairment. If the Company does not expect to recover the amortized basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default. The Company has analyzed the securities portfolio and determined that there was not an other-than-temporary impairment for the year ended December 31, 2019, December 31, 2018 or for the nine months ended September 30, 2020. Investment income consists of interest, dividends, gains and losses from equity method investments, and real estate income, which are recognized on an accrual basis and amortization of premiums and discounts. Certain available-for-sales investments are maintained as collateral under funds withheld and modified coinsurance agreements but the assets and total returns or losses on the asset portfolios belong to the third party reinsurers. American Life has treaties with several third party reinsurers that have funds withheld and modified coinsurance provisions. In a modified coinsurance arrangement (“Modco”), the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a funds withheld coinsurance agreement (“FW”), assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurance, to reduce the potential credit risk. The unrealized gains/losses on those investments are passed through to the third party reinsurers as either a realized gain or loss on the consolidated statement of income. Mortgage loans on real estate, held for investment Mortgage loans on real estate, held for investment are carried at unpaid principal balances. Interest income on mortgage loans on real estate, held for investment is recognized in net investment income at the contract interest rate when earned. A mortgage loan is considered to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the mortgage agreement. Valuation allowances on mortgage loans are established based upon losses expected by management to be realized in connection with future dispositions or settlements of mortgage loans, including foreclosures. The Company establishes valuation allowances for estimated impairments on an individual loan basis as of the balance sheet date. Such valuation allowances are based on the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan’s original effective interest rate. These evaluations are revised as conditions change and new information becomes available. No such valuation allowance was established as of December 31, 2019 or September 30, 2020, respectively. Investment escrow The Company held in escrow as of December 31, 2019, cash used to settle a mortgage loan that closed in January 2020. As of September 30, 2020, the Company did not hold any cash related to investments in escrow. Other invested assets The Company purchases and sells equipment leases in its investment portfolio. As of September 30, 2020, the Company owned several leases. An impairment test, as of June 30, 2020, was completed on the only non-performing lease in the portfolio and it was determined that the underlying collateral value was substantially less than the remaining lease payments of $3.6 million. The Company established a valuation allowance on the asset of $776,973 and will continue to monitor the value the underlying collateral. The valuation allowance was recorded as a bad debt expense; however, this asset is owned by a third party reinsurer. Therefore, the valuation allowance was passed through as a receivable from the reinsurers, offsetting the valuation allowance. As of September 30, 2020, the Company determined the valuation allowance established was still adequate. Within the third quarter 2019, the Company had invested in and sold two leases. As of December 31, 2019, the Company owned one lease investment and the valuation allowance was $0. Derivative Instruments Derivatives are used to hedge the risks experienced in our ongoing operations, such as equity, interest rate and cash flow risks, or for other risk management purposes, which primarily involve managing liability risks associated with our indexed annuity products and reinsurance agreements. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or other underlying notional amounts. Derivative assets and liabilities are carried at fair value on the consolidated balance sheets. To qualify for hedge accounting, at the inception of the hedging relationship, we would formally document our designation of the hedge as a cash flow or fair value hedge and our risk management objective and strategy for undertaking the hedging transaction. In this documentation, we would identify how the hedging instrument is expected to hedge the designated risks related to the hedged item, the method that would be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method which would be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. In the late 2019, the Company began investing in options to hedge our interest rate risks on our FIA product. Options typically do not qualify for hedge accounting; therefore, we chose not to use hedge accounting for our options that we currently have. We value our derivatives at fair market value with the offset being recorded on our income statement as a realized gain or (loss). Additionally, reinsurance agreements written on a funds withheld or modified coinsurance basis contain embedded derivatives on our fixed indexed annuity product. Gains or (losses) associated with the performance of assets maintained in the modified coinsurance deposit and funds withheld accounts are reflected as realized gains or (losses) in the income statement. Preferred Stock Preferred stock of a non-affiliated company was purchased for $500,000 during the third quarter of 2019. An impairment analysis of the preferred stock was performed as of June 30, 2020, due to a change in valuation of an invested asset held by the non-affiliated company. The investment asset had collateral supporting the investment that was less than the book value of the asset; therefore, the Company established a full valuation allowance of $500,000. This was recorded as a reduction of the asset on the balance sheet and a bad debt expense on the Consolidated Statements of Comprehensive Loss. The valuation allowance was $0 at December 31, 2019. As of September 30, 2020, the Company determined the valuation allowance established was still adequate. Notes receivable The Company held in notes receivable as of September 30, 2020, a note of $5,516,302 between American Life and a third party that was rated by a nationally recognized statistical rating organization (“NRSRO”). This note is being carried at the fair market value. Policy loans Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value. Cash and cash equivalents The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. At September 30, 2020, December 31, 2019 and 2018, the Company had no cash equivalents. At September 30, 2020 and December 31, 2019, the Company held approximately 605,506 and 1.8 million in Pound Sterling (“GBP”) in several of our custody accounts, respectively. The USD equivalent held was approximately $783,000 and $2.3 million, respectively. As of September 30, 2020, the Company realized losses of approximately $87,300 related to the change in the foreign currency exchange rate of the GBP that was recorded in realized (losses) gains on investments on the income statement. The Company had money market investments of approximately $26.2 million as of December 31, 2019. Deferred acquisition costs Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to third party reinsurers, that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. These costs are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. The Company evaluates the types of acquisition costs it capitalizes. The Company capitalizes agent compensation and benefits and other expenses that are directly related to the successful acquisition of contracts. The Company also capitalizes expenses directly related to activities performed by the Company, such as underwriting, policy issuance, and processing fees incurred in connection with successful contract acquisitions. Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company had reinsurance contracts with commission and administration allowances from each reinsurer that offset all the DAC costs incurred during 2019, as a result no recovery analysis was deem necessary as of December 31, 2019. The Company determined that no events occurred in the nine months ended September 30, 2020 that suggest a review should be undertaken. Property and equipment Property and equipment are stated at cost net of accumulated depreciation. Annual depreciation is primarily computed using straight-line methods for financial reporting and straight-line and accelerated methods for tax purposes. Furniture and equipment is depreciated over 3 to 7 years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $34,926 and $28,972 for the nine months ended September 30, 2020 and 2019, respectively. Depreciation expense totaled $40,000 and $49,309 for the years ended December 31, 2019 and 2018, respectively. The accumulated depreciation net of disposals totaled $1,010,406, $975,480 and $943,323 as of September 30, 2020, December 31, 2019 and December 31, 2018, respectively. Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. Management has determined that no such events occurred in the years ended December 31, 2019 and December 31, 2018 or the nine months ended September 30, 2020 that would indicate the carrying amounts may not be recoverable. Reinsurance In the normal course of business, the Company seeks to limit any single exposure to losses on large risks by purchasing reinsurance. The amounts reported in the consolidated balance sheets as reinsurance recoverable include amounts billed to reinsurers on losses paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverable on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Insurance liabilities are reported gross of reinsurance recoverable. Management believes the recoverables are appropriately established. The Company generally strives to diversify its credit risks related to reinsurance ceded. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were no such allowances as of December 31, 2019, December 31, 2018 or for the nine months ended September 30, 2020. We expect to reinsure substantially all of our new insurance policies with a variety of reinsurers in exchange for upfront ceding commissions, expense reimbursements and administrative fees. Under these reinsurance agreements, we expect there will be a monthly or quarterly settlement of premiums, claims, surrenders, collateral, and other administration fees. We believe this will help preserve American Life’s capital while supporting its growth because American Life will have lower capital requirements when its business is reinsured due to lower overall financial exposure versus retaining the insurance policy business itself. See Note 10 below for further discussion of our reinsurance activities. There are two main categories of reinsurance transactions: 1) “indemnity,” where we cede a portion of our risk but retain the legal responsibility to our policyholders should our reinsurers not meet their financial obligations; and 2) “assumption,” where we transfer the risk and legal responsibilities to the reinsurers. The reinsurers are required to acquire the appropriate regulatory and policyholder approvals to convert indemnity policies to assumption policies. Our reinsurers may be domestic or foreign capital markets investors or traditional reinsurance companies seeking to assume U.S. insurance business. We plan to mitigate the credit risk relating to reinsurers generally by requiring other financial commitments from the reinsurers to secure the reinsured risks (such as posting substantial collateral). It should be noted that under indemnity reinsurance agreements American Life remains exposed to the credit risk of its reinsurers. If one or more reinsurers becomes insolvent or is otherwise unable or unwilling to pay claims under the terms of the applicable reinsurance agreement, American Life retains legal responsibility to pay policyholder claims, which, in such event would likely materially and adversely affect the capital and surplus of American Life. As indicated above under “Nature of operations,” Midwest formed Seneca Re in early 2020. On April 15, 2020, Midwest entered into an operating agreement with Seneca Re and as of September 30, 2020, Seneca Re currently has Protected Cell 2020-01 (“SRC1”) which is consolidated in our financial statements and Cell 2020-02 (“SRC2”) which is not consolidated in our financial statements. Some reinsurers are not and may not be “accredited” or qualified as reinsurers under Nebraska Law. In order to enter into reinsurance agreements with such reinsurers and to reduce potential credit risk, American Life holds a deposit or withholds funds from the reinsurer or require the reinsurer to maintain a trust that holds assets backing up the reinsurer’s obligation to pay claims on the business it assumes. The reinsurer may also appoint an investment manager for such funds, which is some cases may be our investment adviser subsidiary, 1505 Capital, to manage these assets pursuant to guidelines adopted by us that are consistent with state investment statutes and reinsurance regulations. American Life currently has treaties with several third party reinsurers and one related party reinsurer. Of the third party reinsurers, only three have funds withheld or modified coinsurance provisions. In a modified coinsurance arrangement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a funds withheld coinsurance agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurance, to reduce the potential credit risk. Under those provisions with third party reinsurers, the assets backing the treaties are maintained by American Life as investments but the assets and total returns or losses on the investments are owned by the reinsurers. Under GAAP, this arrangement is considered an embedded derivative as discussed in Note 7 below. As a result of recent market volatility, assets carried as investments on American Life’s financial statements for the third party reinsurers contained unrealized losses of approximately $4.4 million as of September 30, 2020. The terms of the contracts with the third party reinsurers provide that unrealized losses on the portfolios accrue to the third party reinsurers. Accordingly, the unrealized losses on the assets held by American Life were offset by a gain in the embedded derivative of $4.4 million. We account for this unrealized loss pass-through by recording equivalent realized gains on our income statement and in amount recoverable from our third party reinsurers on our balance sheet. Benefit reserves The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality, and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables. Policy claims Policy claims are based on reported claims plus estimated incurred but not reported claims developed from trends of historical data applied to current exposure. Deposit-type contracts Deposit-type contracts consist of amounts on deposit associated with deferred annuities, premium deposit funds and supplemental contracts without life contingencies. Notes payable Notes payable consist of the convertible notes entered into due to the Xenith transaction and were recorded net of issuance costs. The notes were converted into our voting common stock on June 18, 2019. Deferred gain on coinsurance transactions American Life has entered into four reinsurance contracts where it has earned or is earning ceding commissions. These ceding commissions are recorded as a deferred liability and amortized over the life of the business ceded. American Life receives commission, administrative, and option allowances from reinsurance transactions that represent recovery of acquisition costs. These allowances first reduce the DAC associated with the reinsured blocks of business with the remainder being included in the deferred gain on coinsurance transactions that is also being amortized. Income taxes The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state, or local tax examinations by tax authorities for the years before 2015. The Company is not currently under examination for any open years. The provision for income taxes is based on income as reported in the financial statements. The income tax provision is calculated under the asset and liability method. Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. The Company has no uncertain tax positions that it believes are more-likely-than not that the benefit will not to be realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. Revenue recognition and related expenses Amounts received as payment for annuities are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services and cost of insurance, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the consolidated statements of cash flows. Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due. Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts. Acquisition costs are amortized over the expected life of the annuity contracts. Comprehensive loss Comprehensive income (loss) is comprised of net (loss) income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable securities classified as available for sale and unrealized gains and losses from foreign currency transactions, net of applicable taxes. American Life has treaties with four third party reinsurers that have funds withheld and modified coinsurance provisions. Under those provisions, the assets backing the treaties are maintained by American Life as collateral but are owned by the third party reinsurers, thus, the total return on the asset portfolio belongs to the third party reinsurers. Under GAAP this is considered an embedded derivative as discussed in Note 7 below. As a result of recent market volatility, the investments carried by American Life for the third party reinsurers contained unrealized losses of approximately $4.4 million as of September 30, 2020. The terms of the contracts with the third party reinsurers provided that unrea |
New Accounting Standards
New Accounting Standards | 21 Months Ended |
Sep. 30, 2020 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Standards | Note 2. New Accounting Standards Adoption of New Accounting Standards In November 2019, the FASB issued ASU No. 2019‑08, Compensation – Stock Compensation and Revenue from Contracts with Customers . This update requires an entity to measure and classify share-based payment awards that are granted to customers in accordance with Topic 718 whereby the amount recorded is measured as the fair value on the grant date. On June 19, 2019, the Company granted stock options which were recorded in accordance with this ASU at fair value on grant date. In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016‑02, Leases (Topic 842) . The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The lease liability is measured at the present value of the lease payments over the lease term with the right-of-use asset measured as the lease liability amount and including adjustments for certain lease incentives and initial direct costs. Lease expense recognition will continue to differentiate between finance leases and operating leases resulting in a similar pattern of lease expense recognition as under current GAAP. This ASU permitted a modified retrospective adoption approach that includes a number of optional practical expedients that entities may elect upon adoption. On January 1, 2019, the Company adopted this standard using a modified retrospective adoption approach. The adoption resulted in the Company identifying three operating leases and one financial lease which were subject to this guidance. The impact to the Consolidated Statements of Comprehensive Income (Loss) was minimal. We identified four leases with net assets of $378,682 and $473,045, and lease liabilities of $428,851 and $526,108 for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively, and net assets of $470,132 and $592,065 and lease liabilities of $526,108 and $655,818 for the years ended December 31, 2019 and 2018, respectively. On February 14, 2018, the FASB issued ASU No. 2018‑02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . It allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for public business entities for reporting periods for which financial statements have not yet been issued. The Company has evaluated the impact of this update and has determined that this does not impact us currently due to not recording unrealized losses or gains net of tax. The Company has incurred net operating losses since inception so it does not record deferred tax assets or deferred tax liabilities due to establishing a valuation allowance. In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers (“ASU 2014‑09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of ASU 2014‑09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015‑14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015‑14”). This amendment deferred the effective date of the previously issued ASU 2014‑09 until the interim and annual reporting periods beginning after December 15, 2017. In addition, the FASB has issued four related ASU’s on principal versus agent guidance (ASU 2016‑08), identifying performance obligations and the licensing implementation guidance (ASU 2016‑10) a revision of certain SEC Staff Observer comments (ASU 2016‑11) and implementation guidance (ASU 2016‑12). The guidance permits two methods of transition upon adoption: full retrospective and modified retrospective. The Company adopted ASU 2014‑09 on January 1, 2018, and utilized the modified retrospective method. Insurance contracts, lease contracts and investments are not within the scope of ASU 2014‑09; therefore, this standard does not apply to the majority of our consolidated revenues. For the Company’s miscellaneous income, which is within the scope of this guidance, the Company reviewed its service fee income revenue streams and compared its historical accounting policies and practices to the new adopted standard. The Company believes its historical revenue recognition was materially consistent with the way we recognized service fee income as of December 31, 2019. In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018‑15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computer Arrangement That is a Service Contract . Under ASU No. 2018‑15, the amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. In order to determine which costs can be capitalized, we are to follow the guidance in Subtopic 350‑40. Cost for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and the post-implementation stage are expensed as the activities are performed. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Management has reviewed and evaluated the impact of this pending new standard and will implement this starting in fiscal year 2020. We reviewed our software enhancements as of September 30, 2020 to determine the impact of implementing ASU No. 2018‑12 and determined that none of those enhancements should be capitalized as they did not meet the requirements of this ASU. Future adoption of New Accounting Standards In January 2020, the FASB issued ASU No. 2020‑1, Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) -Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this Update clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. We are unable to determine the impact at this time of ASU No. 2020‑1 as we are still in the process of evaluating the standard. In November 2018, the FASB issued ASU No. 2018‑10, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments in this update include items brought to the Board’s attention by stakeholders to clarify the guidance in the amendments in ASU 2016‑13, Financial Instruments – Credit Losses (Topic 326) which was issued in June 2016. These updated amendments clarify that receivables arising from operating leases are not within the scope of Subtopic 326‑20. Under ASU 2016‑13, this replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to perform credit loss estimates. This update changes the methodology from an incurred loss to an expected credit loss. An allowance for the expected credit loss will be set up and the net income will be impacted. The credit losses will be evaluated in the current period and an adjustment to the allowance can be made. The new standard becomes effective after December 15, 2022. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements. In February 2020, the FASB issued ASU No. 2020‑02, Financials Services Instruments-Credit Losses (Topic 326), and Leases (topic 842). The amendments in this Update adds language to Accounting Bulletin N. 119. In November 2019, the FASB issued ASU No. 2019‑10, Financials Services Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (topic 842). The Board developed a philosophy to extend and simplify how effective dates are staggered between larger public companies and all other entities. For business entities that meet the definition of a smaller reporting company (“SRC”), the amendments in ASU 2018‑12 are effective for fiscal years beginning after December 15, 2021. In August 2018, the FASB issued ASU No. 2018‑12, Financial Services-Insurance (Topic 944). This update 1) modifies the timeliness of recognizing changes in the liability for future policy benefits and modifies the rate used to discount future cash flows, 2) simplifies the accounting for certain market-based options or guarantees associated with deposit contracts, 3) simplifies the amortization of deferred acquisition costs, and 4) addresses the effectiveness of the required disclosures. This ASU becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2023. We anticipate that the adoption of ASU 2018‑12 will have a broad impact on our consolidated financial statements and related disclosures and will require us to make changes to certain of our processes, systems, and controls. We are unable to determine the impact at this time of ASU No. 2018‑12 as we are still in the process of evaluating the standard. In March 2020, the FASB issued ASU No. 2020‑03, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The scope of this amendment is to clarify the interaction of ASC 842 (Leases) and ASC 326 (credit losses). In November 2018, the FASB issued ASU No. 2018‑10, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments in this update include items brought to the Board’s attention by stakeholders to clarify the guidance in the amendments in ASU 2016‑13, Financial Instruments – Credit Losses (Topic 326) which was issued in June 2016. These updated amendments clarify that receivables arising from operating leases are not within the scope of Subtopic 326‑20. Under ASU 2016‑13, this replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to perform credit loss estimates. This update changes the methodology from an incurred loss to an expected credit loss. An allowance for the expected credit loss will be set up and the net income will be impacted. The credit losses will be evaluated in the current period and an adjustment to the allowance can be made. The new standard becomes effective after December 15, 2022. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The scope of this amendment is a reaction to the global markets’ planned shift away from using major interbank reference rates, including the London Interbank Offered Rate (LIBOR). This amendment was issued to ease the burden of accounting for contract modifications related to reference rate reform. The amendments in ASU 2020-04 create a new Topic in the Codification, ASC 848, Reference Rate Reform, which contains guidance that is designed to simplify how entities account for contracts that are modified to replace LIBOR or other benchmark interest rates with new rates. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. |
Change in Control
Change in Control | 21 Months Ended |
Sep. 30, 2020 | |
Change In Control | |
Change in Control | Note 3. Change in Control On June 28, 2018, we underwent a change in control as a result of the closing of a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement dated May 9, 2018 (the “Agreement”) with a non-affiliated third party, Xenith Holdings LLC, a Delaware limited liability company (“Xenith”). Vespoint LLC, a Delaware limited liability company (“Vespoint”), owns 100% of the voting stock of Xenith. Vespoint is owned and managed by AMS Advisors LLC, a Delaware limited liability company, and Rendezvous Capital LLC, a New York limited liability company. Each of these three companies is a private investment company; they are controlled by Michael Minnich and A. Michael Salem, who are Co-Chief Executive Officers of Vespoint and Executive Officers of Midwest and American Life. The terms and conditions of the Agreement were described in Midwest’s Current Report on Form 8‑K filed with the SEC on May 14, 2018. All conditions to consummation of the Agreement, including approval of the transactions contemplated therein by the State of Nebraska Department of Insurance (“NDOI”), were subsequently met and a closing was held pursuant to the Agreement on June 28, 2018 (the “Closing”). At the closing of the Agreement, we issued 1,500,000 shares of newly created Series C Convertible Preferred Stock (“Series C Preferred Stock”) to Xenith for $1,500,000, which was recorded in our balance sheet as Mezzanine Equity, and it ranked senior to our voting common stock on liquidation with a preference of $1.00 per share. Subject to the availability of funds, annual dividends of 8% of the Series C Preferred Stock liquidation preference were payable by us; if not paid the dividends accrued. Prior to conversion on June 18, 2019, at any time after June 28, 2025 and subject to Nebraska law, Xenith could have required us to redeem the Series C Preferred Stock at the liquidation preference (plus accrued dividends) or fair market value, whichever was greater. If the shares were not redeemed for any reason, an interest rate of 12% per year would have begun. The Preferred Stock voted along with the voting common stock as a single class on an “as converted” basis. Also, holders of Preferred Stock voting as a separate Series were entitled to elect five of the Company’s eight members of its Board of Directors. The Preferred Stock had several protections against the Company taking action that would adversely affect the rights of holders of Preferred Stock such as mergers, liquidation, and dilutive stock issuances, among others. On June 18, 2019, the Series C Preferred Stock shares were converted, at Xenith’s election, into 145,709 shares of our voting common stock at approximately $10.29 per share. All accrued dividends were waived. Also, at closing of the Agreement, Xenith loaned a total of $600,000 to Midwest, repayable upon maturity in 10 years with cash interest of 4% per annum payable quarterly and accrued interest of another 4% per annum payable upon maturity. The loans were made under two notes of $500,000 and $100,000, respectively. Both notes were converted by Xenith into an aggregate 58,284 voting common shares on June 18, 2019. The Agreement further provided that Xenith, in its sole discretion, could loan up to an additional $23,500,000 to Midwest. Any loans made by Xenith under this election (“Subsequent Loans”) could also to be converted into voting common stock at the price of approximately $10.29 per share. Xenith loaned an additional $18,500,000 in the fourth quarter of 2018 following the amendment of the Midwest Articles of Incorporation to increase its authorized voting common shares. The additional notes were converted, at Xenith’s election, into 1,797,077 shares of voting common stock on June 18, 2019. All interest on the notes through June 18, 2019 was waived for payment and was accounted for as a capital contribution to Midwest. Substantially all the proceeds from the Loans and Series C Preferred Stock were contributed to our insurance subsidiary, American Life, to be used for general business purposes. The table below summarizes conversion of the Notes and shares of Series C Preferred Stock into voting common stock and the total outstanding voting common stock as of December 31, 2019: As Converted Voting Common Stock Number Percentage Previous* Company shareholders 45,746 2.2 % Note conversion ($500,000) 48,570 2.4 % Note conversion ($100,000) 9,714 0.5 % Note conversion ($1,000,000) 97,139 4.7 % Note conversion ($17,500,000) 1,699,938 83.1 % Series C Preferred stock conversion 145,709 7.1 % Total shares outstanding as of December 31, 2019 2,046,816 100.0 % * Prior to note and stock conversions. |
Assets and Liabilities Held for
Assets and Liabilities Held for Sale | 21 Months Ended |
Sep. 30, 2020 | |
Assets and Liabilities Held for Sale | |
Assets and Liabilities Held for Sale | Note 4. Assets and Liabilities Held for Sale On November 30, 2018, American Life entered into an Assumption and Indemnity Reinsurance Agreement (“Reinsurance Agreement”) with Unified Life Insurance Company (“Unified”), a Texas domiciled stock insurance company. The Reinsurance Agreement provides that American Life ceded and Unified agreed to reinsure, on an indemnity reinsurance basis, 100% of the liabilities and obligations under substantially all of American Life’s life, annuity, and health policies (“Policies”). The Agreement closed on December 10, 2018, as previously disclosed in Midwest’s Current Report on Form 8‑K filed with the Securities and Exchange Commission (the “SEC”) on December 12, 2018. The effective date of the Agreement was July 1, 2018. After the closing of the Reinsurance Agreement, Unified began the process of preparing and delivering certificates of assumption and other materials to policyholders of American Life in order to effect an assumption of the Policies by Unified such that all of American Life’s rights and obligations under the policies arising on and after July 1, 2018 would be completely assumed by Unified without further indemnification or other obligations, except for liabilities, claims and obligations incurred before July 1, 2018. Unified is obligated to indemnify American Life against all liabilities and claims and all of its policy obligations from and after July 1, 2018. As of September 30, 2020 and December 31, 2019, 89% and 79%, respectively, of the indemnity policies were converted to assumptive policies thereby releasing American Life from its legal obligations related to those policies. The consideration paid by Unified to American Life under the Reinsurance Agreement upon closing was $3,500,000 (“Ceding Commission”), subject to minor settlement adjustments. At closing, American Life transferred the Statutory Reserves and Liabilities, as defined in the Reinsurance Agreement, directly related to the policies, to Unified. The Ceding Commission is being amortized on a straight-line basis over the life of the policies. When the policies are converted to assumptive, meaning American Life has no liability exposure for those policies, the remaining Ceding Commission will be recognized in our income statement. Our balance sheet was required to be restated for all periods shown with the assets and liabilities which were ceded by American Life to Unified into separate line items as assets and liabilities held for sale. The table below summarizes the assets and liabilities that are included in discontinued operations as of September 30, 2020 and as of December 31, 2019: As of September 30, As of December 31, 2020 2019 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 35,302 $ 50,387 Reinsurance recoverables 1,043,985 3,569,849 Premiums receivable 23,490 33,512 Total assets held for sale in the Consolidated Balance Sheet $ 1,102,777 $ 3,653,748 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 594,603 $ 1,403,953 Policy claims 35,302 28,203 Deposit-type contracts 474,943 2,209,195 Advance premiums 593 2,226 Accounts payable and accrued expenses 5,672 3,290 Total liabilities held for sale in the Consolidated Balance Sheets $ 1,111,113 $ 3,646,867 The table below summarizes the assets and liabilities that are included in discontinued operations for the years ended December 31, 2019 and 2018: As of December 31, As of December 31, 2019 2018 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 50,387 $ 366,849 Reinsurance recoverables 3,569,849 20,359,326 Premiums receivable 33,512 210,896 Total assets held for sale in the Consolidated Balance Sheet $ 3,653,748 $ 20,937,071 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 1,403,953 $ 9,799,834 Policy claims 28,203 127,666 Deposit-type contracts 2,209,195 11,050,139 Advance premiums 2,226 21,699 Accounts payable and accrued expenses 3,290 53,395 Total liabilities held for sale in the Consolidated Balance Sheets $ 3,646,867 $ 21,052,733 The income statement for 2018 was also required to be restated shown breaking out the net income between continuing operations and discontinued operations. Year ended December 31, 2018 Major line items constituting pretax loss of discontinued operations: Premiums $ 933,980 Death and other benefits (421,448) Interest credited (192,008) Increase in benefit reserves (41,790) Amortization of deferred acquisition costs (202,913) Other operating expenses (104,105) Loss on discontinued operations $ (28,284) There were no items in 2019 or for the nine months ended, September 30, 2020 that were reclassified as discontinued operations. |
Non-controlling Interest
Non-controlling Interest | 21 Months Ended |
Sep. 30, 2020 | |
Non-controlling Interest | |
Non-controlling Interest | Note 5. Non-controlling Interest On April 2, 2019, Midwest entered into a contract to acquire a 51% ownership in 1505 Capital LLC (“1505 Capital”), a Delaware limited liability company. 1505 Capital was organized to provide financial and investment advisory and management services to clients and any related investment, trading, or financial activities. Midwest purchased for $1 its 51% ownership and on June 15, 2020, we purchased the remaining 49% ownership in 1505 Capital for $500,000. Midwest used the equity method of accounting for the purchase of the controlling interest eliminating the non-controlling interest and recording the difference to additional paid in capital. Midwest had consolidated the 1505 Capital income of $252,113 into its consolidated financials from April 2, 2019, through December 31, 2019. Midwest’s portion of income was $127,636 and the non-controlling interest income was $124,477. |
Investments
Investments | 21 Months Ended |
Sep. 30, 2020 | |
Investments | |
Investments | Note 6. Investments The cost or amortized cost and estimated fair value of investments as of September 30, 2020 and December 31, 2019 are as follows: Cost or Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value September 30, 2020: Fixed maturities: U.S. government obligations $ 2,007,031 $ 104,703 $ 6,712 $ 2,105,022 Mortgage-backed securities 371,273 7,042 179 378,136 Asset-backed securities 205,589,130 2,235,333 5,382,412 202,442,051 States and political subdivisions–general obligations 237,339 11,409 — 248,748 States and political subdivisions–special revenue 5,629,266 565,843 4,930 6,190,179 Trust preferred 2,218,142 — 55,183 2,162,959 Corporate 36,784,304 1,070,998 839,447 37,015,855 Total fixed maturities $ 252,836,485 $ 3,995,328 $ 6,288,863 $ 250,542,950 Mortgage loans on real estate, held for investment 61,464,515 — — 61,464,515 Derivatives 5,698,117 2,395,084 429,195 7,664,006 Other invested assets 14,808,870 — — 14,808,870 Notes receivable 5,516,302 — — 5,516,302 Policy loans 147,309 — — 147,309 $ 340,471,598 $ 6,390,412 $ 6,718,058 $ 340,143,952 December 31, 2019: Fixed maturities: U.S. government obligations 2,091,710 7,073 17,559 2,081,224 Mortgage-backed securities 819,678 — 21,070 798,608 Asset-backed securities 95,006,241 646,335 404,752 95,247,824 States and political subdivisions–general obligations 240,494 8,788 — 249,282 States and political subdivisions–special revenue 25,112 179 — 25,291 Corporate 18,493,077 501,022 154,467 18,839,632 Total fixed maturities 116,676,312 1,163,397 597,848 117,241,861 Mortgage loans on real estate, held for investment 13,810,041 — — 13,810,041 Derivatives 490,831 87,684 3,221 575,294 Investment escrow 3,899,986 — — 3,899,986 Other invested assets 2,468,947 — — 2,468,947 Preferred stock 500,000 — — 500,000 Policy loans 106,014 — — 106,014 Total fixed maturities $ 137,952,131 $ 1,251,081 $ 601,069 $ 138,602,143 The cost or amortized cost and estimated fair value of investments as of December 31, 2018 was as follows: Cost or Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value December 31, 2018: Fixed maturities: U.S. government obligations $ 2,112,816 $ 247 $ 117,112 $ 1,995,951 Mortgage-back securities 1,068,976 — 64,925 1,004,051 States and political subdivisions–general obligations 265,473 — 2,289 263,184 States and political subdivisions–special revenue 25,231 — 58 25,173 Corporate 15,754,345 14 1,658,535 14,095,824 Total fixed maturities $ 19,226,841 $ 261 $ 1,842,919 $ 17,384,183 The Company has two securities that individually exceed 10% of the total of the state and political subdivisions categories as of September 30, 2020 and December 31, 2019. The amortized cost, fair value, credit ratings, and description of each security as of September 30, 2020 and December 31, 2019 is as follows: Amortized Estimated Cost Fair Value Credit Rating September 30, 2020: Fixed maturities: States and political subdivisions–general obligations Bellingham, Washington $ 106,829 $ 117,759 AA+ Longview, Washington Refunding 130,510 130,989 Aa3 Total $ 237,339 $ 248,748 Amortized Estimated Cost Fair Value Credit Rating December 31,2019: Fixed maturities: States and political subdivisions–general obligations Bellingham, Washington $ 107,709 $ 115,597 AA+ Longview, Washington Refunding 132,785 133,685 Aa3 Total $ 240,494 $ 249,282 The following table summarizes, for all securities in an unrealized loss position at September 30, 2020 and December 31, 2019, the estimated fair value, pre-tax gross unrealized loss, and number of securities by consecutive months they have been in an unrealized loss position. September 30, 2020 December 31, 2019 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 35,073 $ 311 1 $ 1,518,772 $ 14,935 9 Asset-backed securities 112,190,271 5,122,847 66 39,114,732 404,752 26 Mortgage-back securities 22,828 179 1 160,010 4,844 4 States and political subdivisions -- special revenue 1,168,610 4,930 3 — — — Trust preferred 2,162,960 55,183 1 — — — Corporate 19,005,716 666,972 24 2,800,815 13,618 4 Greater than 12 months: U.S. government obligations 157,752 6,401 4 353,834 2,624 2 Asset-backed securities 10,592,569 259,565 5 — — — Mortgage-back securities — — — 638,598 16,226 14 Corporate 584,003 172,475 4 2,201,658 140,849 13 Total fixed maturities $ 145,919,782 $ 6,288,863 109 $ 46,788,419 $ 597,848 72 (1) We may reflect a security in more than one aging category based on various purchase dates. Due to market price decreases in 2020, our securities positions resulted in an unrealized loss as of September 30, 2020. We performed an analysis of the unrealized losses and determined no valuation impairment on our fixed maturities should be recorded because the investments had been in such a position for less than nine months and approximately 80% of them had durations of 10 to 20 years. Management believes that the Company will fully recover its cost basis in these securities and management does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, such securities until they recover or mature. We will continue to monitor the world and U.S. economies and the capital markets throughout the remainder of 2020 to determine if any impairment is required. The majority of the unrealized losses are related to our collateralized loan obligations (“CLOs”). CLOs are typically illiquid and are intended to be held to maturity. Thus, risk of loss is minimal. The Company has monitored the underlying unrealized losses and believes they pose little chance of loss in the long-term due to the quality of the underlying credits. See the discussion above under “Comprehensive loss” in Note 1 regarding unrealized losses on investments that are owned by our reinsurers and the corresponding offset carried as a gain in the associated embedded derivative. The Company purchases and sells equipment leases in its investment portfolio. As of September 30, 2020, the Company owned several leases. An impairment test, as of September 30, 2020, was completed on the only non-performing lease in the portfolio and it was determined that the underlying collateral value was substantially less than the outstanding remaining lease payments of $3.6 million. The Company established a valuation allowance on the asset of $776,973 and will continue to monitor the value the underlying collateral. The valuation allowance was recorded as a bad debt expense; however, this asset is owned by a third party reinsurer. Therefore, the valuation allowance was passed through as a receivable from the reinsurers, offsetting the valuation allowance. The amortized cost and estimated fair value of fixed maturities at September 30, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. No securities due in the next year are in an unrealized loss position, further supporting management’s decision not to recognize an other-than-temporary impairment. Amortized Estimated Cost Fair Value Due in one year or less $ 964,295 $ 1,067,733 Due after one year through five years 21,154,753 21,469,752 Due after five years through ten years 76,161,161 76,055,560 Due after ten years through twenty years 134,902,342 131,788,843 Due after twenty years 19,653,934 20,161,062 $ 252,836,485 $ 250,542,950 The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At September 30, 2020 and December 31, 2019, these required deposits had a total amortized cost of $3,526,609 and $3,611,292 and fair values of $3,714,594 and $3,612,844, respectively. The following table summarizes, for all securities in an unrealized loss position at December 31, 2019 and 2018, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position. December 31, 2019 December 31, 2018 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 1,518,772 $ 14,935 9 $ 7,862 $ 430 1 Asset-backed securities 39,114,732 404,752 26 — — — Mortgage-back securities 160,010 4,844 4 — — — Corporate 2,800,815 13,618 4 3,351,664 315,617 23 Greater than 12 months: U.S. government obligations 353,834 2,624 2 1,785,949 116,682 10 Mortgage-back securities 638,598 16,226 14 1,004,052 64,925 19 States and political subdivisions–general obligations — — — 263,183 2,289 2 States and political subdivisions–special revenue — — — 25,173 58 1 Corporate 2,201,658 140,849 13 10,628,745 1,342,918 58 Total fixed maturities $ 46,788,419 $ 597,848 72 $ 17,066,628 $ 1,842,919 114 (1) We may reflect a security in more than one aging category based on various purchase dates. Based on our review of the securities in an unrealized loss position at December 31, 2019 and 2018, no other-than-temporary impairments were deemed necessary. Management believes that the Company will fully recover its cost basis in the securities held at December 31, 2019, and management does not have the intent to sell nor is it more likely than not that the Company will be required to sell such securities before they recover or mature. The amortized cost and estimated fair value of fixed maturities at December 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. No securities are due in the next year to further support management’s decision not to recognize an other-than-temporary impairment. Amortized Estimated Cost Fair Value Due in one year or less $ 101,205 $ 100,958 Due after one year through five years 2,649,457 2,724,011 Due after five years through ten years 21,925,465 22,013,673 Due after ten years through twenty years 84,210,270 84,473,538 Due after twenty years 7,789,915 7,929,681 $ 116,676,312 $ 117,241,861 The Company is required to hold assets on deposit for the benefit of policyholders in accordance with insurance rules and regulations. At December 31, 2019 and 2018, these required deposits had a total amortized cost of $3,611,292 and $2,958,178 and fair values of $3,612,844 and $2,772,809, respectively. The following table presents a reconciliation of the beginning balance for the mortgage loan investments measured at fair value on a recurring basis using Level 3 inputs at September 30, 2020 and December 31, 2019: Interest Income Interest Income Carrying Value Accrued Earned September 30, 2020: Industrial $ 1,250,000 $ 18,236 $ 62,743 Commercial mortgage loan-multi-family 58,195,692 1,634,008 2,199,823 Other 2,018,823 221,136 134,631 Total mortgage loans $ 61,464,515 $ 1,873,380 $ 2,397,197 December 31, 2019: Industrial $ 500,000 $ — $ 15,889 Commercial mortgage loan-multi-family 11,320,924 116,860 329,684 Other 1,989,117 195,168 7,386 Total mortgage loans $ 13,810,041 $ 312,028 $ 352,959 American Life has treaties with three third party reinsurers that have funds withheld and modified coinsurance provisions. Under those provisions, the mortgage loans backing the treaties are maintained by American Life as collateral but the assets and total returns or losses on the asset portfolios belong to the third party reinsurers; therefore, the Company derives minimal investment income from these mortgages. The components of net investment income for the nine months ended September 30, 2020 and 2019 are as follows: Nine months ended September 30, 2020 2019 Fixed maturities $ 1,364,414 $ 342,104 Mortgage loans 80,749 78,466 Other 62,942 6,973 Gross investment income 1,508,105 427,543 Less: investment expense (230,768) (96,633) Investment income, net of expenses $ 1,277,337 $ 330,910 Proceeds for the nine months ended September 30, 2020 and 2019 from sales of investments classified as available-for-sale were $24,050,257 and $2,488,387, respectively. Gross gains of $1,342,283 and $9,006 and gross losses of $76,085 and $22,660 were realized on those sales during the nine months ended September 30, 2020 and 2019, respectively. The proceeds included those assets associated with the third party reinsurers. The gains and losses were related only to the assets retained by American Life. The components of net investment income for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, 2019 2018 Fixed maturities $ 292,453 $ 789,949 Other 38,397 44,614 Gross investment income 330,850 834,563 Less investment expenses (210,269) (318,675) Investment (loss) income, net of expenses $ 120,581 $ 515,888 Proceeds for the years ended December 31, 2019 and 2018 from sales of investments classified as available-for-sale were $5,752,910 and $10,043,118 respectively. Gross gains of $268,848 and $27,972 and gross losses of $30,885 and $367,792 were realized on sales and the realized losses on sales during the year ended December 31, 2019 and 2018, respectively. |
Derivative Instruments
Derivative Instruments | 21 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Note 7. Derivative Instruments The Company entered into derivative instruments to hedge fixed indexed annuity products that guarantee the return of principal to the policyholders and credit interest based on a percentage of the gain in a specified market index. To hedge against adverse changes in equity indices, the Company entered into contracts to buy equity indexed options. However, these derivatives are not designated as hedge under GAAP. The Company did not have any asset derivatives or embedded derivatives in policyholder contracts as of December 31, 2018. As indicated in Notes 1, 6 and 10, American Life has treaties with four reinsurance companies, three third party and one related party, that have funds withheld and modified coinsurance provisions. Under these provisions with third party reinsurers, the assets backing the treaties are maintained by American Life as collateral and are carried on the balance sheet for American Life, but the assets are owned by the third party reinsurer; thus, the total return on the asset portfolio belongs to the third party reinsurers. Under GAAP this is considered an embedded derivative but is not designated as a hedge. The following is a summary of the asset derivatives not designated as hedges and embedded derivatives in our FIA product as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Location in the Derivatives Not Designated Consolidated Statement Notional Number of Estimated Notional Number of Estimated as Hedging Instruments of Balance Sheets Amount Contracts Fair Value Amount Contracts Fair Value Equity-indexed options Derivatives $ 166,197,790 177 $ 7,664,006 $ 9,698,863 24 $ 575,294 Equity-indexed embedded derivative Deposit-type contracts 204,289,800 1,418 6,359,657 10,720,324 108 576,634 Due to significant price decreases in the capital markets, our securities positions resulted in a substantial unrealized loss at September 30, 2020, reported in accumulated other comprehensive loss on the balance sheet. The embedded derivative related to the asset portfolio belonging to the third party reinsurers offset these unrealized losses by recording a realized gain in other comprehensive income. The following table summarizes the impact of those embedded derivatives related to the funds withheld provision where the total return on the asset portfolio belongs to the third party reinsurers: September 30, 2020 Book Value of Market Value of Total Return Reinsurance Portfolio Assets Assets Swap Value Ironbound $ 100,442,130 $ 96,516,241 $ 3,925,889 SDA 21,072,864 20,495,383 577,481 US Alliance 36,801,442 36,616,705 184,737 SRC2 23,624,061 23,942,606 (318,545) Total $ 181,940,497 $ 177,570,935 $ 4,369,562 The total return swap value was recorded as an increase in our amounts recoverable from reinsurers of $4,369,562 on our balance sheet and a realized gain of $4,369,562 on our income statement. |
Fair Values of Financial Instru
Fair Values of Financial Instruments | 21 Months Ended |
Sep. 30, 2020 | |
Investments, All Other Investments [Abstract] | |
Fair Values of Financial Instruments | Note 8. Fair Values of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We use valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: · Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. · Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. · Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the period in which the reclassifications occur. A description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Level 1 measurements Cash: The carrying value of cash and cash equivalents and short-term investments approximate the fair value because of the short maturity of the instruments. Level 2 measurements Fixed maturities: Fixed maturities are recorded at fair value on a recurring basis utilizing a third-party pricing source. The valuations are reviewed and validated quarterly through random testing by comparisons to separate pricing models or other third-party pricing services. For the period ended September 30, 2020 and year ended December 31, 2019, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received. Derivatives: Derivatives are reported at fair market value utilizing a third-party pricing source. Investment escrow: The Company held in escrow as of December 31, 2019, cash that was used to settle a mortgage loan that did not close until January 2020. Notes receivable: The Company held in notes receivable as of September 30, 2020, a note of $5,516,302 between American Life and a third party that was rated by a NRSRO. This note is being carried at the fair market value. Embedded derivative for equity-indexed contracts: The Company has embedded derivatives in our policyholder contracts. These embedded derivatives are being carried at the fair market value as of September 30, 2020. Level 3 measurements Mortgage loans on real estate, held for investment: Mortgage loans are carried at their unpaid principal value as that is considered the fair market values for these loans. Other invested assets: The Company purchases and sells equipment leases in its investment portfolio. As of September 30, 2020, the Company owned several leases. An impairment test, as of September 30, 2020, was completed on the only non-performing lease in the portfolio and it was determined that the underlying collateral value was substantially less than the outstanding remaining lease payments of $3.6 million. The Company established a valuation allowance on the asset of $776,973 and will continue to monitor the value the underlying collateral. The valuation allowance was recorded as a bad debt expense; however, this asset is owned by a third party reinsurer. Therefore, the valuation allowance was passed through as a receivable from the reinsurers, offsetting the valuation allowance. Preferred stock: Preferred stock of a non-affiliated company was purchased for $500,000 during the third quarter of 2019. An impairment analysis of the preferred stock was performed as of September 30, 2020, due to a change in valuation of an invested asset held by the non-affiliated company. The investment asset had collateral supporting the investment that was less than the book value of the asset; therefore, the Company established a full valuation allowance of $500,000. This was recorded as a reduction of the asset on the balance sheet and a bad debt expense in the Consolidated Statements of Comprehensive (Loss) Income. Policy loans: Policy loans are stated at unpaid principal balances. As these loans are fully collateralized by the cash surrender value of the underlying insurance policies, the carrying value of the policy loans approximates their fair value. Deposit-type contracts: The fair value for direct and assumed liabilities under deposit-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and nonperformance risk of the liabilities. The fair values for insurance contracts other than deposit-type contracts are not required to be disclosed. The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value September 30, 2020 Financial assets Fixed maturities: U.S. government obligations $ — $ 2,105,022 $ — $ 2,105,022 Mortgage-backed securities — 378,136 — 378,136 Asset-backed securities — 202,442,051 — 202,442,051 States and political subdivisions–general obligations — 248,748 — 248,748 States and political subdivisions–special revenue — 6,190,179 — 6,190,179 Trust preferred — 2,162,959 — 2,162,959 Corporate — 37,015,855 — 37,015,855 Total fixed maturities — 250,542,950 — 250,542,950 Mortgage loans on real estate, held for investment — — 61,464,515 61,464,515 Derivatives — 7,664,006 — 7,664,006 Other invested assets — — 14,808,870 14,808,870 Notes receivable — 5,516,302 — 5,516,302 Policy loans — — 147,309 147,309 Total Investments $ — $ 263,723,258 $ 76,420,694 $ 340,143,952 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ 6,359,657 $ — 6,359,657 December 31, 2019 Fixed maturities: U.S. government obligations — 2,081,224 — 2,081,224 Mortgage-backed securities — 798,608 — 798,608 Asset-backed securities — 95,247,824 — 95,247,824 States and political subdivisions–general obligations — 249,282 — 249,282 States and political subdivisions–special revenue — 25,291 — 25,291 Corporate — 18,839,632 — 18,839,632 Total fixed maturities — 117,241,861 — 117,241,861 Mortgage loans on real estate, held for investment — — 13,810,041 13,810,041 Derivatives — 575,294 — 575,294 Investment escrow — 3,899,986 — 3,899,986 Other invested assets — — 2,468,947 2,468,947 Preferred stock — — 500,000 500,000 Policy loans — — 106,014 Total Investments $ — $ 121,717,141 $ 16,885,002 $ 138,496,129 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ 576,634 $ — 576,634 There were no transfers of financial instruments between any levels during the nine months ended September 30, 2020 or during the year ended December 31, 2019. The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of December 31, 2019 and 2018. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value December 31, 2019 Financial assets Fixed maturities: U.S. government obligations $ — $ 2,081,224 $ — $ 2,081,224 Mortgage-backed securities — 798,608 — 798,608 Asset-backed securities — 95,247,824 — 95,247,824 States and political subdivisions–general obligations — 249,282 — 249,282 States and political subdivisions–special revenue — 25,291 — 25,291 Corporate — 18,839,632 — 18,839,632 Total fixed maturities — 117,241,861 — 117,241,861 Mortgage loans on real estate, held for investment — — 13,810,041 13,810,041 Derivatives — 575,294 — 575,294 Investment escrow — 3,899,986 — 3,899,986 Other invested assets — — 2,468,947 2,468,947 Preferred stock — — 500,000 500,000 Total Investments $ — $ 121,717,141 $ 16,778,988 $ 138,496,129 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ 576,634 $ — 576,634 December 31, 2018 Fixed maturities: U.S. government obligations $ — $ 1,995,951 $ — $ 1,995,951 Mortgage-back securities — 1,004,051 — 1,004,051 States and political subdivisions–general obligations — 263,184 — 263,184 States and political subdivisions–special revenue — 25,173 — 25,173 Corporate — 14,095,824 — 14,095,824 Total fixed maturities $ — $ 17,384,183 $ — $ 17,384,183 There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the years ended December 31, 2019 or 2018. Accounting standards require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis are discussed above. There were no financial assets or financial liabilities measured at fair value on a non-recurring basis. The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy for financial assets and financial liabilities as of September 30, 2020 and December 31, 2019, respectively: September 30, 2020 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 147,309 $ — $ — $ 147,309 $ 147,309 Cash 136,431,785 136,431,785 — — 136,431,785 Liabilities: Policyholder deposits (Deposit-type contracts) 455,429,384 — — 455,429,384 455,429,384 December 31, 2019 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 106,014 $ — $ — $ 106,014 $ 106,014 Cash 43,716,205 43,716,205 — — 43,716,205 Liabilities: Policyholder deposits (Deposit-type contracts) 171,168,785 — — 171,168,785 171,168,785 The following tables present a reconciliation of the beginning balance for all investments measured at fair value on a recurring basis using level three inputs during the six months ended September 30, 2020. Beginning Ending Balance Balance As of Valuation Realized As of December 31, 2019 Additions Sales Allowance Gain September 30, 2020 Assets: Policy loans $ 106,014 $ 41,295 $ — $ — $ — $ 147,309 Mortgage loans on real estate, held for investment 13,810,041 56,402,943 8,918,066 — 169,597 61,464,515 Other invested assets 2,468,947 26,787,844 13,670,948 (776,973) 14,808,870 Preferred stock 500,000 — — (500,000) — Total Investments $ 16,885,002 $ 83,232,082 $ 22,589,014 $ (1,276,973) $ 169,597 $ 76,420,694 The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of December 31, 2019 and 2018, respectively: December 31, 2019 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 106,014 $ — $ — $ 106,014 $ 106,014 Cash 43,716,205 43,716,205 — — 43,716,205 Liabilities: Policyholder deposits (Deposit-type contracts) 171,168,785 — — 171,168,785 171,168,785 December 31, 2018 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 43,843 $ — $ — $ 43,843 $ 43,843 Cash 2,832,567 2,832,567 — — 2,832,567 Liabilities: Policyholder deposits (Deposit-type contracts) 7,234,927 — — 7,234,927 7,234,927 Notes payable 18,938,705 — — 18,938,705 18,938,705 The following table presents a reconciliation of the beginning balance for all investments measured at fair value on a recurring basis using level three inputs during the years ended December 31, 2019 and 2018. Beginning Balance Ending Balance As of December 31, Total gains As of December 31, 2018 Additions Sales Included in Income 2019 Assets Policy loans $ 43,843 $ 62,171 $ — $ — $ 106,014 Mortgage loans on real estate, held for investment — 15,036,179 1,226,138 — 13,810,041 Other invested assets — 17,287,325 14,849,555 31,177 2,468,947 Preferred stock — 500,000 — — 500,000 Total Investments $ 43,843 $ 32,885,675 $ 16,075,693 $ 31,177 $ 16,885,002 |
Income Tax Matters
Income Tax Matters | 21 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Tax Matters | Note 9. Income Tax Matters Significant components of the Company’s deferred tax assets and liabilities as of September 30, 2020, December 31, 2019 and December 31, 2018 are as follows: September 30, December 31, December 31, 2020 2019 2018 Deferred tax assets: Loss carryforwards $ 623,258 $ 436,777 1,429,458 Capitalized costs 186,253 221,918 269,472 Stock option granted 4,566 4,566 — Unrealized losses on investments 475,720 — 390,349 Policy acquisition costs 750,034 1,468,030 — Charitable contribution carryforward 1,020 1,020 — Property and equipment 29,896 15,508 — Benefit reserves 3,263,165 848,643 192,858 Total deferred tax assets 5,333,912 2,996,462 2,282,137 Less valuation allowance (4,631,718) (2,618,741) (1,928,454) Total deferred tax assets, net of valuation allowance 702,194 377,721 353,683 Deferred tax liabilities: Unrealized losses on investments 314,738 116,088 — Due premiums 81,789 81,789 117,144 Intangible assets 147,000 147,000 147,000 Policy loans 158,667 32,844 86,246 Property and equipment — — 3,294 Total deferred tax liabilities 702,194 377,721 353,683 Net deferred tax assets $ — $ — — At September 30, 2020, December 31, 2019 and December 31, 2018, the Company recorded a valuation allowance of $4,631,718, $2,618,741 and $1,928,454, respectively, on the deferred tax assets to reduce the total to an amount that management believes will ultimately be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income. There was income tax expense of $2,145,110 and $114,642 for the nine months ended September 30, 2020 and September 30, 2019. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Nine months ended September 30, 2020 2019 Computed expected income tax benefit $ 339,987 $ (813,759) Increase (reduction) in income taxes resulting from: State tax, net of federal benefit 151,680 — Meals, entertainment and political contributions 4,101 3,858 Change in valuation allowance 1,421,169 746,468 COD Interest — 177,563 Other 228,173 512 Subtotal of increases 1,805,123 928,401 Tax expense (benefit) $ 2,145,110 $ 114,642 Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss (“NOL”) carryforwards following a change of control, which occurred on June 28, 2018. As of September 30, 2020, the deferred tax assets included the expected tax benefit attributable to federal NOLs of $2,967,895. The federal NOLs generated prior to June 28, 2018 which are subject to Section 382 limitation can be carried forward. If not utilized, the NOLs of $890,636 prior to 2017 will expire through the year of 2032, and the NOLs generated from June 28, 2018 to September 30, 2020 do not expire and will carry forward indefinitely, but their utilization in any carry forward year is limited to 80% of taxable income in that year. Loss carry forwards for tax purposes as of September 30, 2020, have expiration dates that range from 2024 through 2039. There was income tax expense of $234,180 for the year ended December 31, 2019, and no income tax expense for the year ended December 31, 2018. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Year ended December 31, 2019 2018 Computed expected income tax benefit $ (1,154,890) $ (1,063,749) Increase (reduction) in income taxes resulting from: Meals, entertainment and political contributions 6,170 8,402 Change in loss carryforward due to 382 limitation — 5,595,636 COD Interest 177,563 — Other 8,613 39,143 Subtotal of increases 192,346 5,643,181 Tax benefit before valuation allowance (962,544) 4,579,432 Change in valuation allowance 1,196,724 (4,579,432) Net income tax expenses $ 234,180 $ — Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss (“NOL”) carryforwards following a change of control, which occurred on June 28, 2018. As of December 31, 2019, the deferred tax assets included the expected tax benefit attributable to federal NOLs of $2,079,888. The federal NOLs generated prior to June 28, 2018 which are subject to Section 382 limitation can be carried forward. If not utilized, the NOLs of $798,236 prior to 2017 will expire through the year of 2032, and the NOLs generated from June 28, 2018 to December 31, 2019 do not expire and will carry forward indefinitely, but their utilization in any carry forward year is limited to 80% of taxable income in that year. The Company believes that it is more likely than not that the benefit from federal NOL carryforwards will not be realized; thus, we have recorded a full valuation allowance of $436,777 on the deferred tax assets related to these federal NOL carryforwards. Loss carry forwards for tax purposes as of December 31, 2019, have expiration dates that range from 2024 through 2039. |
Reinsurance
Reinsurance | 21 Months Ended |
Sep. 30, 2020 | |
Reinsurance | |
Reinsurance | Note 10. Reinsurance A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of September 30, 2020 and December 31, 2019 and for the nine months ended September 30, 2020 and 2019 as follows: September 30, 2020 December 31, 2019 Balance sheets: Benefit and claim reserves ceded $ 42,091,115 $ 30,579,524 Nine months ended September 30, 2020 2019 Statements of comprehensive (loss) income: Premiums ceded $ 677,702 $ 702,450 Benefits ceded 99,466 167,895 Commissions ceded 7,595 8,146 A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018, is as follows (excluding Unified): December 31, 2019 December 31, 2018 Balance sheets: Benefit and claim reserves ceded $ 30,579,524 $ 23,100,644 Year ended December 31, 2019 2018 Statements of comprehensive income: Premiums assumed $ — $ 10,268 Premiums ceded 996,711 848,374 Benefits assumed — 92,792 Benefits ceded 201,823 141,896 Commissions assumed — 18 Commissions ceded 10,445 54,346 The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third party reinsurers except for a reinsurance with Unified as it was accounted for as discontinued operations as of September 30, 2020: Recoverable on Total Amount Recoverable Recoverable Benefit Ceded Recoverable AM Best on Paid on Unpaid Reserves/Deposit- Due from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ 4,141,644 $ — $ 4,141,644 Optimum Re Insurance Company A — — 524,701 — 524,701 Sagicor Life Insurance Company A- — 89,179 11,200,888 286,028 11,004,042 SDA Annuity & Life Re NR — — 4,094,584 — 4,094,584 SRC2 (Seneca Re protected cell) NR 5,108,908 — 5,108,908 US Alliance Life and Security Company NR — — 17,281,555 64,319 17,217,236 $ — $ 89,179 $ 42,352,280 $ 350,347 $ 42,091,115 Due to the market price decreases in 2020, certain assets that were carried on our balance sheet have resulted in approximately $2.3 million of unrealized losses as of September 30, 2020. As discussed in “Note. 1. Nature of Operations and Basis of Presentation – Comprehensive loss,” American Life has treaties with several third party reinsurers that have funds withheld and modified coinsurance provisions. Under those provisions, the assets backing the treaties are maintained by American Life as collateral but the assets and total returns or losses on the asset portfolios belong to the third party reinsurers. Under GAAP this arrangement is considered an embedded derivative as discussed in Note 7. As a result of the market volatility, the assets had unrealized losses of approximately $4.4 million as of September 30, 2020. The terms of the contracts with the third party reinsurers provide that unrealized losses on the portfolios accrue to the third party reinsurers. Accordingly, the unrealized losses on the assets held by American Life were offset by a gain in the embedded derivative of $4.4 million. We account for this loss pass through by recording equivalent realized gains on our income statement. Effective July 25, 2019, American Life entered into a Funds Withheld Coinsurance and Modified Coinsurance Agreement (“FW/Modco Ironbound Agreement”) with Ironbound Reinsurance Company Limited, an unaffiliated reinsurance company organized under the laws of Barbados (“Ironbound”). Under the FW/Modco Ironbound Agreement, American Life ceded to Ironbound, on a funds withheld coinsurance and modified coinsurance basis, an initial 95% quota share of certain liabilities with respect to its MYGA business. Starting on March 1, 2020, the quota share dropped to 30% and then again on March 11, 2020 the quota share dropped to 0%. American Life has established two accounts to hold the assets for the FW/Modco Ironbound Agreement, a Funds Withheld Account and a Modco Deposit Account. In addition, a trust account was established on June 30, 2019 among American Life, Ironbound and Wells Fargo Bank, National Association for the sole benefit of American Life to fund the Funds Withheld Account and the Modco Deposit Account for any shortage in required reserves. The initial settlement included net premium income of $45,005,536 (gross premiums of $46,568,321 minus gross commissions paid of $1,562,786) and net statutory reserves of $44,904,704. The initial settlement for the Funds Withheld Account was $24,928,934 and for the Modco Deposit Account was $16,619,289 and the reserves required was $26,944,622 and $17,963,081, respectively. The amount owed by Ironbound to the Funds Withheld Account and the Modco Deposit Account from the trust account was $2,015,688 and $1,343,792, respectively which was funded at the closing of the Ironbound transaction. Effective November 7, 2019, American Life entered into a Funds Withheld Coinsurance and Modified Coinsurance Agreement (“FW/Modco SDA Agreement”) with SDA Annuity & Life Re (“SDA”), a Cayman Islands-domiciled reinsurance company. Under the FW/Modco SDA Agreement, American Life cedes to SDA, on a funds withheld coinsurance and modified coinsurance basis, 5% quota share of certain liabilities with respect to its multi-year guaranteed annuity MYGA business and an initial 95% quota share of certain liabilities with respect to its fixed indexed annuity FIA through December 31, 2019 and thirty 30% through September 30, 2020. American Life has established two accounts to hold the assets for the FW/Modco Agreement, a Funds Withheld Account and a Modco Deposit Account. In addition, a trust account was established on November 7, 2019 among American Life, SDA and Wells Fargo Bank, National Association for the sole benefit of American Life to fund the SDA Funds Withheld Account and the SDA Modco deposit account for any shortage in required reserves. The initial settlement included net premium income of $3,970,509 and net statutory reserves of $3,986,411. The initial settlement for the funds withheld account was $2,256,802 and for the Modified coinsurance deposit Account was $1,504,535 and the reserves required was $2,391,847 and $1,594,564, respectively. The amount owed to the funds withheld account and the Modified coinsurance deposit account from the trust account was $135,044 and $90,029, respectively which was funded at the closing of the SDA transaction. Effective August 25, 2020, the quota share was reduced to 0% for both MYGA and FIA products. Effective April 15, 2020, American Life entered into a Funds Withheld and Funds Paid Coinsurance Agreement (“US Alliance Agreement”) between American Life and US Alliance Life and Security Company, a Kansas reinsurance company (“US Alliance”). Under the US Alliance Agreement, American Life will cede to US Alliance, on a funds withheld and funds paid coinsurance basis, an initial 49% quota share of certain liabilities with respect to American Life’s FIA business effective January 1, 2020 through March 31, 2020. Effective from March 1, 2020 through March 10, 2020, American Life will cede a 45.5% quota share of certain liabilities with respect to its MYGA business to US Alliance. Effective March 11, 2020 through March 31, 2020, on a funds withheld and funds paid coinsurance basis, the quota share will increase to 66.5% of certain liabilities with respect to its MYGA business. Effective April 1, 2020, the FIA quota share was reduced to 40% and the MYGA quota share was reduced to 25%. American Life has established a US Alliance Funds Withheld Account to hold the assets for the US Alliance Agreement. In addition, a trust account was established among American Life, US Alliance and Capitol Federal Savings Bank, for the sole benefit of American Life to fund the Funds Withheld Account for any shortage in required reserves. The initial settlement included net premium income of $13,542,325 and net statutory reserves of $14,706,862. The initial settlement for the Funds Withheld Account was $12,729,785 and to the trust account was $812,539 from American Life and $5,000,000 from US Alliance. In early 2020, Midwest formed Seneca Re, a wholly owned subsidiary, to operate as a sponsored captive insurance company for the purpose of insuring and reinsuring various types of risks of its participants through one or more special purpose entities, or “protected cells” and to conduct any other business or activity that is permitted for sponsored captive insurance companies under Vermont insurance regulations. Seneca Re closed its first Protected Cell 2020-01 (“SRC1”) during May of 2020. Effective July 1, 2020 the FIA policies were increased form 5% to 30%. SRC1 is consolidated in the Company’s financial statements. Effective April 24, 2020, American life entered into a Master Letter Agreement with Seneca Re and Crestline regarding a flow of annuity reinsurance and related asset management, whereby Crestline agreed to provide reinsurance funding for a quota share percentage of 25% of the liabilities of American Life arising from the MYGA and a quota share percentage of 40% of the FIA products. This agreement expires on April 24, 2023. On July 23, 2020, the Nebraska Department of Insurance (“NDOI”) approved the Funds Withheld Coinsurance and Modified Coinsurance Agreement with Seneca Incorporated Cell, LLC 2020-02 (“SRC2”) of Seneca Re. The agreement closed on July 27, 2020. Under the agreement, American Life ceded to SRC2, on a Funds Withheld and Modified Coinsurance basis, an initial 25% quota share of certain liabilities with respect to American Life’s MYGA business and 40% quota share of certain liabilities with respect to American Life’s FIA business effective April 24, 2020. American Life has established a SRC2 Funds Withheld Account and a Modified Coinsurance Account to hold the assets pursuant to the agreement. The NDOI approved the inclusion of the SRC2 coinsurance in American Life’s September 30, 2020 statutory financial statements. The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by reinsurer except for Unified as it is accounted for as discontinued operations as of December 31, 2019: Recoverable on Total Amount Recoverable Recoverable Benefit Ceded Recoverable AM Best on Paid on Unpaid Reserves/Deposit- Due from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ 4,213,699 $ — $ 4,213,699 Optimum Re Insurance Company A — — 489,770 — 489,770 Sagicor Life Insurance Company A- — 130,538 11,347,962 270,273 11,208,227 SDA Annuity & Life Re NR — — 2,506,911 — 2,506,911 US Alliance Life and Security Company NR — 23,000 12,207,079 69,162 12,160,917 $ — $ 153,538 $ 30,765,421 $ 339,435 $ 30,579,524 Effective November 7, 2019, American Life entered into a Funds Withheld Coinsurance and Modified Coinsurance Agreement (“FW/Modco SDA Agreement”) with SDA Annuity & Life Re (“SDA”), an unaffiliated reinsurance company a Cayman Islands-domiciled reinsurance company. In a modified coinsurance arrangement (“Modco”), the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a funds withheld coinsurance agreement (“FW”), assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurance, to reduce the potential credit risk. Under the FW/Modco SDA Agreement, American Life ceded to SDA, on a funds withheld coinsurance and modified coinsurance basis, the remaining (5%) quota share of certain liabilities with respect to its multi-year guaranteed annuity (“MYGA”) business and an initial ninety-five (95%) quota share of certain liabilities with respect to its fixed indexed annuity (“FIA”) through December 31, 2019 and thirty (30%) thereafter. American Life has established two accounts to hold the assets for the FW/Modco Agreement, a Funds Withheld Account and a Modco Deposit Account. In addition, a trust account was established on November 7, 2019 among American Life, SDA and Wells Fargo Bank, National Association for the sole benefit of American Life to fund the SDA Funds Withheld Account and the SDA Modco Deposit Account for any shortage in required reserves. The initial settlement included net premium income of $3,970,509 and net statutory reserves of $3,986,411. The initial settlement for the Funds Withheld Account was $2,256,802 and for the Modco Deposit Account was $1,504,535 and the reserves required was $2,391,847 and $1,594,564, respectively. The amount owed to the Funds Withheld Account and the Modco Deposit Account from the trust account was $135,044 and $90,029, respectively which was funded at the closing of the Ironbound transaction. American Life earned a ceding commission of $996,701 and commission and administrative allowances of $1,734,184 as of December 31, 2019. The commission and administrative allowances of $1,734,184 first reduced costs that would have been deferred acquisitions costs incurred and the remainder of the allowances were classified as deferred ceding commissions along with the $996,701 ceding commission earned. Effective July 25, 2019, American Life entered into a Funds Withheld Coinsurance and Modified Coinsurance Agreement (“FW/Modco Agreement”) with Ironbound Reinsurance Company Limited, an unaffiliated reinsurance company organized under the laws of Barbados (“Ironbound”). In a modified coinsurance arrangement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a funds withheld coinsurance agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurance, to reduce the potential credit risk. Under the FW/Modco Agreement, American Life will cede to Ironbound, on a funds withheld coinsurance and modified coinsurance basis, an initial ninety-five (95%) quota share of certain liabilities with respect to its MYGA business. American Life has established two accounts to hold the assets for the FW/Modco Agreement, a Funds Withheld Account and a Modco Deposit Account. In addition, a trust account was established on June 30, 2019 among American Life, Ironbound and Wells Fargo Bank, National Association for the sole benefit of American Life to fund the Funds Withheld Account and the Modco Deposit Account for any shortage in required reserves. The initial settlement included net premium income of $45,005,536 (gross premiums of $46,568,321 minus gross commissions paid of $1,562,786) and net statutory reserves of $47,271,267. The initial settlement for the Funds Withheld Account was $24,928,934 and for the Modco Deposit Account was $16,619,289 and the reserves required was $26,944,622 and $17,963,081, respectively. The amount owed to the Funds Withheld Account and the Modco Deposit Account from the trust account was $2,015,688 and $1,343,792, respectively which was funded at the closing of the Ironbound transaction. American Life earned a ceding commission of $4,843,120 and commission and administrative allowances of $4,734,926 as of December 31, 2019. The commission and administrative allowances of $4,734,926 first reduced costs that would have been deferred acquisitions costs incurred and the remainder of the allowances were classified as deferred ceding commissions along with the $4,843,120 ceding commission earned. Effective July 1, 2018, American Life entered into an assumptive and indemnity coinsurance transaction with Unified to transfer 100% of the risk related to the remaining legacy block of business, see Note 4 above for further discussion. We transferred $19,311,616 of GAAP net adjusted reserves as of July 1, 2018 to Unified for cash of $14,320,817, which was net of a ceding allowance of $3,500,000 plus the accrued interest on the transaction from July 1, 2018 until it closed on December 10, 2018. Unified assumed certain responsibilities for incurred claims, surrenders and commission from the effective date. The ceding commission of $3,500,000 was recorded net of the difference between statutory and GAAP net adjusted reserves, the elimination of DAC of $1,890,013, VOBA of $338,536, and the remaining deferred profit from our legacy business of $26,896. The remaining $3,069,690 was reflected as a deferred gain and will be recognized into income over the expected duration of the legacy blocks of business. As of December 31, 2019, Unified had converted 79% of the indemnity coinsurance to assumptive coinsurance. American Life had amortization income for the year ended December 31, 2019 of $2,410,054 as a result of the assumption of 79% of the indemnity policies. The ending deferred ceding commission at December 31, 2019 was $582,894. American Life and Security National Life Insurance (“SNL”) reached an agreement to commutate the assumed block of life business effective July 31, 2018. American Life recorded a GAAP loss of $154,780 due to the difference between the GAAP and statutory reserves and the write-off of the remaining VOBA. Net adjusted reserves transferred back to SNL totaled $2,543,898 on a GAAP basis. At December 31, 2019 and 2018, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to Sagicor were $11,208,227 and $11,494,161, respectively. At December 31, 2019 and 2018, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to US Alliance were $12,160,917 and $11,149,888, respectively. American Life remains contingently liable on the ceded reinsurance should Sagicor or US Alliance be unable to meet their respective obligations. At December 31, 2019, total deposit-type contract ceded by American Life to Ironbound and SDA were $4,213,699 and $2,506,991, respectively. The table below shows those ceding commissions and allowances received from the above reinsurers. The new business was not ceded to these reinsurers until the third and fourth quarters of 2019; therefore, there is no comparable data in the first half of 2019. Nine months ended September 30, 2020 Effective Date Ceding Expense Reinsurer of Transaction Commission Paid Allowances Paid (1) Ironbound Reinsurance Company Limited July 2019 $ 688,110 $ 690,169 SDA Annuity & Life Re November 2019 1,356,473 2,605,014 US Alliance Life and Security Company (2) April 2020 2,279,511 4,016,556 SRC2 July 2020 3,837,996 7,247,966 $ 8,162,090 $ 14,559,705 (1) Includes: acquisition and administrative expenses, commission expense allowance and product development fees. (2) US Alliance Life and Security Company funds withheld and funds paid treaty Under GAAP, ceding commissions are deferred on the balance sheet and are amortized over the period of the policyholder contracts. The tables below shows the ceding commissions from the reinsurers including SRC1 and what was earned on a GAAP basis: Nine months ended September 30, 2020 Interest on Earned Gross Ceding Expense Ceding Ceding Reinsurer Commission Allowances (1) Commissions Commission Ironbound Reinsurance Company Limited $ 688,110 $ 690,169 $ 165,607 $ 316,889 SDA Annuity & Life Re 1,356,473 2,605,014 47,461 43,856 US Alliance Life and Security Company (2) 2,279,511 4,016,556 23,171 74,466 SRC2 3,837,996 7,247,966 13,251 54,838 $ 8,162,090 $ 14,559,705 $ 249,490 $ 490,049 (1) Includes: acquisition and administrative expenses, commission expense allowance and product development fees. (2) US Alliance Life and Security Company funds withheld and funds paid treaty The tables below shows the ceding commissions deferred on each reinsurance transaction on a GAAP basis: September 30, 2020 December 31, 2019 Effective Date Deferred Ceding Deferred Ceding Reinsurer of Transaction Commission Commission US Alliance Life and Security Company (1) September 2017 $ 822,393 $ 858,675 Unified Life Insurance Company (1) July 2018 287,189 582,894 Ironbound Reinsurance Company Limited (2) July 2019 5,739,427 5,060,359 SDA Annuity & Life Re (2) November 2019 2,071,427 1,076,267 US Alliance Life and Security Company (3) April 2020 2,508,421 — SRC2 July 2020 4,310,407 — $ 15,739,264 $ 7,578,195 (1) These reinsurance transactions on our legacy business received gross ceding commissions on the effective dates of the transaction. The difference between the statutory net adjusted reserves and the GAAP adjusted reserves plus the elimination of DAC and value of business acquired (“VOBA”) related to these businesses reduces the gross ceding commission with the remaining deferred and amortized over the lifetime of the blocks of business. (2) These reinsurance transactions include the ceding commissions and expense allowances which are accounted for as described in (1). (3) US Alliance Life and Security Company funds withheld and funds paid treaty. The use of reinsurance does not relieve American Life of its primary liability to pay the full amount of the insurance benefit in the event of the failure of a reinsurer to honor its contractual obligation for all blocks of business except what is included in the Unified transaction. The reinsurance agreement with Unified discharges American Life’s responsibilities once all the policies have changed from indemnity to assumptive reinsurance. No reinsurer of business ceded by American Life has failed to pay policy claims (individually or in the aggregate) with respect to our ceded business. American Life monitors several factors that it considers relevant to satisfy itself as to the ongoing ability of a reinsurer to meet all obligations of the reinsurance agreements. These factors include the credit rating of the reinsurer, the financial strength of the reinsurer, significant changes or events of the reinsurer, and any other relevant factors. If American Life believes that any reinsurer would not be able to satisfy its obligations with American Life, separate contingency reserves may be established. At September 30, 2020 and December 31, 2019, no contingency reserves were established. American Life expects to reinsure substantially all of its new insurance policies with a variety of reinsurers in exchange for upfront ceding commissions, expense reimbursements and administrative fees. American Life may retain some business with the intent to reinsure some or all at a future date. |
Notes Payable
Notes Payable | 21 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | Note 11. Notes Payable On June 28, 2018, we underwent a change in control as a result of the closing of a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement dated May 9, 2018 (the “Agreement”) with a non-affiliated third party, Xenith. Vespoint LLC, a Delaware limited liability company (“Vespoint”), owns 100% of the voting stock of Xenith. Vespoint is owned and managed by AMS Advisors LLC, a Delaware limited liability company, and Rendezvous Capital LLC, a New York limited liability company. Each of these companies is a private investment company; they are controlled by Michael Minnich and A. Michael Salem, who are Co-Chief Executive Officers of Vespoint and Executive Officers of Midwest and American Life. At closing of the Agreement with Xenith, it loaned a total of $600,000 to Midwest, repayable upon maturity in 10 years with interest of 8% per annum with 4% payable quarterly and another 4% accrued and payable upon maturity. The loans were made under two notes of $500,000 and $100,000, respectively. The Agreement further provided that Xenith, in its sole discretion, could loan up to an additional $23,500,000 to Midwest. Any loans made by Xenith under this election (“Subsequent Loans”) could also to be converted into Midwest’s voting common stock at $10.29 per share. Xenith contributed an additional $18,500,000 in the fourth quarter of 2018 following the amendment of the Midwest Articles of Incorporation to increase its authorized voting common shares. All loans were later converted into Midwest voting common stock on June 18, 2019. Any additional borrowing capacity was terminated by written mutual consent in April 2020. The Company had total accrued interest of $845,536 on the Xenith notes through June 18, 2019. All interest on the notes from inception through June 18, 2019 was waived by Xenith. The accrued interest was accounted for as an additional capital contribution. The legal fees of $161,000 associated with the Xenith transaction were capitalized and subsequently written off when the notes were converted. The following table sets forth information regarding loans made to us by Xenith and the number of shares of voting common stock each loan was converted into on June 18, 2019: Shares of Common Loan Stock into which Principal Loans Were Date of Loan Amount Converted June 28, 2018 $ 500,000 48,570 June 28, 2018 100,000 9,714 October 10, 2018 1,000,000 97,139 December 7, 2018 17,500,000 1,699,938 Total $ 19,100,000 1,855,361 As of September 30, 2020 and December 31, 2019, Midwest had no notes outstanding to Xenith. |
Long-Term Incentive Plan
Long-Term Incentive Plan | 21 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Long-Term Incentive Plan | Note 12. Long-Term Incentive Plan On June 11, 2019, our Board of Directors (the “Board”) approved the Midwest Holding Inc. Long-Term Incentive Plan. The purposes of this Long-Term Incentive Plan (“LTIP”) is to create incentives which are designed to motivate participants to put forth maximum effort toward the success and growth of the Company and to enable the Company to attract and retain experienced individuals who by their position, ability and diligence are able to make important contributions to the Company’s success. Toward these objectives, this Plan provides for the grant of Options, Restricted Stock Awards, Restricted Stock Units, SARs, Performance Units, Performance Bonuses, Stock Awards and Other Incentive Awards to Eligible Employees and the grant of Nonqualified Stock Options, Restricted Stock Awards, Restricted Stock Units, SARs, Performance Units, Stock Awards and Other Incentive Awards to Consultants and Eligible Directors, subject to the conditions set forth in this Plan. All awards are required to be established, approved, and/or granted by our Board. On July 19, 2019, the Company granted stock options for 17,900 shares that are exercisable during a ten-year period after the date of grant at a price of $25.00 per share with one-third exercisable after July 17, 2021 and two-thirds exercisable after July 17, 2023. The fair market value of the shares was approximately $8.00 a share at grant date. The Company’s management team considered the stock options as compensation. Using the Black-Scholes Model we determined the consideration should be $143,200. The factors we used to determine the consideration were the following: the weighted average fair market value at grant date of $8.00 a share, exercise price of $25.00 a share, time to maturity of 10 years, annual risk-free interest rate of 1.84% based upon the 10 year U.S. Treasury rate at grant date, and a 200% volatility based on the change in price of the stock between the decision and grant date, the amount of shares and the closely held nature of the stock before the grant. On July 21, 2020, the Company granted additional stock options for 26,300 shares voting common stock. The Company’s management team considered the stock options as compensation. Using the Black-Scholes Model we determined the consideration should be $333,500. The factors we used to determine the consideration were the following: the weighted average fair market value at grant date of $14.50 a share, exercise price of $25.00 a share, time to maturity of 10 years, annual risk-free interest rate of .55% based upon the 10 year U.S. Treasury rate at grant date, and a 60% volatility based on the valuation that was completed for this stock grant. On September 13, 2020, the Company granted additional stock options for 6,667 to a new employee with an exercise price of $25.00 a share. For the nine months ending September 30, 2020 and year ended December 31, 2019, we amortized the consideration , from the three stock option grants above, over the two and four year vesting tranches for an expense and additional paid in capital of $54,827 and 21,745, respectively. On May 1, 2020, 200 stock options became vested by two Board members resigning from the Board. As of the nine months ended September 30, 2020, the outstanding non-vested stock was 47,317 with 3,350 being forfeited. Table below show the remaining non-vested shares as of September 30, 2020: 2020 Stock 2019 Stock Options Options Outstanding (1) Outstanding (1) Non-vested at December 31, 2019 17,900 17,900 Granted 32,967 — Forfeited (3,350) — Vested (200) Non-vested at September 30, 2020 47,317 17,900 |
Deposit-Type Contracts
Deposit-Type Contracts | 21 Months Ended |
Sep. 30, 2020 | |
Separate Accounts Disclosure [Abstract] | |
Deposit-Type Contracts | Note 13. Deposit-Type Contracts The Company’s deposit-type contracts represent the contract value that has accrued to the benefit of policyholders as of the balance sheet date. Liabilities for these deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less policyholder withdrawals. The following table provides information about deposit-type contracts for the nine months ended September 30, 2020 and the year ended December 31, 2019: September 30, 2020 December 31, 2019 Beginning balance $ 171,168,785 $ 7,234,927 US Alliance 547,193 657,986 Deposits received 279,537,157 161,392,700 Investment earnings (includes embedded derivative) 5,910,237 2,043,762 Withdrawals (1,718,288) (160,590) Contract changes (15,700) — Ending balance $ 455,429,384 $ 171,168,785 The following table provides information about deposit-type contracts for the years ended December 31, 2019 and 2018: Year ended December 31, 2019 2018 Beginning balance $ 7,234,927 $ 8,314,297 US Alliance 657,986 804,187 Commutation of assumption agreement — (1,881,411) Ironbound Reinsurance Company Limited 1,839,551 — SDA Annuity & Life Re (includes MVA adjustment and embedded derivative) 194,940 — Deposits received 161,392,700 650 Investment earnings (includes MVA adjustment and embedded derivative) 9,271 47,936 Withdrawals (160,590) (50,732) Ending balance $ 171,168,785 $ 7,234,927 Under the terms of American Life’s coinsurance agreement with a third party, American Life assumed certain deposit-type contract obligations. The deposits, withdrawals and interest credited in the table above represents the activity from the third party through July 31, 2018. |
Commitments and Contingencies
Commitments and Contingencies | 21 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 14. Commitments and Contingencies Legal Proceedings: We are involved in litigation incidental to our operations from time to time. We are not presently a party to any legal proceedings other than litigation arising in the ordinary course of our business, and we are not aware of any claims that could materially affect our financial position or results of operations. Regulatory Matters : State regulatory bodies and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning the Company’s compliance with laws in relation to, but not limited to, insurance and securities matters. American Life received a Certificate of Authority to conduct business in Iowa during the first quarter of 2019. American Life received a Certificate of Authority to conduct business during 2020 from each of the following states and the District of Columbia: Utah, Montana, Louisiana and Ohio. American Life has pending applications six additional states that are expected to be approved by the end of 2020. The Nebraska Department of Insurance (“NDOI”) granted American Life approval to enter into the Funds Withheld Coinsurance and Modified Coinsurance Agreement with Ironbound prior to closing of the agreement in July 2019. The NDOI granted American Life approval to enter into the Funds Withheld Coinsurance and Modified Coinsurance Agreement with SDA prior to closing of the agreement in December 2019. The NDOI granted American Life approval to enter into the Funds Withheld and Funds Paid Coinsurance Agreement with US Alliance Agreement prior to closing of the agreement on April 15, 2020. The NDOI granted American Life approval to enter into the Funds Withheld and Modified Coinsurance Agreement with Seneca Re through SRC1 prior to closing of the agreement on May 13, 2020. The NDOI granted American Life approval to enter into the FW and Modco Agreement with Seneca Re through SRC2 prior to closing of the agreement on July 23, 2020. |
Leases
Leases | 21 Months Ended |
Sep. 30, 2020 | |
Leases | |
Leases | Note 15. Leases Our operating lease activities consist of leases for office space and equipment. Our finance lease activities consist of leases for hardware which we owned effective September 30, 2020. None of our lease agreements include variable lease payments. See the discussion of our January 1, 2019 implementation of a new accounting standard for leases and its impact on our Consolidated Financial Statements in Note 2. New Accounting Standards. Supplemental balance sheet information as of September 30, 2020 and December 31, 2019 regarding our leases is as follows: As of As of Leases Classification September 30, 2020 December 31, 2019 Assets Noncurrent: Finance Office and other equipment, net of accumulated depreciation and amortization $ — $ 2,913 Operating Operating lease right-of-use assets 378,682 470,132 Total leased assets $ 378,682 $ 473,045 Liabilities Current: Finance lease Finance lease liabilities $ — $ 1,860 Noncurrent: Operating lease Operating lease liabilities 428,851 524,248 Total leased liabilities $ 428,851 $ 526,108 Our operating and finance leases expenses for the nine months ended September 30, 2020 and 2019, were as follows: Nine months ended September 30, Leases Classification 2020 2019 Operating General and administrative expense $ 6,654 $ 10,453 Finance lease cost: Amortization expense 2,913 8,739 Interest expense 111 333 Minimum contractual obligations for our operating leases at September 30, 2020, are as follows: Operating Leases 2020 (excluding nine months ended September 30,2020) $ 40,345 2021 164,081 2022 156,608 2023 161,674 2024 13,508 Total remaining lease payments $ 536,216 Supplemental cash flow information related to leases was as follows: Nine months ended September 30, 2020 2019 Cash payments Operating cash flows from operating leases $ (1,035) $ (148) Operating cash flows from finance leases 4,657 2,328 Financing cash flows from finance leases (111) (333) The weighted average remaining lease terms and discount rate of our finance and operating leases was as follows: As of As of September 30, 2020 December 31, 2019 Weighted Average Remaining Lease Term Finance lease 0 3 months Operating lease 1.7 years 2.5 years Weighted Average Discount Rate Finance lease — % 6 % Operating lease 8 % 8 % Supplemental balance sheet information for our leases for the years ended December 31, 2019 and 2018, are as follows: As of As of Leases Classification December 31, 2019 December 31, 2018 Assets Noncurrent: Finance Office and other equipment, net of accumulated depreciation and amortization $ 2,913 $ 14,564 Operating Operating lease right-of-use assets 470,132 592,065 Total leased assets $ 473,045 $ 606,629 Liabilities Current: Finance lease Finance lease liabilities $ 1,860 $ 9,299 Noncurrent: Operating lease Operating lease liabilities 524,248 646,519 Total leased liabilities $ 526,108 $ 655,818 The difference between assets and liabilities includes a $5,266 adjust to the finance lease and a $54,454 adjustment to an operating lease, both at the beginning of the period as part of the ASC 842 implementation adjustment discussed in Note 2. New Accounting Standards. Our operating and finance leases expenses for the years ended December 31, 2019 and 2018, are as follows: Year ended December 31, Leases Classification 2019 2018 Operating General and administrative expense $ 13,797 $ 16,810 Finance lease cost: Amortization expense 11,651 4,481 Interest expense 444 444 Minimum contractual obligations for our leases as of December 31, 2019 are as follows: Operating Leases Finance Lease 2020 (excluding year ended December 31, 2019) $ 160,958 $ 2,133 2021 164,081 — 2022 156,608 — 2023 161,674 — 2024 13,508 — Total remaining lease payments $ 656,829 $ 2,133 Supplemental cash flow information related to leases was as follows: Year ended December 31, 2019 2018 Cash payments Operating cash flows from operating leases $ (337) $ 4,306 Operating cash flows from finance leases 4,657 (2,514) Financing cash flows from finance leases (444) (444) The weighted average remaining lease terms of our finance and operating leases were six months and approximately two and a half years, respectively as of December 31, 2019. As of December 31, 2018, the weighted average remaining lease terms of our finance and operating leases were fifteen months and three and a half years, respectively. The weighted average discount rates used to determine the lease liabilities for finance leases was 6% and operating leases was 8% as of December 31, 2019 and 2018, respectively. The discount rate used for finance leases was based on the rates implicit in the leases. The discount rate used for operating leases was based on our incremental borrowing rate. |
Statutory Net Income and Surplu
Statutory Net Income and Surplus | 21 Months Ended |
Sep. 30, 2020 | |
Statutory Net Income and Surplus | |
Statutory Net Income and Surplus | Note 16. Statutory Net Income and Surplus American Life is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the NDOI. Statutory practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis. As filed in the statutory-basis annual statement with the NDOI, American Life’s statutory net gains (losses) for the nine months ended September 30, 2020 and 2019 were $4,541,349 and $(149,247), respectively. Capital and surplus of American Life as of September 30, 2020 and December 31, 2019 was $27,350,123 and $19,507,325, respectively. The net gain was primarily due to the ceding commission and reserve adjustments earned on the Ironbound, SDA, US Alliance, SRC1 and SRC2 reinsurance transactions; offset by continuing expenses incurred to provide services on new software and related technology to distribute products through national marketing organizations. For the nine months ended September 30, 2020, the MYGA and FIA sales were $86,502,950 and $193,034,208 compared to the $79,500,172 of MYGA sales for the nine months ended September 30, 2019. As filed in the statutory-basis annual statement with the NDOI, American Life’s statutory net gains (losses) for the year ended December 31, 2019 and 2018 were $1,843,725 and $(4,283,351), respectively. Capital and surplus of American Life as of December 31, 2019 and 2018 was $20,033,157 and $20,979,285, respectively. The net gain was primarily due to the ceding commission and reserve adjustments earned on the Ironbound and SDA reinsurance transactions; offset by continuing expenses incurred to provide services on the new software and related technology to distribute products through national marketing organizations. The MYGA sales began late in January 2019 with $145,747,737 of face amount of MYGA policies and $15,616,831 of face amount of FIA policies issued during 2019. An additional $9,568,290 of MYGA and $2,571,687 of FIA sales was pending as of December 31, 2019. State insurance laws require American Life to maintain certain minimum capital and surplus amounts on a statutory basis. Our insurance subsidiary is subject to regulations that restrict the payment of dividends from statutory surplus and may require prior approval from its domiciliary insurance regulatory authorities. American Life is also subject to risk-based capital (“RBC”) requirements that may further affect its ability to pay dividends. American Life’s statutory capital and surplus as September 30, 2020, December 31, 2019 and December 31, 2018, exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements. As of September 30, 2020, American Life had an invested asset that was impaired as a result of the fair market of the underlying collateral was valued less that the book value. This was non-admitted for statutory accounting. This asset was held in our modified coinsurance account for Ironbound so it was passed through the third party reinsurer through a reduction of the investment income earned by the third party reinsurer. As of September 30, 2020, December 31, 2019 and December 31, 2018, American Life did not hold any participating policyholder contracts where dividends were required to be paid. |
Surplus Notes
Surplus Notes | 21 Months Ended |
Sep. 30, 2020 | |
Surplus Notes | |
Surplus Notes | Note 17. Surplus Notes Our surplus notes of $300,000 and $250,000 matured on August 1, 2016 and September 1, 2016, respectively. The Company retired the notes in full, including accrued interest, through the transfer of condominiums in Hawaii owned by American Life in December 2018. The book value of the surplus notes, including interest, was $876,400. The book value of the condominiums in Hawaii was $493,648. We recognized a gain of $382,752 on the settlement of the surplus notes in 2019. |
Third Party Administration
Third Party Administration | 21 Months Ended |
Sep. 30, 2020 | |
Third Party Administration | |
Third Party Administration | Note 18. Third Party Administration The Company commenced its third party administrative (“TPA”) services in 2012 as an additional revenue source. These services are offered to non-affiliated entities. These agreements, for various levels of administrative services on behalf of each company, generate fee income for the Company. Services provided vary based on their needs and can include some or all aspects of back-office accounting and policy administration. TPA fee income associated with the administering of the Unified transactions from July 1, 2018 through December 31, 2018 was $90,796 and fees earned for other TPA administration during the year ended December 31, 2019 and 2018 were $48,300 and $89,240, respectively. The TPA contracts were not a significant source of revenue as of September 30, 2020. |
Reverse Stock Split
Reverse Stock Split | 21 Months Ended |
Sep. 30, 2020 | |
Reverse Stock Split | |
Reverse Stock Split | Note 19. Reverse Stock Split On August 10, 2020, Midwest filed Articles of Amendment of Amended and Restated Articles of Incorporation (“Amendment”) that changed the total number of shares that the Company is authorized to issue to 22,000,000 shares of common stock, of which 20,000,000 were designated as voting common stock with a par value of $0.001 per share and 2,000,000 designated as non-voting common stock with a par value of $0.001 per share. The Amendment also provides for 2,000,000 shares of preferred stock with a par value of $0.001 per share. The Amendment provided that upon effectiveness, each 500 shares of voting common stock either issued or outstanding would be converted into one share of voting common stock through a reverse stock split. Fractional shares were not issued in connection with the reverse stock split but were paid out in cash. The Company paid approximately $175,000 for those fractional shares and is now holding treasury stock represented by that amount. Outstanding shares as of September 30, 2020 and 2019 were 2,718,967 and 2,042,670, respectively, and for December 31, 2019 and 2018 were 2,042,670 and 41,601, respectively. The effective date, August 27, 2020, for the reverse stock split was retrospectively applied to these financial statements. |
Subsequent Events
Subsequent Events | 21 Months Ended |
Sep. 30, 2020 | |
Subsequent Events | |
Subsequent Events | Note 20. Subsequent Events The NDOI approved on November 4, 2020, an additional capital contribution of $4.5 million from Midwest to SRC1. We continue to closely monitor developments related to the coronavirus (COVID-19) pandemic to assess any potential adverse impact on our business. Due to the evolving and highly uncertain nature of this event, it currently is not possible provide a longer-term estimate of potential insurance or reinsurance exposure or the indirect effects the pandemic may have on our results of operations, financial condition or liquidity. Management implemented the Company's business continuity plan in early March 2020 and operated thriugh July 2020 with the majority of employees working remotely. Opreations continued as normal despite a sharp increase on sales during the period. We continue to monitor the Centers for Disease Control and Prevention and Nebraska guidelines regarding employee safety. |
Nature of Operations and Summ_2
Nature of Operations and Summary of Significant Accounting Policies (Policies) | 21 Months Ended |
Sep. 30, 2020 | |
Nature of Operations and Summary of Significant Accounting Policies | |
Nature of operations: | Nature of operations: Midwest Holding Inc. (“Midwest,” “the Company,” “we,” “our,” or “us”) was incorporated in Nebraska on October 31, 2003 for the primary purpose of operating a financial services company. The Company redomesticated from the State of Nebraska to the state of Delaware on August 27, 2020. The Company is in the life and annuity insurance business and operates through its wholly owned subsidiaries, American Life & Security Corp. (“American Life”), 1505 Capital LLC (“1505 Capital”). and through its sponsored captive reinsurance company, Seneca Reinsurance Company, LLC (“Seneca Re”) American Life is a Nebraska-domiciled life insurance company, which is also commercially domiciled in Texas, that is currently licensed to sell, underwrite, and market life insurance and annuity products in 20 states and the District of Columbia. As discussed in Note 3, on June 28, 2018, the Company underwent a change in control as a result of the closing of a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement (the “Xenith Agreement”) with a then non-affiliated third party, Xenith Holdings LLC (“Xenith”). Xenith was a wholly controlled subsidiary of Vespoint LLC (“Vespoint”), which was also the manager of Xenith. Vespoint is owned and managed by investment funds controlled by Michael Minnich and A. Michael Salem. Pursuant to the Xenith Agreement, the Company issued Series C Preferred Stock and convertible senior secured notes to Xenith between June and December 2018. Of the funds received from Xenith, we contributed $20.5 million to American Life through capital contributions. At the closing of the Xenith Agreement, Messrs. Minnich and Salem were subsequently appointed as executive officers of American Life and later as our Executive Chairman and Chief Executive Officer, respectively, in 2019. On April 2, 2019, we obtained a 51% ownership in 1505 Capital, a Delaware limited liability company, that was established in 2018 to provide financial and investment advisory and management services to clients and related investment activities. On June 15, 2020, we purchased the remaining 49% ownership in 1505 Capital for $500,000. 1505 Capital’s financial results have been consolidated with the Company’s since the date of its acquisition. Effective March 12, 2020, Seneca Reinsurance Company, LLC (“Seneca Re”), a Vermont limited liability company, was formed by Midwest to operate as a sponsored captive insurance company for the purpose of insuring and reinsuring various types of risks of its participants through one or more protected cells and to conduct any other business or activity that is permitted for sponsored captive insurance companies under Vermont insurance regulations. On March 30, 2020, Seneca Re received its Certification of Authority to transact the business of a captive insurance company. On May 12, 2020, Midwest contributed $300,000 to Seneca Re for a 100% ownership interest. As of September 30, 2020, Seneca Re had established Protected Cell‑2020‑01 (“SRC1”) and Cell-2020-02 (“SRC2”). Midwest contributed $3,000,000 to capitalize SRC1 and Crestline Management, L.P. (“Crestline”), a Delaware limited partnership, contributed $40.0 million to capitalize to SRC2. Crestline owns approximately 16% of our voting common stock. On April 24, 2020, Midwest entered into a Securities Purchase Agreement with Crestline Assurance Holdings LLC (“Crestline”), a Delaware limited liability company (“Crestline”) and Xenith, Vespoint LLC, a Delaware limited liability company (“Vespoint”), and Pursuant to the Agreement, Crestline purchased 444,444 shares of the Company’s voting common stock, par value $0.001 per share (“common stock”), at a purchase price of $22.50 per share for $10.0 million. Also, effective as of April 24, 2020, in a separate transaction, Midwest sold 231,655 shares of common stock to various investors at $22.50 per share for $5.227 million. Under the Crestline agreement, the Company contributed $5.0 million to American Life and the remaining proceeds are to be used for general working capital and corporate purposes. Also effective April 24, 2020, American life entered into a Master Letter Agreement with Seneca Re and Crestline regarding a flow of annuity reinsurance and related asset management, whereby Crestline agreed to provide reinsure funding for a quota share percentage of 25% of the liabilities of American Life arising from its multi-year guaranteed annuities ("MYGA") and a quota share percentage of 40% for American Life’s fixed indexed annuity (“FIA”) products. This agreement expires on April 24, 2023. Management evaluates the Company as one reporting segment in the life insurance industry. The Company is primarily engaged in the underwriting and marketing of annuity products and life insurance through American Life and then reinsuring such products with third party reinsurers and, since April 24, 2020, with the Seneca Re entity. The Company’s historical product offerings consisted of a multi-benefit life insurance policy that combined cash value life insurance with a tax deferred annuity and a single premium term life product. These product offerings were underwritten, marketed, and managed as a group of similar products on an overall portfolio basis. American Life presently offers five products, two multi-year guaranteed annuities ("MYGAs”), a fixed indexed annuity (“FIA”), and two bonus plans associated with the FIA product. |
Basis of presentation: | Basis of presentation: These audited consolidated financial statements for the year ended December 31, 2019 have been prepared in conformity with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. All intercompany accounts and transactions have been eliminated in consolidation and certain immaterial reclassifications have been made to the prior period results to conform to the current period’s presentation with no impact on results of operations or total stockholders’ equity. The accompanying Consolidated Balance Sheets as of December 31, 2018 and 2019 (audited) and September 30, 2020 (unaudited), Consolidated Statements of Comprehensive Loss as of December 31, 2018 and 2019 (audited) and September 30, 2019 and 2020 (unaudited), Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019 and 2018 (audited) and for the nine months ended September 30, 2020 and 2019 (unaudited), Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2019 (audited) and for the nine months ended September 30, 2019 and 2020 (unaudited) have been prepared in accordance with GAAP for interim financial information and rules of the Securities and Exchange Commission (“SEC”), including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the nine months ended September 30, 2020 and September 30, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020. The financial data and other information disclosed in these notes related to the nine months ended September 30, 2019 and 2020 are also unaudited. |
Investments | Investments All fixed maturities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in accumulated other comprehensive income. Declines in the fair value of available-for-sale securities below their amortized cost are evaluated to assess whether any other-than-temporary impairment loss should be recorded. In determining if these losses are expected to be other-than-temporary, the Company considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, the financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost. The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the statement of comprehensive income as an other-than-temporary impairment. If the Company does not expect to recover the amortized basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default. The Company has analyzed the securities portfolio and determined that there was not an other-than-temporary impairment for the year ended December 31, 2019, December 31, 2018 or for the nine months ended September 30, 2020. Investment income consists of interest, dividends, gains and losses from equity method investments, and real estate income, which are recognized on an accrual basis and amortization of premiums and discounts. Certain available-for-sales investments are maintained as collateral under funds withheld and modified coinsurance agreements but the assets and total returns or losses on the asset portfolios belong to the third party reinsurers. American Life has treaties with several third party reinsurers that have funds withheld and modified coinsurance provisions. In a modified coinsurance arrangement (“Modco”), the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a funds withheld coinsurance agreement (“FW”), assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurance, to reduce the potential credit risk. The unrealized gains/losses on those investments are passed through to the third party reinsurers as either a realized gain or loss on the consolidated statement of income. |
Mortgage loans on real estate, held for investment | Mortgage loans on real estate, held for investment Mortgage loans on real estate, held for investment are carried at unpaid principal balances. Interest income on mortgage loans on real estate, held for investment is recognized in net investment income at the contract interest rate when earned. A mortgage loan is considered to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the mortgage agreement. Valuation allowances on mortgage loans are established based upon losses expected by management to be realized in connection with future dispositions or settlements of mortgage loans, including foreclosures. The Company establishes valuation allowances for estimated impairments on an individual loan basis as of the balance sheet date. Such valuation allowances are based on the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan’s original effective interest rate. These evaluations are revised as conditions change and new information becomes available. No such valuation allowance was established as of December 31, 2019 or September 30, 2020, respectively. |
Investment escrow | Investment escrow The Company held in escrow as of December 31, 2019, cash used to settle a mortgage loan that closed in January 2020. As of September 30, 2020, the Company did not hold any cash related to investments in escrow. |
Other invested assets | Other invested assets The Company purchases and sells equipment leases in its investment portfolio. As of September 30, 2020, the Company owned several leases. An impairment test, as of June 30, 2020, was completed on the only non-performing lease in the portfolio and it was determined that the underlying collateral value was substantially less than the remaining lease payments of $3.6 million. The Company established a valuation allowance on the asset of $776,973 and will continue to monitor the value the underlying collateral. The valuation allowance was recorded as a bad debt expense; however, this asset is owned by a third party reinsurer. Therefore, the valuation allowance was passed through as a receivable from the reinsurers, offsetting the valuation allowance. As of September 30, 2020, the Company determined the valuation allowance established was still adequate. Within the third quarter 2019, the Company had invested in and sold two leases. As of December 31, 2019, the Company owned one lease investment and the valuation allowance was $0. |
Derivative Instruments | Derivative Instruments Derivatives are used to hedge the risks experienced in our ongoing operations, such as equity, interest rate and cash flow risks, or for other risk management purposes, which primarily involve managing liability risks associated with our indexed annuity products and reinsurance agreements. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or other underlying notional amounts. Derivative assets and liabilities are carried at fair value on the consolidated balance sheets. To qualify for hedge accounting, at the inception of the hedging relationship, we would formally document our designation of the hedge as a cash flow or fair value hedge and our risk management objective and strategy for undertaking the hedging transaction. In this documentation, we would identify how the hedging instrument is expected to hedge the designated risks related to the hedged item, the method that would be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method which would be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. In the late 2019, the Company began investing in options to hedge our interest rate risks on our FIA product. Options typically do not qualify for hedge accounting; therefore, we chose not to use hedge accounting for our options that we currently have. We value our derivatives at fair market value with the offset being recorded on our income statement as a realized gain or (loss). Additionally, reinsurance agreements written on a funds withheld or modified coinsurance basis contain embedded derivatives on our fixed indexed annuity product. Gains or (losses) associated with the performance of assets maintained in the modified coinsurance deposit and funds withheld accounts are reflected as realized gains or (losses) in the income statement. |
Preferred Stock | Preferred Stock Preferred stock of a non-affiliated company was purchased for $500,000 during the third quarter of 2019. An impairment analysis of the preferred stock was performed as of June 30, 2020, due to a change in valuation of an invested asset held by the non-affiliated company. The investment asset had collateral supporting the investment that was less than the book value of the asset; therefore, the Company established a full valuation allowance of $500,000. This was recorded as a reduction of the asset on the balance sheet and a bad debt expense on the Consolidated Statements of Comprehensive Loss. The valuation allowance was $0 at December 31, 2019. As of September 30, 2020, the Company determined the valuation allowance established was still adequate. |
Notes receivable | Notes receivable The Company held in notes receivable as of September 30, 2020, a note of $5,516,302 between American Life and a third party that was rated by a nationally recognized statistical rating organization (“NRSRO”). This note is being carried at the fair market value. |
Policy loans | Policy loans Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. At September 30, 2020, December 31, 2019 and 2018, the Company had no cash equivalents. At September 30, 2020 and December 31, 2019, the Company held approximately 605,506 and 1.8 million in Pound Sterling (“GBP”) in several of our custody accounts, respectively. The USD equivalent held was approximately $783,000 and $2.3 million, respectively. As of September 30, 2020, the Company realized losses of approximately $87,300 related to the change in the foreign currency exchange rate of the GBP that was recorded in realized (losses) gains on investments on the income statement. The Company had money market investments of approximately $26.2 million as of December 31, 2019. |
Deferred acquisition costs | Deferred acquisition costs Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to third party reinsurers, that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. These costs are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. The Company evaluates the types of acquisition costs it capitalizes. The Company capitalizes agent compensation and benefits and other expenses that are directly related to the successful acquisition of contracts. The Company also capitalizes expenses directly related to activities performed by the Company, such as underwriting, policy issuance, and processing fees incurred in connection with successful contract acquisitions. Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company had reinsurance contracts with commission and administration allowances from each reinsurer that offset all the DAC costs incurred during 2019, as a result no recovery analysis was deem necessary as of December 31, 2019. The Company determined that no events occurred in the nine months ended September 30, 2020 that suggest a review should be undertaken. |
Property and equipment | Property and equipment Property and equipment are stated at cost net of accumulated depreciation. Annual depreciation is primarily computed using straight-line methods for financial reporting and straight-line and accelerated methods for tax purposes. Furniture and equipment is depreciated over 3 to 7 years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $34,926 and $28,972 for the nine months ended September 30, 2020 and 2019, respectively. Depreciation expense totaled $40,000 and $49,309 for the years ended December 31, 2019 and 2018, respectively. The accumulated depreciation net of disposals totaled $1,010,406, $975,480 and $943,323 as of September 30, 2020, December 31, 2019 and December 31, 2018, respectively. Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. Management has determined that no such events occurred in the years ended December 31, 2019 and December 31, 2018 or the nine months ended September 30, 2020 that would indicate the carrying amounts may not be recoverable. |
Reinsurance | Reinsurance In the normal course of business, the Company seeks to limit any single exposure to losses on large risks by purchasing reinsurance. The amounts reported in the consolidated balance sheets as reinsurance recoverable include amounts billed to reinsurers on losses paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverable on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Insurance liabilities are reported gross of reinsurance recoverable. Management believes the recoverables are appropriately established. The Company generally strives to diversify its credit risks related to reinsurance ceded. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were no such allowances as of December 31, 2019, December 31, 2018 or for the nine months ended September 30, 2020. We expect to reinsure substantially all of our new insurance policies with a variety of reinsurers in exchange for upfront ceding commissions, expense reimbursements and administrative fees. Under these reinsurance agreements, we expect there will be a monthly or quarterly settlement of premiums, claims, surrenders, collateral, and other administration fees. We believe this will help preserve American Life’s capital while supporting its growth because American Life will have lower capital requirements when its business is reinsured due to lower overall financial exposure versus retaining the insurance policy business itself. See Note 10 below for further discussion of our reinsurance activities. There are two main categories of reinsurance transactions: 1) “indemnity,” where we cede a portion of our risk but retain the legal responsibility to our policyholders should our reinsurers not meet their financial obligations; and 2) “assumption,” where we transfer the risk and legal responsibilities to the reinsurers. The reinsurers are required to acquire the appropriate regulatory and policyholder approvals to convert indemnity policies to assumption policies. Our reinsurers may be domestic or foreign capital markets investors or traditional reinsurance companies seeking to assume U.S. insurance business. We plan to mitigate the credit risk relating to reinsurers generally by requiring other financial commitments from the reinsurers to secure the reinsured risks (such as posting substantial collateral). It should be noted that under indemnity reinsurance agreements American Life remains exposed to the credit risk of its reinsurers. If one or more reinsurers becomes insolvent or is otherwise unable or unwilling to pay claims under the terms of the applicable reinsurance agreement, American Life retains legal responsibility to pay policyholder claims, which, in such event would likely materially and adversely affect the capital and surplus of American Life. As indicated above under “Nature of operations,” Midwest formed Seneca Re in early 2020. On April 15, 2020, Midwest entered into an operating agreement with Seneca Re and as of September 30, 2020, Seneca Re currently has Protected Cell 2020-01 (“SRC1”) which is consolidated in our financial statements and Cell 2020-02 (“SRC2”) which is not consolidated in our financial statements. Some reinsurers are not and may not be “accredited” or qualified as reinsurers under Nebraska Law. In order to enter into reinsurance agreements with such reinsurers and to reduce potential credit risk, American Life holds a deposit or withholds funds from the reinsurer or require the reinsurer to maintain a trust that holds assets backing up the reinsurer’s obligation to pay claims on the business it assumes. The reinsurer may also appoint an investment manager for such funds, which is some cases may be our investment adviser subsidiary, 1505 Capital, to manage these assets pursuant to guidelines adopted by us that are consistent with state investment statutes and reinsurance regulations. American Life currently has treaties with several third party reinsurers and one related party reinsurer. Of the third party reinsurers, only three have funds withheld or modified coinsurance provisions. In a modified coinsurance arrangement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a funds withheld coinsurance agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurance, to reduce the potential credit risk. Under those provisions with third party reinsurers, the assets backing the treaties are maintained by American Life as investments but the assets and total returns or losses on the investments are owned by the reinsurers. Under GAAP, this arrangement is considered an embedded derivative as discussed in Note 7 below. As a result of recent market volatility, assets carried as investments on American Life’s financial statements for the third party reinsurers contained unrealized losses of approximately $4.4 million as of September 30, 2020. The terms of the contracts with the third party reinsurers provide that unrealized losses on the portfolios accrue to the third party reinsurers. Accordingly, the unrealized losses on the assets held by American Life were offset by a gain in the embedded derivative of $4.4 million. We account for this unrealized loss pass-through by recording equivalent realized gains on our income statement and in amount recoverable from our third party reinsurers on our balance sheet. |
Benefit reserves | Benefit reserves The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality, and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables. |
Policy claims | Policy claims Policy claims are based on reported claims plus estimated incurred but not reported claims developed from trends of historical data applied to current exposure. |
Deposit-type contracts | Deposit-type contracts Deposit-type contracts consist of amounts on deposit associated with deferred annuities, premium deposit funds and supplemental contracts without life contingencies. |
Notes payable | Notes payable Notes payable consist of the convertible notes entered into due to the Xenith transaction and were recorded net of issuance costs. The notes were converted into our voting common stock on June 18, 2019. |
Deferred gain on coinsurance transactions | Deferred gain on coinsurance transactions American Life has entered into four reinsurance contracts where it has earned or is earning ceding commissions. These ceding commissions are recorded as a deferred liability and amortized over the life of the business ceded. American Life receives commission, administrative, and option allowances from reinsurance transactions that represent recovery of acquisition costs. These allowances first reduce the DAC associated with the reinsured blocks of business with the remainder being included in the deferred gain on coinsurance transactions that is also being amortized. |
Income taxes | Income taxes The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state, or local tax examinations by tax authorities for the years before 2015. The Company is not currently under examination for any open years. The provision for income taxes is based on income as reported in the financial statements. The income tax provision is calculated under the asset and liability method. Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. The Company has no uncertain tax positions that it believes are more-likely-than not that the benefit will not to be realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. |
Revenue recognition and related expenses | Revenue recognition and related expenses Amounts received as payment for annuities are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services and cost of insurance, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the consolidated statements of cash flows. Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due. Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts. Acquisition costs are amortized over the expected life of the annuity contracts. |
Comprehensive loss | Comprehensive loss Comprehensive income (loss) is comprised of net (loss) income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable securities classified as available for sale and unrealized gains and losses from foreign currency transactions, net of applicable taxes. American Life has treaties with four third party reinsurers that have funds withheld and modified coinsurance provisions. Under those provisions, the assets backing the treaties are maintained by American Life as collateral but are owned by the third party reinsurers, thus, the total return on the asset portfolio belongs to the third party reinsurers. Under GAAP this is considered an embedded derivative as discussed in Note 7 below. As a result of recent market volatility, the investments carried by American Life for the third party reinsurers contained unrealized losses of approximately $4.4 million as of September 30, 2020. The terms of the contracts with the third party reinsurers provided that unrealized losses on the portfolios accrue to the third party reinsurers. We account for this loss pass through by booking equivalent embedded derivative realized gains in our Consolidated Statements of Comprehensive Loss. Accordingly, for the first nine months of 2020, such gains were $4.4 million. The remaining investments retained by American Life had unrealized gains of approximately $2.1 million that included unrealized gains from assets held for SRC1. Basic earnings per share in the first nine months ended, September 30, 2020 was $0.22 which included the aforementioned gain of $4.4 million. Basic loss per share in the first nine months ended September 30, 2020 without the aforementioned gain was ($1.98). |
Common and preferred stock and earnings (loss) per share | Common and preferred stock and earnings (loss) per share The par value per each Company share is $0.001 with 20,000,000 voting common shares authorized, 2,000,000 non-voting common shares authorized, and 2,000,000 preferred shares authorized. On June 18, 2019, Xenith exercised the right to convert its 1,500,000 Series C preferred stock and the $19,100,000 notes payable to voting common stock at the conversion rate of approximately $10.29 per common share. With the infusion of capital and the issuance of voting common stock in the Crestline transaction mentioned above under “Nature of operations,” the Company had 2,718,967 voting common shares issued and outstanding at September 30, 2020. The Series C preferred shares were converted by Xenith to voting common shares on June 18, 2019 at a rate of approximately $10.29 per share for 145,709 voting common shares. The stated annual dividend rate on the Series C preferred shares was 8%. At the time of the conversion, Xenith forgave all previously accrued dividends from June 28, 2018 through the conversion date. (Loss) gain per basic share attributable to the Company’s common stockholders was computed based on the weighted average number of shares outstanding during each period. The weighted average number of shares outstanding during the year ended 2019 and 2018 were 1,149,042 and 41,601, respectively, and for the nine months ended September 30, 2020 and 2019 were 2,435,115 and 847,893, respectively. (Loss) gain diluted share attributable to the Company’s common stockholders was computed based on the average shares outstanding and options granted under our Long-Term Incentive Plan (“LTIP”), as if all were vested and exercised. The weighted average number of diluted shares outstanding during the year ended December 31, 2019 and 2018 were 1,150,936 and 41,601, respectively, and for the nine months ended September 30, 2020 and 2019 were 2,482,632 and 888,443 shares, respectively. |
Reclassifications | Reclassifications Certain reclassifications have been made on the Consolidated Balance Sheets and Statements of Comprehensive Loss for the year ended December 31, 2018. These reclassifications do not impact the overall Net loss or Net loss per common shares line items of the Consolidated Statements of Comprehensive Loss for the year ended December 31, 2018. |
Change in Control (Tables)
Change in Control (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Change In Control | |
Schedule of Company's Voting Common Stock | The table below summarizes conversion of the Notes and shares of Series C Preferred Stock into voting common stock and the total outstanding voting common stock as of December 31, 2019: As Converted Voting Common Stock Number Percentage Previous* Company shareholders 45,746 2.2 % Note conversion ($500,000) 48,570 2.4 % Note conversion ($100,000) 9,714 0.5 % Note conversion ($1,000,000) 97,139 4.7 % Note conversion ($17,500,000) 1,699,938 83.1 % Series C Preferred stock conversion 145,709 7.1 % Total shares outstanding as of December 31, 2019 2,046,816 100.0 % * Prior to note and stock conversions. |
Assets and Liabilities Held f_2
Assets and Liabilities Held for Sale (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Assets and Liabilities Held for Sale | |
Schedule of Assets and Liabilities Discontinued Operations | The table below summarizes the assets and liabilities that are included in discontinued operations as of September 30, 2020 and as of December 31, 2019: As of September 30, As of December 31, 2020 2019 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 35,302 $ 50,387 Reinsurance recoverables 1,043,985 3,569,849 Premiums receivable 23,490 33,512 Total assets held for sale in the Consolidated Balance Sheet $ 1,102,777 $ 3,653,748 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 594,603 $ 1,403,953 Policy claims 35,302 28,203 Deposit-type contracts 474,943 2,209,195 Advance premiums 593 2,226 Accounts payable and accrued expenses 5,672 3,290 Total liabilities held for sale in the Consolidated Balance Sheets $ 1,111,113 $ 3,646,867 The table below summarizes the assets and liabilities that are included in discontinued operations for the years ended December 31, 2019 and 2018: As of December 31, As of December 31, 2019 2018 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 50,387 $ 366,849 Reinsurance recoverables 3,569,849 20,359,326 Premiums receivable 33,512 210,896 Total assets held for sale in the Consolidated Balance Sheet $ 3,653,748 $ 20,937,071 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 1,403,953 $ 9,799,834 Policy claims 28,203 127,666 Deposit-type contracts 2,209,195 11,050,139 Advance premiums 2,226 21,699 Accounts payable and accrued expenses 3,290 53,395 Total liabilities held for sale in the Consolidated Balance Sheets $ 3,646,867 $ 21,052,733 |
Schedule of Losses/Gains Discontinued Operations | The income statement for 2018 was also required to be restated shown breaking out the net income between continuing operations and discontinued operations. Year ended December 31, 2018 Major line items constituting pretax loss of discontinued operations: Premiums $ 933,980 Death and other benefits (421,448) Interest credited (192,008) Increase in benefit reserves (41,790) Amortization of deferred acquisition costs (202,913) Other operating expenses (104,105) Loss on discontinued operations $ (28,284) |
Investments (Tables)
Investments (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Schedule of available for sale investments | The cost or amortized cost and estimated fair value of investments as of September 30, 2020 and December 31, 2019 are as follows: Cost or Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value September 30, 2020: Fixed maturities: U.S. government obligations $ 2,007,031 $ 104,703 $ 6,712 $ 2,105,022 Mortgage-backed securities 371,273 7,042 179 378,136 Asset-backed securities 205,589,130 2,235,333 5,382,412 202,442,051 States and political subdivisions–general obligations 237,339 11,409 — 248,748 States and political subdivisions–special revenue 5,629,266 565,843 4,930 6,190,179 Trust preferred 2,218,142 — 55,183 2,162,959 Corporate 36,784,304 1,070,998 839,447 37,015,855 Total fixed maturities $ 252,836,485 $ 3,995,328 $ 6,288,863 $ 250,542,950 Mortgage loans on real estate, held for investment 61,464,515 — — 61,464,515 Derivatives 5,698,117 2,395,084 429,195 7,664,006 Other invested assets 14,808,870 — — 14,808,870 Notes receivable 5,516,302 — — 5,516,302 Policy loans 147,309 — — 147,309 $ 340,471,598 $ 6,390,412 $ 6,718,058 $ 340,143,952 December 31, 2019: Fixed maturities: U.S. government obligations 2,091,710 7,073 17,559 2,081,224 Mortgage-backed securities 819,678 — 21,070 798,608 Asset-backed securities 95,006,241 646,335 404,752 95,247,824 States and political subdivisions–general obligations 240,494 8,788 — 249,282 States and political subdivisions–special revenue 25,112 179 — 25,291 Corporate 18,493,077 501,022 154,467 18,839,632 Total fixed maturities 116,676,312 1,163,397 597,848 117,241,861 Mortgage loans on real estate, held for investment 13,810,041 — — 13,810,041 Derivatives 490,831 87,684 3,221 575,294 Investment escrow 3,899,986 — — 3,899,986 Other invested assets 2,468,947 — — 2,468,947 Preferred stock 500,000 — — 500,000 Policy loans 106,014 — — 106,014 Total fixed maturities $ 137,952,131 $ 1,251,081 $ 601,069 $ 138,602,143 The cost or amortized cost and estimated fair value of investments as of December 31, 2018 was as follows: Cost or Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value December 31, 2018: Fixed maturities: U.S. government obligations $ 2,112,816 $ 247 $ 117,112 $ 1,995,951 Mortgage-back securities 1,068,976 — 64,925 1,004,051 States and political subdivisions–general obligations 265,473 — 2,289 263,184 States and political subdivisions–special revenue 25,231 — 58 25,173 Corporate 15,754,345 14 1,658,535 14,095,824 Total fixed maturities $ 19,226,841 $ 261 $ 1,842,919 $ 17,384,183 |
Schedule of Amortized cost, Fair value, Credit rating | Amortized Estimated Cost Fair Value Credit Rating September 30, 2020: Fixed maturities: States and political subdivisions–general obligations Bellingham, Washington $ 106,829 $ 117,759 AA+ Longview, Washington Refunding 130,510 130,989 Aa3 Total $ 237,339 $ 248,748 Amortized Estimated Cost Fair Value Credit Rating December 31,2019: Fixed maturities: States and political subdivisions–general obligations Bellingham, Washington $ 107,709 $ 115,597 AA+ Longview, Washington Refunding 132,785 133,685 Aa3 Total $ 240,494 $ 249,282 |
Schedule of unrealized loss of securities | The following table summarizes, for all securities in an unrealized loss position at September 30, 2020 and December 31, 2019, the estimated fair value, pre-tax gross unrealized loss, and number of securities by consecutive months they have been in an unrealized loss position. September 30, 2020 December 31, 2019 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 35,073 $ 311 1 $ 1,518,772 $ 14,935 9 Asset-backed securities 112,190,271 5,122,847 66 39,114,732 404,752 26 Mortgage-back securities 22,828 179 1 160,010 4,844 4 States and political subdivisions -- special revenue 1,168,610 4,930 3 — — — Trust preferred 2,162,960 55,183 1 — — — Corporate 19,005,716 666,972 24 2,800,815 13,618 4 Greater than 12 months: U.S. government obligations 157,752 6,401 4 353,834 2,624 2 Asset-backed securities 10,592,569 259,565 5 — — — Mortgage-back securities — — — 638,598 16,226 14 Corporate 584,003 172,475 4 2,201,658 140,849 13 Total fixed maturities $ 145,919,782 $ 6,288,863 109 $ 46,788,419 $ 597,848 72 (1) We may reflect a security in more than one aging category based on various purchase dates. The following table summarizes, for all securities in an unrealized loss position at December 31, 2019 and 2018, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position. December 31, 2019 December 31, 2018 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 1,518,772 $ 14,935 9 $ 7,862 $ 430 1 Asset-backed securities 39,114,732 404,752 26 — — — Mortgage-back securities 160,010 4,844 4 — — — Corporate 2,800,815 13,618 4 3,351,664 315,617 23 Greater than 12 months: U.S. government obligations 353,834 2,624 2 1,785,949 116,682 10 Mortgage-back securities 638,598 16,226 14 1,004,052 64,925 19 States and political subdivisions–general obligations — — — 263,183 2,289 2 States and political subdivisions–special revenue — — — 25,173 58 1 Corporate 2,201,658 140,849 13 10,628,745 1,342,918 58 Total fixed maturities $ 46,788,419 $ 597,848 72 $ 17,066,628 $ 1,842,919 114 We may reflect a security in more than one aging category based on various purchase dates. |
Schedule of amortized cost and estimated fair value of fixed maturities | The amortized cost and estimated fair value of fixed maturities at September 30, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. No securities due in the next year are in an unrealized loss position, further supporting management’s decision not to recognize an other-than-temporary impairment. Amortized Estimated Cost Fair Value Due in one year or less $ 964,295 $ 1,067,733 Due after one year through five years 21,154,753 21,469,752 Due after five years through ten years 76,161,161 76,055,560 Due after ten years through twenty years 134,902,342 131,788,843 Due after twenty years 19,653,934 20,161,062 $ 252,836,485 $ 250,542,950 The amortized cost and estimated fair value of fixed maturities at December 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. No securities are due in the next year to further support management’s decision not to recognize an other-than-temporary impairment. Amortized Estimated Cost Fair Value Due in one year or less $ 101,205 $ 100,958 Due after one year through five years 2,649,457 2,724,011 Due after five years through ten years 21,925,465 22,013,673 Due after ten years through twenty years 84,210,270 84,473,538 Due after twenty years 7,789,915 7,929,681 $ 116,676,312 $ 117,241,861 |
Schedule of investments measured at fair value on a recurring basis using level three inputs | Beginning Ending Balance Balance As of Valuation Realized As of December 31, 2019 Additions Sales Allowance Gain September 30, 2020 Assets: Policy loans $ 106,014 $ 41,295 $ — $ — $ — $ 147,309 Mortgage loans on real estate, held for investment 13,810,041 56,402,943 8,918,066 — 169,597 61,464,515 Other invested assets 2,468,947 26,787,844 13,670,948 (776,973) 14,808,870 Preferred stock 500,000 — — (500,000) — Total Investments $ 16,885,002 $ 83,232,082 $ 22,589,014 $ (1,276,973) $ 169,597 $ 76,420,694 Beginning Balance Ending Balance As of December 31, Total gains As of December 31, 2018 Additions Sales Included in Income 2019 Assets Policy loans $ 43,843 $ 62,171 $ — $ — $ 106,014 Mortgage loans on real estate, held for investment — 15,036,179 1,226,138 — 13,810,041 Other invested assets — 17,287,325 14,849,555 31,177 2,468,947 Preferred stock — 500,000 — — 500,000 Total Investments $ 43,843 $ 32,885,675 $ 16,075,693 $ 31,177 $ 16,885,002 |
Schedule of components of net investment income | The components of net investment income for the nine months ended September 30, 2020 and 2019 are as follows: Nine months ended September 30, 2020 2019 Fixed maturities $ 1,364,414 $ 342,104 Mortgage loans 80,749 78,466 Other 62,942 6,973 Gross investment income 1,508,105 427,543 Less: investment expense (230,768) (96,633) Investment income, net of expenses $ 1,277,337 $ 330,910 The components of net investment income for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, 2019 2018 Fixed maturities $ 292,453 $ 789,949 Other 38,397 44,614 Gross investment income 330,850 834,563 Less investment expenses (210,269) (318,675) Investment (loss) income, net of expenses $ 120,581 $ 515,888 |
Mortgage Backed Securities | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Schedule of investments measured at fair value on a recurring basis using level three inputs | The following table presents a reconciliation of the beginning balance for the mortgage loan investments measured at fair value on a recurring basis using Level 3 inputs at September 30, 2020 and December 31, 2019: Interest Income Interest Income Carrying Value Accrued Earned September 30, 2020: Industrial $ 1,250,000 $ 18,236 $ 62,743 Commercial mortgage loan-multi-family 58,195,692 1,634,008 2,199,823 Other 2,018,823 221,136 134,631 Total mortgage loans $ 61,464,515 $ 1,873,380 $ 2,397,197 December 31, 2019: Industrial $ 500,000 $ — $ 15,889 Commercial mortgage loan-multi-family 11,320,924 116,860 329,684 Other 1,989,117 195,168 7,386 Total mortgage loans $ 13,810,041 $ 312,028 $ 352,959 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of the derivatives not designated as hedges | The following is a summary of the asset derivatives not designated as hedges and embedded derivatives in our FIA product as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Location in the Derivatives Not Designated Consolidated Statement Notional Number of Estimated Notional Number of Estimated as Hedging Instruments of Balance Sheets Amount Contracts Fair Value Amount Contracts Fair Value Equity-indexed options Derivatives $ 166,197,790 177 $ 7,664,006 $ 9,698,863 24 $ 575,294 Equity-indexed embedded derivative Deposit-type contracts 204,289,800 1,418 6,359,657 10,720,324 108 576,634 |
Summary of embedded derivatives related to the funds withheld provision | September 30, 2020 Book Value of Market Value of Total Return Reinsurance Portfolio Assets Assets Swap Value Ironbound $ 100,442,130 $ 96,516,241 $ 3,925,889 SDA 21,072,864 20,495,383 577,481 US Alliance 36,801,442 36,616,705 184,737 SRC2 23,624,061 23,942,606 (318,545) Total $ 181,940,497 $ 177,570,935 $ 4,369,562 |
Fair Values of Financial Inst_2
Fair Values of Financial Instruments (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Investments, All Other Investments [Abstract] | |
Schedule of financial instruments at fair value measured on a recurring basis | The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value September 30, 2020 Financial assets Fixed maturities: U.S. government obligations $ — $ 2,105,022 $ — $ 2,105,022 Mortgage-backed securities — 378,136 — 378,136 Asset-backed securities — 202,442,051 — 202,442,051 States and political subdivisions–general obligations — 248,748 — 248,748 States and political subdivisions–special revenue — 6,190,179 — 6,190,179 Trust preferred — 2,162,959 — 2,162,959 Corporate — 37,015,855 — 37,015,855 Total fixed maturities — 250,542,950 — 250,542,950 Mortgage loans on real estate, held for investment — — 61,464,515 61,464,515 Derivatives — 7,664,006 — 7,664,006 Other invested assets — — 14,808,870 14,808,870 Notes receivable — 5,516,302 — 5,516,302 Policy loans — — 147,309 147,309 Total Investments $ — $ 263,723,258 $ 76,420,694 $ 340,143,952 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ 6,359,657 $ — 6,359,657 December 31, 2019 Fixed maturities: U.S. government obligations — 2,081,224 — 2,081,224 Mortgage-backed securities — 798,608 — 798,608 Asset-backed securities — 95,247,824 — 95,247,824 States and political subdivisions–general obligations — 249,282 — 249,282 States and political subdivisions–special revenue — 25,291 — 25,291 Corporate — 18,839,632 — 18,839,632 Total fixed maturities — 117,241,861 — 117,241,861 Mortgage loans on real estate, held for investment — — 13,810,041 13,810,041 Derivatives — 575,294 — 575,294 Investment escrow — 3,899,986 — 3,899,986 Other invested assets — — 2,468,947 2,468,947 Preferred stock — — 500,000 500,000 Policy loans — — 106,014 Total Investments $ — $ 121,717,141 $ 16,885,002 $ 138,496,129 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ 576,634 $ — 576,634 The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of December 31, 2019 and 2018. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value December 31, 2019 Financial assets Fixed maturities: U.S. government obligations $ — $ 2,081,224 $ — $ 2,081,224 Mortgage-backed securities — 798,608 — 798,608 Asset-backed securities — 95,247,824 — 95,247,824 States and political subdivisions–general obligations — 249,282 — 249,282 States and political subdivisions–special revenue — 25,291 — 25,291 Corporate — 18,839,632 — 18,839,632 Total fixed maturities — 117,241,861 — 117,241,861 Mortgage loans on real estate, held for investment — — 13,810,041 13,810,041 Derivatives — 575,294 — 575,294 Investment escrow — 3,899,986 — 3,899,986 Other invested assets — — 2,468,947 2,468,947 Preferred stock — — 500,000 500,000 Total Investments $ — $ 121,717,141 $ 16,778,988 $ 138,496,129 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ 576,634 $ — 576,634 December 31, 2018 Fixed maturities: U.S. government obligations $ — $ 1,995,951 $ — $ 1,995,951 Mortgage-back securities — 1,004,051 — 1,004,051 States and political subdivisions–general obligations — 263,184 — 263,184 States and political subdivisions–special revenue — 25,173 — 25,173 Corporate — 14,095,824 — 14,095,824 Total fixed maturities $ — $ 17,384,183 $ — $ 17,384,183 |
Schedule of financial assets and liabilities at fair value | The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy for financial assets and financial liabilities as of September 30, 2020 and December 31, 2019, respectively: September 30, 2020 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 147,309 $ — $ — $ 147,309 $ 147,309 Cash 136,431,785 136,431,785 — — 136,431,785 Liabilities: Policyholder deposits (Deposit-type contracts) 455,429,384 — — 455,429,384 455,429,384 December 31, 2019 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 106,014 $ — $ — $ 106,014 $ 106,014 Cash 43,716,205 43,716,205 — — 43,716,205 Liabilities: Policyholder deposits (Deposit-type contracts) 171,168,785 — — 171,168,785 171,168,785 The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of December 31, 2019 and 2018, respectively: December 31, 2019 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 106,014 $ — $ — $ 106,014 $ 106,014 Cash 43,716,205 43,716,205 — — 43,716,205 Liabilities: Policyholder deposits (Deposit-type contracts) 171,168,785 — — 171,168,785 171,168,785 December 31, 2018 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 43,843 $ — $ — $ 43,843 $ 43,843 Cash 2,832,567 2,832,567 — — 2,832,567 Liabilities: Policyholder deposits (Deposit-type contracts) 7,234,927 — — 7,234,927 7,234,927 Notes payable 18,938,705 — — 18,938,705 18,938,705 |
Schedule of Recurring Basis Using Level Three Inputs | Beginning Ending Balance Balance As of Valuation Realized As of December 31, 2019 Additions Sales Allowance Gain September 30, 2020 Assets: Policy loans $ 106,014 $ 41,295 $ — $ — $ — $ 147,309 Mortgage loans on real estate, held for investment 13,810,041 56,402,943 8,918,066 — 169,597 61,464,515 Other invested assets 2,468,947 26,787,844 13,670,948 (776,973) 14,808,870 Preferred stock 500,000 — — (500,000) — Total Investments $ 16,885,002 $ 83,232,082 $ 22,589,014 $ (1,276,973) $ 169,597 $ 76,420,694 Beginning Balance Ending Balance As of December 31, Total gains As of December 31, 2018 Additions Sales Included in Income 2019 Assets Policy loans $ 43,843 $ 62,171 $ — $ — $ 106,014 Mortgage loans on real estate, held for investment — 15,036,179 1,226,138 — 13,810,041 Other invested assets — 17,287,325 14,849,555 31,177 2,468,947 Preferred stock — 500,000 — — 500,000 Total Investments $ 43,843 $ 32,885,675 $ 16,075,693 $ 31,177 $ 16,885,002 |
Income Tax Matters (Tables)
Income Tax Matters (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets and liabilities | Significant components of the Company’s deferred tax assets and liabilities as of September 30, 2020, December 31, 2019 and December 31, 2018 are as follows: September 30, December 31, December 31, 2020 2019 2018 Deferred tax assets: Loss carryforwards $ 623,258 $ 436,777 1,429,458 Capitalized costs 186,253 221,918 269,472 Stock option granted 4,566 4,566 — Unrealized losses on investments 475,720 — 390,349 Policy acquisition costs 750,034 1,468,030 — Charitable contribution carryforward 1,020 1,020 — Property and equipment 29,896 15,508 — Benefit reserves 3,263,165 848,643 192,858 Total deferred tax assets 5,333,912 2,996,462 2,282,137 Less valuation allowance (4,631,718) (2,618,741) (1,928,454) Total deferred tax assets, net of valuation allowance 702,194 377,721 353,683 Deferred tax liabilities: Unrealized losses on investments 314,738 116,088 — Due premiums 81,789 81,789 117,144 Intangible assets 147,000 147,000 147,000 Policy loans 158,667 32,844 86,246 Property and equipment — — 3,294 Total deferred tax liabilities 702,194 377,721 353,683 Net deferred tax assets $ — $ — — |
Schedule of effective tax rate reconciliation | There was income tax expense of $2,145,110 and $114,642 for the nine months ended September 30, 2020 and September 30, 2019. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Nine months ended September 30, 2020 2019 Computed expected income tax benefit $ 339,987 $ (813,759) Increase (reduction) in income taxes resulting from: State tax, net of federal benefit 151,680 — Meals, entertainment and political contributions 4,101 3,858 Change in valuation allowance 1,421,169 746,468 COD Interest — 177,563 Other 228,173 512 Subtotal of increases 1,805,123 928,401 Tax expense (benefit) $ 2,145,110 $ 114,642 There was income tax expense of $234,180 for the year ended December 31, 2019, and no income tax expense for the year ended December 31, 2018. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Year ended December 31, 2019 2018 Computed expected income tax benefit $ (1,154,890) $ (1,063,749) Increase (reduction) in income taxes resulting from: Meals, entertainment and political contributions 6,170 8,402 Change in loss carryforward due to 382 limitation — 5,595,636 COD Interest 177,563 — Other 8,613 39,143 Subtotal of increases 192,346 5,643,181 Tax benefit before valuation allowance (962,544) 4,579,432 Change in valuation allowance 1,196,724 (4,579,432) Net income tax expenses $ 234,180 $ — |
Reinsurance (Tables)
Reinsurance (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Summary of significant reinsurance amounts | A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of September 30, 2020 and December 31, 2019 and for the nine months ended September 30, 2020 and 2019 as follows: September 30, 2020 December 31, 2019 Balance sheets: Benefit and claim reserves ceded $ 42,091,115 $ 30,579,524 Nine months ended September 30, 2020 2019 Statements of comprehensive (loss) income: Premiums ceded $ 677,702 $ 702,450 Benefits ceded 99,466 167,895 Commissions ceded 7,595 8,146 A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018, is as follows (excluding Unified): December 31, 2019 December 31, 2018 Balance sheets: Benefit and claim reserves ceded $ 30,579,524 $ 23,100,644 Year ended December 31, 2019 2018 Statements of comprehensive income: Premiums assumed $ — $ 10,268 Premiums ceded 996,711 848,374 Benefits assumed — 92,792 Benefits ceded 201,823 141,896 Commissions assumed — 18 Commissions ceded 10,445 54,346 |
Schedule of significant reinsurance balances | The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third party reinsurers except for a reinsurance with Unified as it was accounted for as discontinued operations as of June 30, 2020: Recoverable on Total Amount Recoverable Recoverable Benefit Ceded Recoverable AM Best on Paid on Unpaid Reserves/Deposit- Due from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ 4,141,644 $ — $ 4,141,644 Optimum Re Insurance Company A — — 524,701 — 524,701 Sagicor Life Insurance Company A- — 89,179 11,200,888 286,028 11,004,042 SDA Annuity & Life Re NR — — 4,094,584 — 4,094,584 SRC2 (Seneca Re protected cell) NR 5,108,908 — 5,108,908 US Alliance Life and Security Company NR — — 17,281,555 64,319 17,217,236 $ — $ 89,179 $ 42,352,280 $ 350,347 $ 42,091,115 The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by reinsurer except for Unified as it is accounted for as discontinued operations as of December 31, 2019: Recoverable on Total Amount Recoverable Recoverable Benefit Ceded Recoverable AM Best on Paid on Unpaid Reserves/Deposit- Due from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ 4,213,699 $ — $ 4,213,699 Optimum Re Insurance Company A — — 489,770 — 489,770 Sagicor Life Insurance Company A- — 130,538 11,347,962 270,273 11,208,227 SDA Annuity & Life Re NR — — 2,506,911 — 2,506,911 US Alliance Life and Security Company NR — 23,000 12,207,079 69,162 12,160,917 $ — $ 153,538 $ 30,765,421 $ 339,435 $ 30,579,524 |
Schedule of Ceded Commission Earned [Table Text Block] | Nine months ended September 30, 2020 Interest on Earned Gross Ceding Expense Ceding Ceding Reinsurer Commission Allowances (1) Commissions Commission Ironbound Reinsurance Company Limited $ 688,110 $ 690,169 $ 165,607 $ 316,889 SDA Annuity & Life Re 1,356,473 2,605,014 47,461 43,856 US Alliance Life and Security Company (2) 2,279,511 4,016,556 23,171 74,466 SRC2 3,837,996 7,247,966 13,251 54,838 $ 8,162,090 $ 14,559,705 $ 249,490 $ 490,049 (1) Includes: acquisition and administrative expenses, commission expense allowance and product development fees. (2) US Alliance Life and Security Company funds withheld and funds paid treaty |
Schedule Of Ceded Commission Deferred Table Text Block | The tables below shows the ceding commissions deferred on each reinsurance transaction on a GAAP basis: September 30, 2020 December 31, 2019 Effective Date Deferred Ceding Deferred Ceding Reinsurer of Transaction Commission Commission US Alliance Life and Security Company (1) September 2017 $ 822,393 $ 858,675 Unified Life Insurance Company (1) July 2018 287,189 582,894 Ironbound Reinsurance Company Limited (2) July 2019 5,739,427 5,060,359 SDA Annuity & Life Re (2) November 2019 2,071,427 1,076,267 US Alliance Life and Security Company (3) April 2020 2,508,421 — SRC2 July 2020 4,310,407 — $ 15,739,264 $ 7,578,195 (1) These reinsurance transactions on our legacy business received gross ceding commissions on the effective dates of the transaction. The difference between the statutory net adjusted reserves and the GAAP adjusted reserves plus the elimination of DAC and value of business acquired (“VOBA”) related to these businesses reduces the gross ceding commission with the remaining deferred and amortized over the lifetime of the blocks of business. (2) These reinsurance transactions include the ceding commissions and expense allowances which are accounted for as described in (1). (3) US Alliance Life and Security Company funds withheld and funds paid treaty. |
American Life & Security Corp [Member] | |
Schedule of Ceded Commission Earned [Table Text Block] | Nine months ended September 30, 2020 Effective Date Ceding Expense Reinsurer of Transaction Commission Paid Allowances Paid (1) Ironbound Reinsurance Company Limited July 2019 $ 688,110 $ 690,169 SDA Annuity & Life Re November 2019 1,356,473 2,605,014 US Alliance Life and Security Company (2) April 2020 2,279,511 4,016,556 SRC2 July 2020 3,837,996 7,247,966 $ 8,162,090 $ 14,559,705 (1) Includes: acquisition and administrative expenses, commission expense allowance and product development fees. (2) US Alliance Life and Security Company funds withheld and funds paid treaty |
Notes Payable (Tables)
Notes Payable (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Summary of information regarding loans | Shares of Common Loan Stock into which Principal Loans Were Date of Loan Amount Converted June 28, 2018 $ 500,000 48,570 June 28, 2018 100,000 9,714 October 10, 2018 1,000,000 97,139 December 7, 2018 17,500,000 1,699,938 Total $ 19,100,000 1,855,361 |
Long-Term Incentive Plan (Table
Long-Term Incentive Plan (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of remaining non-vested shares | Table below show the remaining non-vested shares as of September 30, 2020: 2020 Stock 2019 Stock Options Options Outstanding (1) Outstanding (1) Non-vested at December 31, 2019 17,900 17,900 Granted 32,967 — Forfeited (3,350) — Vested (200) Non-vested at September 30, 2020 47,317 17,900 |
Deposit-Type Contracts (Tables)
Deposit-Type Contracts (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Deposit-Type Contracts | |
Schedule of deposit-type contracts | The following table provides information about deposit-type contracts for the nine months ended September 30, 2020 and the year ended December 31, 2019: September 30, 2020 December 31, 2019 Beginning balance $ 171,168,785 $ 7,234,927 US Alliance 547,193 657,986 Deposits received 279,537,157 161,392,700 Investment earnings (includes embedded derivative) 5,910,237 2,043,762 Withdrawals (1,718,288) (160,590) Contract changes (15,700) — Ending balance $ 455,429,384 $ 171,168,785 The following table provides information about deposit-type contracts for the years ended December 31, 2019 and 2018: Year ended December 31, 2019 2018 Beginning balance $ 7,234,927 $ 8,314,297 US Alliance 657,986 804,187 Commutation of assumption agreement — (1,881,411) Ironbound Reinsurance Company Limited 1,839,551 — SDA Annuity & Life Re (includes MVA adjustment and embedded derivative) 194,940 — Deposits received 161,392,700 650 Investment earnings (includes MVA adjustment and embedded derivative) 9,271 47,936 Withdrawals (160,590) (50,732) Ending balance $ 171,168,785 $ 7,234,927 |
Leases (Tables)
Leases (Tables) | 21 Months Ended |
Sep. 30, 2020 | |
Leases | |
Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information as of September 30, 2020 and December 31, 2019 regarding our leases is as follows: As of As of Leases Classification September 30, 2020 December 31, 2019 Assets Noncurrent: Finance Office and other equipment, net of accumulated depreciation and amortization $ — $ 2,913 Operating Operating lease right-of-use assets 378,682 470,132 Total leased assets $ 378,682 $ 473,045 Liabilities Current: Finance lease Finance lease liabilities $ — $ 1,860 Noncurrent: Operating lease Operating lease liabilities 428,851 524,248 Total leased liabilities $ 428,851 $ 526,108 Supplemental balance sheet information for our leases for the years ended December 31, 2019 and 2018, are as follows: As of As of Leases Classification December 31, 2019 December 31, 2018 Assets Noncurrent: Finance Office and other equipment, net of accumulated depreciation and amortization $ 2,913 $ 14,564 Operating Operating lease right-of-use assets 470,132 592,065 Total leased assets $ 473,045 $ 606,629 Liabilities Current: Finance lease Finance lease liabilities $ 1,860 $ 9,299 Noncurrent: Operating lease Operating lease liabilities 524,248 646,519 Total leased liabilities $ 526,108 $ 655,818 |
Schedule of Components of Lease Expenses | Our operating and finance leases expenses for the nine months ended September 30, 2020 and 2019, were as follows: Nine months ended September 30, Leases Classification 2020 2019 Operating General and administrative expense $ 6,654 $ 10,453 Finance lease cost: Amortization expense 2,913 8,739 Interest expense 111 333 Our operating and finance leases expenses for the years ended December 31, 2019 and 2018, are as follows: Year ended December 31, Leases Classification 2019 2018 Operating General and administrative expense $ 13,797 $ 16,810 Finance lease cost: Amortization expense 11,651 4,481 Interest expense 444 444 |
Schedule of Finance and Operating Leases Minimum | Minimum contractual obligations for our operating leases at September 30, 2020, are as follows: Operating Leases 2020 (excluding nine months ended September 30,2020) $ 40,345 2021 164,081 2022 156,608 2023 161,674 2024 13,508 Total remaining lease payments $ 536,216 Minimum contractual obligations for our leases as of December 31, 2019 are as follows: Operating Leases Finance Lease 2020 (excluding year ended December 31, 2019) $ 160,958 $ 2,133 2021 164,081 — 2022 156,608 — 2023 161,674 — 2024 13,508 — Total remaining lease payments $ 656,829 $ 2,133 |
Schedule of Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases was as follows: Nine months ended September 30, 2020 2019 Cash payments Operating cash flows from operating leases $ (1,035) $ (148) Operating cash flows from finance leases 4,657 2,328 Financing cash flows from finance leases (111) (333) Supplemental cash flow information related to leases was as follows: Year ended December 31, 2019 2018 Cash payments Operating cash flows from operating leases $ (337) $ 4,306 Operating cash flows from finance leases 4,657 (2,514) Financing cash flows from finance leases (444) (444) |
Schedule of Weighted-average Remaining Lease Terms and Discount Rate | The weighted average remaining lease terms and discount rate of our finance and operating leases was as follows: As of As of September 30, 2020 December 31, 2019 Weighted Average Remaining Lease Term Finance lease 0 3 months Operating lease 1.7 years 2.5 years Weighted Average Discount Rate Finance lease — % 6 % Operating lease 8 % 8 % |
Nature of Operations and Summ_3
Nature of Operations and Summary of Significant Accounting Policies (Details) | Jun. 15, 2020USD ($) | May 12, 2020USD ($) | Apr. 24, 2020USD ($)$ / sharesshares | Mar. 11, 2020 | Mar. 01, 2020 | Jul. 25, 2019 | Jun. 28, 2019USD ($)shares | Jun. 18, 2019shares | May 09, 2018shares | Jun. 18, 2019shares | Sep. 30, 2019lease | Jun. 30, 2020USD ($)product | Sep. 30, 2020USD ($)segmentproductitemplan$ / sharesshares | Sep. 30, 2019USD ($)$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2018USD ($)$ / sharesshares | Sep. 30, 2020GBP (£)stateshares | Sep. 30, 2020USD ($)state$ / sharesshares | Aug. 10, 2020$ / sharesshares | Apr. 02, 2020 | Dec. 31, 2019GBP (£)leaseshares | Dec. 31, 2019USD ($)leaseshares | Apr. 02, 2019 |
Number of states in which the insurance company is currently licensed to sell, underwrite, and market life insurance and annuity products | state | 20 | 20 | |||||||||||||||||||||
Ownership percentage acquired | 49.00% | 49.00% | |||||||||||||||||||||
Common stock shares | shares | 231,655 | ||||||||||||||||||||||
Share Price | $ / shares | $ 22.500 | ||||||||||||||||||||||
Proceeds from Issuance of Common Stock | $ 5,227,000 | ||||||||||||||||||||||
Number of segments | segment | 1 | ||||||||||||||||||||||
Valuation allowances on mortgage loans | $ 0 | ||||||||||||||||||||||
Number of lease investments purchased | lease | 2 | ||||||||||||||||||||||
Number of lease investments sold | lease | 2 | ||||||||||||||||||||||
Outstanding remaining lease payments on non-performing lease | 3,600,000 | ||||||||||||||||||||||
Valuation allowance on leased assets | 776,973 | $ 0 | |||||||||||||||||||||
Number of lease investments | lease | 1 | 1 | |||||||||||||||||||||
Preferred stock | $ 500,000 | ||||||||||||||||||||||
Valuation allowance on investment in preferred stock of the non-affiliated company | 500,000 | 0 | |||||||||||||||||||||
Notes receivable | 5,516,302 | ||||||||||||||||||||||
Valuation allowance on policy loans | 0 | ||||||||||||||||||||||
Cash equivalents | $ 0 | 0 | 0 | ||||||||||||||||||||
Cash held in custody accounts | £ 605,506 | 783,000 | £ 1,800,000 | 2,300,000 | |||||||||||||||||||
Unrealized gains (losses) related to change in foreign currency exchange rate | $ (87,300) | ||||||||||||||||||||||
Money market investments | 26,200,000 | ||||||||||||||||||||||
Depreciation | $ 34,926 | $ 28,972 | $ 40,000 | 49,309 | |||||||||||||||||||
Accumulated depreciation | 943,323 | 1,010,406 | 975,480 | ||||||||||||||||||||
Reinsurance recoverables on unpaid losses, allowance | 0 | $ 0 | $ 0 | ||||||||||||||||||||
Number of third party reinsurers | item | 4 | ||||||||||||||||||||||
Number of related party reinsurer | item | 1 | ||||||||||||||||||||||
Number of reinsurers having funds withheld or modified coinsurance provisions | item | 3 | ||||||||||||||||||||||
Unrealized loss | $ 4,400,000 | ||||||||||||||||||||||
Embedded derivative gains | $ 4,400,000 | ||||||||||||||||||||||
Number of reinsurance agreements | item | 4 | ||||||||||||||||||||||
Unrealized gains (losses) on investments | $ (2,875,489) | $ 2,291,413 | $ (1,306,795) | ||||||||||||||||||||
Basic earnings per share | $ / shares | $ (0.220) | $ (4.710) | $ (4.990) | $ (121.770) | |||||||||||||||||||
Basic earnings per share, excluding embedded derivative gain | $ / shares | (1.980) | ||||||||||||||||||||||
Basic Earnings Per Share, including embedded derivative gain | $ / shares | $ 0.220 | ||||||||||||||||||||||
Preferred stock, shares authorized (in shares) | shares | 2,000,000 | 2,000,000 | 2,000,000 | ||||||||||||||||||||
Common stock par value | $ / shares | $ 0.001 | ||||||||||||||||||||||
Common stock, shares authorized | shares | 20,000,000 | 20,000,000 | |||||||||||||||||||||
Stated dividend rate | 8.00% | ||||||||||||||||||||||
Weighted average number of shares outstanding, Basic (in shares) | shares | 2,435,115 | 847,893 | 1,149,042 | 41,601 | |||||||||||||||||||
Weighted average number of shares outstanding, Diluted (in shares) | shares | 2,482,632 | 888,443 | 1,150,936 | 41,601 | |||||||||||||||||||
Xenith | |||||||||||||||||||||||
Voting common stock | shares | 1,797,077 | ||||||||||||||||||||||
Conversion amount | $ 19,100,000 | ||||||||||||||||||||||
Series C Preferred Stock [Member] | |||||||||||||||||||||||
Preferred stock, shares authorized (in shares) | shares | 1,500,000 | ||||||||||||||||||||||
Preferred stock, shares outstanding (in shares) | shares | 1,500,000 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Preferred stock, shares issued | shares | 1,500,000 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Conversion rate | 10.29 | ||||||||||||||||||||||
Series C Preferred Stock [Member] | Xenith | |||||||||||||||||||||||
Common stock shares | shares | 1,500,000 | ||||||||||||||||||||||
Voting common stock | shares | 145,709 | 58,284 | |||||||||||||||||||||
Stated dividend rate | 8.00% | ||||||||||||||||||||||
Series C Preferred Stock [Member] | Xenith1Member | |||||||||||||||||||||||
Voting common stock | shares | 1,500,000 | ||||||||||||||||||||||
Conversion rate | 10.29 | ||||||||||||||||||||||
Non-voting common shares | |||||||||||||||||||||||
Common stock par value | $ / shares | $ 0.001 | ||||||||||||||||||||||
Common stock, shares authorized | shares | 2,000,000 | 2,000,000 | |||||||||||||||||||||
Furniture and Fixtures [Member] | Minimum | |||||||||||||||||||||||
Useful life | 3 years | ||||||||||||||||||||||
Furniture and Fixtures [Member] | Maximum | |||||||||||||||||||||||
Useful life | 7 years | ||||||||||||||||||||||
Computer Software, Intangible Asset [Member] | |||||||||||||||||||||||
Useful life | 3 years | ||||||||||||||||||||||
1505 Capital LLC | |||||||||||||||||||||||
Ownership percentage acquired | 49.00% | 51.00% | 51.00% | ||||||||||||||||||||
Business Combination, Consideration Transferred | $ 500,000 | ||||||||||||||||||||||
American Life [Member] | |||||||||||||||||||||||
Capital contributions made to subsidiary | 5,000,000 | $ 20,500,000 | |||||||||||||||||||||
Contributions made | $ 5,000,000 | $ 20,500,000 | |||||||||||||||||||||
Unrealized gains (losses) on investments | $ 2,100,000 | ||||||||||||||||||||||
FW, Modco Agreement | |||||||||||||||||||||||
Percentage of indemnity coinsurance | 0.00% | 30.00% | 95.00% | ||||||||||||||||||||
Securities Purchase Agreement | Crestline Assurance Holdings LLC | |||||||||||||||||||||||
Common stock shares | shares | 444,444 | ||||||||||||||||||||||
Share Price | $ / shares | $ 22.500 | ||||||||||||||||||||||
Proceeds from Issuance of Common Stock | $ 10,000,000 | ||||||||||||||||||||||
Common stock par value | $ / shares | $ 0.001 | ||||||||||||||||||||||
Seneca Re Agreement | |||||||||||||||||||||||
Capital contributions made to subsidiary | $ 300,000 | ||||||||||||||||||||||
Ownership percentage acquired | 100.00% | ||||||||||||||||||||||
Contributions made | $ 300,000 | ||||||||||||||||||||||
SRC2 | |||||||||||||||||||||||
Capital contributions made to subsidiary | $ 3,000,000 | 3,000,000 | |||||||||||||||||||||
Contributions made | $ 3,000,000 | $ 3,000,000 | |||||||||||||||||||||
American Life Product [Member] | |||||||||||||||||||||||
Number of products | product | 5 | ||||||||||||||||||||||
Multi Year Guaranteed Annuity | |||||||||||||||||||||||
Number of products | product | 2 | ||||||||||||||||||||||
Multi Year Guaranteed Annuity | Master Letter Agreement | Crestline Assurance Holdings LLC | |||||||||||||||||||||||
Percentage of indemnity coinsurance | 25.00% | ||||||||||||||||||||||
Fixed Index Annuity | |||||||||||||||||||||||
Number of products | product | 1 | ||||||||||||||||||||||
Number of bonus plans | plan | 2 | ||||||||||||||||||||||
Fixed Index Annuity | Master Letter Agreement | Crestline Assurance Holdings LLC | |||||||||||||||||||||||
Percentage of indemnity coinsurance | 40.00% |
New Accounting Standards (Detai
New Accounting Standards (Details) | Sep. 30, 2020USD ($)item | Jun. 30, 2020item | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ||||
Number of operating leases | item | 3 | |||
Number of finance leases | item | 1 | |||
Total leased assets | $ 378,682 | $ 470,132 | $ 592,065 | |
Total leased assets | 378,682 | 473,045 | 606,629 | |
Total leased liabilities | $ 428,851 | $ 526,108 | $ 655,818 |
Change in Control (Narrative) (
Change in Control (Narrative) (Details) - USD ($) | Apr. 24, 2020 | Jun. 18, 2019 | May 09, 2018 | Jun. 18, 2019 | Sep. 30, 2020 | Dec. 31, 2019 |
Common Stock, Shares Authorized | 20,000,000 | |||||
Common stock par value | $ 0.001 | |||||
Shares sold | 231,655 | |||||
Shares sold, value | $ 14,941,533 | |||||
Preferred stock liquidation preference percentage | 8.00% | |||||
Xenith | ||||||
Proceeds from issuance of loan | $ 600,000 | |||||
Loan term | 10 years | |||||
Voting common stock | 1,797,077 | |||||
Proceeds from additional loan | $ 23,500,000 | $ 18,500,000 | ||||
Preferred stock liquidation preference | $ 10.29 | |||||
Cash interest (as a percent) | 4.00% | |||||
Additional per annum interest due at maturity (as a percent) | 4.00% | |||||
Xenith | Notes One | ||||||
Proceeds from issuance of notes and preferred stock | $ 500,000 | |||||
Xenith | Notes Two | ||||||
Proceeds from issuance of notes and preferred stock | $ 100,000 | |||||
Xenith | Series C Preferred Stock [Member] | ||||||
Debt interest rate, if not redeemed | 12 | |||||
Voting common stock | 145,709 | 58,284 | ||||
Shares sold | 1,500,000 | |||||
Shares sold, value | $ 1,500,000 | |||||
Preferred stock liquidation preference | $ 10.29 | $ 1 | $ 10.29 | |||
Preferred stock liquidation preference percentage | 8.00% | |||||
Number of Board of Directors entitled to elect | 5 | |||||
Number of Board of Directors | 8 | |||||
Voting stock of Xenith in Vespoint LLC [Member] | ||||||
Ownership interest | 100.00% |
Change in Control (Schedule of
Change in Control (Schedule of Company's Voting Common Stock) (Details) - USD ($) | Jun. 18, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Previous Company Shareholders, Number (in shares) | 45,746 | ||
Previous Company Shareholders, percentage | 2.20% | ||
Note Conversion, Number (in Shares) | 1,855,361 | ||
Total Outstanding, Number | 2,046,816 | ||
Total Outstanding, Percentage | 100.00% | ||
Loan Principal Amount | $ 19,100,000 | ||
Series C Preferred Stock [Member] | |||
Converted shares as a percent of the total shares outstanding | 7.10% | ||
Preferred Stock Conversion, Number | 145,709 | ||
Xenith | Notes One | |||
Converted shares as a percent of the total shares outstanding | 2.40% | ||
Preferred Stock Conversion, Number | 48,570 | ||
Xenith | Notes Two | |||
Converted shares as a percent of the total shares outstanding | 0.50% | ||
Preferred Stock Conversion, Number | 9,714 | ||
Xenith | Notes Three | |||
Converted shares as a percent of the total shares outstanding | 4.70% | ||
Preferred Stock Conversion, Number | 97,139 | ||
Xenith | Notes Four | |||
Converted shares as a percent of the total shares outstanding | 83.10% | ||
Preferred Stock Conversion, Number | 1,699,938 | ||
June 28, 2018 [Member] | |||
Note Conversion, Number (in Shares) | 48,570 | ||
Loan Principal Amount | $ 500,000 | ||
June 28, 2018 [Member] | |||
Note Conversion, Number (in Shares) | 9,714 | ||
Loan Principal Amount | $ 100,000 | ||
October 10, 2018 [Member] | |||
Note Conversion, Number (in Shares) | 97,139 | ||
Loan Principal Amount | $ 1,000,000 | ||
December 7, 2018 [Member] | |||
Note Conversion, Number (in Shares) | 1,699,938 | ||
Loan Principal Amount | $ 17,500,000 |
Assets and Liabilities Held f_3
Assets and Liabilities Held for Sale - Assets and Liabilities Discontinued Operations (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Carrying amounts of major classes of assets included as part of discontinued operations: | |||
Policy loans | $ 35,302 | $ 50,387 | $ 366,849 |
Reinsurance recoverables | 1,043,985 | 3,569,849 | 20,359,326 |
Premiums receivable | 23,490 | 33,512 | 210,896 |
Total assets held for sale in the Consolidated Balance Sheet | 1,102,777 | 3,653,748 | 20,937,071 |
Carrying amounts of major classes of liabilities included as part of discontinued operations: | |||
Benefit reserves | 594,603 | 1,403,953 | 9,799,834 |
Policy claims | 35,302 | 28,203 | 127,666 |
Deposit-type contracts | 474,943 | 2,209,195 | 11,050,139 |
Advance premiums | 593 | 2,226 | 21,699 |
Accounts payable and accrued expenses | 5,672 | 3,290 | 53,395 |
Total liabilities held for sale in the Consolidated Balance Sheet | $ 1,111,113 | $ 3,646,867 | $ 21,052,733 |
Assets and Liabilities Held f_4
Assets and Liabilities Held for Sale - Losses/Gains Discontinued Operations (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Major line items constituting pretax loss of discontinued operations: | |
Premiums | $ 933,980 |
Death and other benefits | (421,448) |
Interest credited | (192,008) |
Increase in benefit reserves | (41,790) |
Amortization of deferred acquisition costs | (202,913) |
Other operating expenses | (104,105) |
Loss on discontinued operations | $ (28,284) |
Assets and Liabilities Held f_5
Assets and Liabilities Held for Sale - Additional Information (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Assets and Liabilities Held for Sale | ||
Percentage of indemnity reinsurance basis of liabilities and obligations | 100.00% | |
Ceding commission | $ 3,500,000 | |
Percentage of indemnity policies | 89.00% | 79.00% |
Non-controlling Interest (Detai
Non-controlling Interest (Details) - USD ($) | Jun. 15, 2020 | Apr. 02, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Apr. 02, 2020 |
Noncontrolling Interest [Line Items] | ||||||||
Ownership percentage acquired | 49.00% | |||||||
Valuation Allowance on Investment in Preferred Stock of the Non-affiliated Company | $ 500,000 | $ 0 | $ 0 | |||||
Net income, including portion attributable to non-controlling interest | (526,123) | $ (3,942,870) | (5,609,181) | $ (5,065,534) | ||||
Net income (loss) | $ (526,123) | $ (3,989,684) | $ (5,733,658) | $ (5,065,534) | ||||
1505 Capital LLC | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Ownership percentage acquired | 49.00% | 51.00% | 51.00% | |||||
Capital units acquired, purchase price | $ 500,000 | $ 1 | ||||||
Business Combination, Consideration Transferred | $ 500,000 | |||||||
Net income, including portion attributable to non-controlling interest | 252,113 | |||||||
Income attributable to non-controlling interest | 127,636 | |||||||
Net income (loss) | $ 124,477 |
Investments (Schedule of Amorti
Investments (Schedule of Amortized Cost and Estimated Fair Value of Investments) (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020USD ($)security | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Cost or Amortized Cost | $ 252,836,485 | $ 116,676,312 | $ 19,226,841 |
Total fixed maturities | 250,542,950 | 117,241,861 | 17,384,183 |
Mortgage loans on real estate, held for investment | 61,464,515 | 13,810,041 | |
Derivatives, Cost | 5,698,117 | 490,831 | |
Derivatives, Gross Unrealized Gains | 2,395,084 | 87,684 | |
Derivatives, Gross Unrealized Losses | 429,195 | 3,221 | |
Derivatives instruments (See Note 7) | 7,664,006 | 575,294 | |
Investment escrow | 3,899,986 | ||
Other invested assets | 14,808,870 | 2,468,947 | |
Preferred stock | 500,000 | ||
Notes receivable | 5,516,302 | ||
Policy Loans | 147,309 | 106,014 | |
Total investments, Amortized Cost | 340,471,598 | ||
Investments, Gross Unrealized Gains | 6,390,412 | ||
Investments, Gross Unrealized Losses | 6,718,058 | ||
Investments, Fair Value Disclosure | $ 340,143,952 | 138,496,129 | |
Number of securities Exceeded | security | 2 | ||
Fixed Maturities | |||
Cost or Amortized Cost | $ 252,836,485 | 116,676,312 | 19,226,841 |
Gross Unrealized Gains | 3,995,328 | 1,163,397 | 261 |
Gross Unrealized Losses | 6,288,863 | 597,848 | 1,842,919 |
Total fixed maturities | 250,542,950 | 117,241,861 | 17,384,183 |
Total investments, Amortized Cost | 137,952,131 | ||
Investments, Gross Unrealized Gains | 1,251,081 | ||
Investments, Gross Unrealized Losses | 601,069 | ||
Investments, Fair Value Disclosure | 138,602,143 | ||
U.S. government obligations | Fixed Maturities | |||
Cost or Amortized Cost | 2,007,031 | 2,091,710 | 2,112,816 |
Gross Unrealized Gains | 104,703 | 7,073 | 247 |
Gross Unrealized Losses | 6,712 | 17,559 | 117,112 |
Total fixed maturities | 2,105,022 | 2,081,224 | 1,995,951 |
Mortgage Backed Securities | Fixed Maturities | |||
Cost or Amortized Cost | 371,273 | 819,678 | 1,068,976 |
Gross Unrealized Gains | 7,042 | ||
Gross Unrealized Losses | 179 | 21,070 | 64,925 |
Total fixed maturities | 378,136 | 798,608 | 1,004,051 |
Asset-backed Securities | Fixed Maturities | |||
Cost or Amortized Cost | 205,589,130 | 95,006,241 | |
Gross Unrealized Gains | 2,235,333 | 646,335 | |
Gross Unrealized Losses | 5,382,412 | 404,752 | |
Total fixed maturities | 202,442,051 | 95,247,824 | |
States and Political Subdivisions General Obligations [Member] | Fixed Maturities | |||
Cost or Amortized Cost | 237,339 | 240,494 | 265,473 |
Gross Unrealized Gains | 11,409 | 8,788 | |
Gross Unrealized Losses | 2,289 | ||
Total fixed maturities | 248,748 | 249,282 | 263,184 |
States and Political Subdivisions Special Revenue [Member] | Fixed Maturities | |||
Cost or Amortized Cost | 5,629,266 | 25,112 | 25,231 |
Gross Unrealized Gains | 565,843 | 179 | |
Gross Unrealized Losses | 4,930 | 58 | |
Total fixed maturities | 6,190,179 | 25,291 | 25,173 |
Trust preferred | Fixed Maturities | |||
Cost or Amortized Cost | 2,218,142 | ||
Gross Unrealized Losses | 55,183 | ||
Total fixed maturities | 2,162,959 | ||
Corporate | Fixed Maturities | |||
Cost or Amortized Cost | 36,784,304 | 18,493,077 | 15,754,345 |
Gross Unrealized Gains | 1,070,998 | 501,022 | 14 |
Gross Unrealized Losses | 839,447 | 154,467 | 1,658,535 |
Total fixed maturities | $ 37,015,855 | $ 18,839,632 | $ 14,095,824 |
Investments (Schedule of Amor_2
Investments (Schedule of Amortized Cost, Fair Value, Credit Rating) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Amortized Cost | $ 252,836,485 | $ 116,676,312 | $ 19,226,841 |
States and Political Subdivisions General Obligations [Member] | US States and Political Subdivisions Debt Securities | |||
Amortized Cost | 237,339 | 240,494 | |
Estimated Fair Value | 248,748 | 249,282 | |
States and Political Subdivisions General Obligations [Member] | US States and Political Subdivisions Debt Securities | Bellingham, Washington | |||
Amortized Cost | 106,829 | 107,709 | |
Estimated Fair Value | $ 117,759 | $ 115,597 | |
Credit Rating | AA+ | AA+ | |
States and Political Subdivisions General Obligations [Member] | US States and Political Subdivisions Debt Securities | Longview, Washington | |||
Amortized Cost | $ 130,510 | $ 132,785 | |
Estimated Fair Value | $ 130,989 | $ 133,685 | |
Credit Rating | Aa3 | Aa3 |
Investments (Schedule of Unreal
Investments (Schedule of Unrealized Loss of Securities) (Details) - Fixed Maturities | Sep. 30, 2020USD ($)security | Dec. 31, 2019USD ($)security | Dec. 31, 2018USD ($)security |
Estimated Fair Value, Total | $ 145,919,782 | $ 46,788,419 | $ 17,066,628 |
Gross Unrealized Loss, Total | $ 6,288,863 | $ 597,848 | $ 1,842,919 |
Number of Securities, Total | security | 109 | 72 | 114 |
U.S. government obligations | |||
Estimated Fair Value, Less than 12 months | $ 35,073 | $ 1,518,772 | $ 7,862 |
Gross Unrealized Loss, Less than 12 months | $ 311 | $ 14,935 | $ 430 |
Number of Securities, Less than 12 months | security | 1 | 9 | 1 |
Estimated Fair value, Greater than 12 months | $ 157,752 | $ 353,834 | $ 1,785,949 |
Gross Unrealized Loss, Greater than 12 months | $ 6,401 | $ 2,624 | $ 116,682 |
Number of Securities, Greater than 12 months | security | 4 | 2 | 10 |
Asset-backed Securities | |||
Estimated Fair Value, Less than 12 months | $ 112,190,271 | $ 39,114,732 | |
Gross Unrealized Loss, Less than 12 months | $ 5,122,847 | $ 404,752 | |
Number of Securities, Less than 12 months | security | 66 | 26 | |
Estimated Fair value, Greater than 12 months | $ 10,592,569 | ||
Gross Unrealized Loss, Greater than 12 months | $ 259,565 | ||
Number of Securities, Greater than 12 months | security | 5 | ||
Mortgage Backed Securities | |||
Estimated Fair Value, Less than 12 months | $ 22,828 | $ 160,010 | |
Gross Unrealized Loss, Less than 12 months | $ 179 | $ 4,844 | |
Number of Securities, Less than 12 months | security | 1 | 4 | |
Estimated Fair value, Greater than 12 months | $ 638,598 | $ 1,004,052 | |
Gross Unrealized Loss, Greater than 12 months | $ 16,226 | $ 64,925 | |
Number of Securities, Greater than 12 months | security | 14 | 19 | |
States and Political Subdivisions General Obligations [Member] | |||
Estimated Fair value, Greater than 12 months | $ 263,183 | ||
Gross Unrealized Loss, Greater than 12 months | $ 2,289 | ||
Number of Securities, Greater than 12 months | security | 2 | ||
States and Political Subdivisions Special Revenue [Member] | |||
Estimated Fair Value, Less than 12 months | $ 1,168,610 | ||
Gross Unrealized Loss, Less than 12 months | $ 4,930 | ||
Number of Securities, Less than 12 months | security | 3 | ||
Estimated Fair value, Greater than 12 months | $ 25,173 | ||
Gross Unrealized Loss, Greater than 12 months | $ 58 | ||
Number of Securities, Greater than 12 months | security | 1 | ||
Trust preferred | |||
Estimated Fair Value, Less than 12 months | $ 2,162,960 | ||
Gross Unrealized Loss, Less than 12 months | $ 55,183 | ||
Number of Securities, Less than 12 months | security | 1 | ||
Corporate | |||
Estimated Fair Value, Less than 12 months | $ 19,005,716 | $ 2,800,815 | $ 3,351,664 |
Gross Unrealized Loss, Less than 12 months | $ 666,972 | $ 13,618 | $ 315,617 |
Number of Securities, Less than 12 months | security | 24 | 4 | 23 |
Estimated Fair value, Greater than 12 months | $ 584,003 | $ 2,201,658 | $ 10,628,745 |
Gross Unrealized Loss, Greater than 12 months | $ 172,475 | $ 140,849 | $ 1,342,918 |
Number of Securities, Greater than 12 months | security | 4 | 13 | 58 |
Investments (Schedule of Fixed
Investments (Schedule of Fixed Maturities) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Investments | |||
Amortized Cost, Due in one year or less | $ 964,295 | $ 101,205 | |
Amortized Cost, Due after one year through five years | 21,154,753 | 2,649,457 | |
Amortized Cost, Due after five years through ten years | 76,161,161 | 21,925,465 | |
Amortized Cost, Due after ten years through twenty years | 134,902,342 | 84,210,270 | |
Amortized Cost, Due after twenty years | 19,653,934 | 7,789,915 | |
Amortized Cost | 252,836,485 | 116,676,312 | $ 19,226,841 |
Estimated Fair Value, Due in one year or less | 1,067,733 | 100,958 | |
Estimated Fair Value, Due after one year through five years | 21,469,752 | 2,724,011 | |
Estimated Fair Value, Due after five years through ten years | 76,055,560 | 22,013,673 | |
Estimated Fair Value, Due after ten years through twenty years | 131,788,843 | 84,473,538 | |
Estimated Fair Value, Due after twenty years | 20,161,062 | 7,929,681 | |
Estimated Fair Value | $ 250,542,950 | $ 117,241,861 | $ 17,384,183 |
Investments (Schedule of Invest
Investments (Schedule of Investments Measured at Fair Value on a Recurring Basis) (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | $ 61,464,515 | $ 13,810,041 |
Interest Income Accrued | 1,873,380 | 312,028 |
Interest Income Earned | 2,397,197 | 352,959 |
Industrial | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 1,250,000 | 500,000 |
Interest Income Accrued | 18,236 | |
Interest Income Earned | 62,743 | 15,889 |
Commercial mortgage loan - multi-family | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 58,195,692 | 11,320,924 |
Interest Income Accrued | 1,634,008 | 116,860 |
Interest Income Earned | 2,199,823 | 329,684 |
Other. | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 2,018,823 | 1,989,117 |
Interest Income Accrued | 221,136 | 195,168 |
Interest Income Earned | 134,631 | 7,386 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | $ 61,464,515 | $ 13,810,041 |
Investments (Components of Net
Investments (Components of Net Investment Income) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Gross investment income | $ 1,508,105 | $ 427,543 | $ 330,850 | $ 834,563 |
Less investment expenses | (230,768) | (96,633) | (210,269) | (318,675) |
Investment income, net of expenses | 1,277,337 | 330,910 | 120,581 | 515,888 |
Fixed Maturities | ||||
Gross investment income | 1,364,414 | 342,104 | 292,453 | 789,949 |
Mortgage loans | ||||
Gross investment income | 80,749 | 78,466 | ||
Other | ||||
Gross investment income | $ 62,942 | $ 6,973 | $ 38,397 | $ 44,614 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Amortized cost | $ 3,526,609 | $ 3,611,292 | $ 2,958,178 | |
Fair value | 3,714,594 | 3,612,844 | 2,772,809 | |
Proceeds from sales of available-for-sale investments | 24,050,257 | $ 2,488,387 | 5,752,910 | 10,043,118 |
Gross realized gain | 1,342,283 | 9,006 | 268,848 | 27,972 |
Gross realized losses | $ 76,085 | $ 22,660 | 30,885 | $ 367,792 |
Percentage of total investments having a longer duration | 80.00% | |||
Outstanding remaining lease payments on non-performing lease | $ 3,600,000 | |||
Valuation allowance on leased assets | $ 776,973 | $ 0 | ||
Minimum | ||||
Period of maturity of debt instruments | 10 years | |||
Maximum | ||||
Period of maturity of debt instruments | 20 years |
Derivative Instruments (Details
Derivative Instruments (Details) | Sep. 30, 2020USD ($)contractitem | Dec. 31, 2019USD ($)contract |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Estimated Fair Value | $ 7,664,006 | $ 575,294 |
Number of treaties with reinsurance companies | item | 4 | |
Number of treaties with third-party reinsurance companies | item | 3 | |
Number of treaties with related party reinsurance companies | item | 1 | |
Derivatives not designated as hedge | Equity options | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 166,197,790 | $ 9,698,863 |
Number of Contracts | contract | 177 | 24 |
Estimated Fair Value | $ 7,664,006 | $ 575,294 |
Derivatives not designated as hedge | Equity-indexed embedded derivative | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 204,289,800 | $ 10,720,324 |
Number of Contracts | contract | 1,418 | 108 |
Estimated Fair Value | $ 6,359,657 | $ 576,634 |
Derivative Instruments - Funds
Derivative Instruments - Funds Withheld Provision (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Amounts recoverable from reinsurers | $ 42,091,115 | $ 30,579,524 | $ 23,100,644 |
SDA Annuity and Life Re | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Amounts recoverable from reinsurers | 4,094,584 | 2,506,911 | |
US Alliance Life And Security Company Member | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Amounts recoverable from reinsurers | 17,217,236 | $ 12,160,917 | |
SRC2 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Amounts recoverable from reinsurers | 5,108,908 | ||
Funds With held Provision Agreement | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Book value of assets | 181,940,497 | ||
Market value of assets | 177,570,935 | ||
Total return swap value | 4,369,562 | ||
Amounts recoverable from reinsurers | 4,369,562 | ||
Funds With held Provision Agreement | Ironbound Reinsurance Company Limited | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Book value of assets | 100,442,130 | ||
Market value of assets | 96,516,241 | ||
Total return swap value | 3,925,889 | ||
Funds With held Provision Agreement | SDA Annuity and Life Re | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Book value of assets | 21,072,864 | ||
Market value of assets | 20,495,383 | ||
Total return swap value | 577,481 | ||
Funds With held Provision Agreement | US Alliance Life And Security Company Member | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Book value of assets | 36,801,442 | ||
Market value of assets | 36,616,705 | ||
Total return swap value | 184,737 | ||
Funds With held Provision Agreement | SRC2 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Book value of assets | 23,624,061 | ||
Market value of assets | 23,942,606 | ||
Total return swap value | $ (318,545) |
Fair Values of Financial Inst_3
Fair Values of Financial Instruments (Schedule of Financial Instruments at Fair Value Measured on a Recurring Basis) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | $ 250,542,950 | $ 117,241,861 | $ 17,384,183 | |
Mortgage loans on real estate, held for investment | 61,464,515 | 13,810,041 | ||
Derivatives | 7,664,006 | 575,294 | ||
Investment escrow | 3,899,986 | |||
Other invested assets | 14,808,870 | 2,468,947 | ||
Preferred stock | 500,000 | |||
Notes receivable | 5,516,302 | |||
Policy Loans | 147,309 | 106,014 | ||
Policy Loans Receivable | 147,309 | 106,014 | 43,843 | |
Total Investments | 340,143,952 | 138,496,129 | ||
Embedded derivative for equity-indexed contracts | 6,359,657 | 576,634 | ||
Transfers between levels | 0 | 0 | 0 | |
Valuation Allowance on Investment in Preferred Stock of the Non-affiliated Company | 500,000 | 0 | ||
Outstanding remaining lease payments on non-performing lease | 3,600,000 | |||
Valuation allowance on leased assets | 776,973 | 0 | ||
Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Derivatives | 7,664,006 | 575,294 | ||
Investment escrow | 3,899,986 | |||
Notes receivable | 5,516,302 | |||
Total Investments | 263,723,258 | 121,717,141 | ||
Embedded derivative for equity-indexed contracts | 6,359,657 | 576,634 | ||
Fair Value, Inputs, Level 3 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Mortgage loans on real estate, held for investment | 61,464,515 | 13,810,041 | ||
Other invested assets | 14,808,870 | 2,468,947 | ||
Preferred stock | 500,000 | |||
Policy Loans | 147,309 | 106,014 | ||
Total Investments | 76,420,694 | 16,778,988 | ||
Total investments | 16,885,002 | |||
Valuation Allowance on Investment in Preferred Stock of the Non-affiliated Company | 500,000 | |||
Outstanding remaining lease payments on non-performing lease | 3,600,000 | |||
Valuation allowance on leased assets | 776,973 | |||
Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Preferred stock | $ 500,000 | |||
Fixed Maturities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 250,542,950 | 117,241,861 | 17,384,183 | |
Total Investments | 138,602,143 | |||
Fixed Maturities | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 250,542,950 | 117,241,861 | 17,384,183 | |
Fixed Maturities | U.S. government obligations | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 2,105,022 | 2,081,224 | 1,995,951 | |
Fixed Maturities | U.S. government obligations | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 2,105,022 | 2,081,224 | 1,995,951 | |
Fixed Maturities | Mortgage Backed Securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 378,136 | 798,608 | 1,004,051 | |
Fixed Maturities | Mortgage Backed Securities | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 378,136 | 798,608 | 1,004,051 | |
Fixed Maturities | Asset-backed Securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 202,442,051 | 95,247,824 | ||
Fixed Maturities | Asset-backed Securities | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 202,442,051 | 95,247,824 | ||
Fixed Maturities | States and Political Subdivisions General Obligations [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 248,748 | 249,282 | 263,184 | |
Fixed Maturities | States and Political Subdivisions General Obligations [Member] | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 248,748 | 249,282 | 263,184 | |
Fixed Maturities | States and Political Subdivisions Special Revenue [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 6,190,179 | 25,291 | 25,173 | |
Fixed Maturities | States and Political Subdivisions Special Revenue [Member] | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 6,190,179 | 25,291 | 25,173 | |
Fixed Maturities | Trust preferred | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 2,162,959 | |||
Fixed Maturities | Trust preferred | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 2,162,959 | |||
Fixed Maturities | Corporate | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | 37,015,855 | 18,839,632 | 14,095,824 | |
Fixed Maturities | Corporate | Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total fixed maturities | $ 37,015,855 | $ 18,839,632 | $ 14,095,824 |
Fair Values of Financial Inst_4
Fair Values of Financial Instruments (Schedule of Financial Assets and Liabilities at Fair Value) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Assets: | |||
Cash | $ 136,431,785 | $ 43,716,205 | $ 2,832,567 |
Liabilities: | |||
Notes payable | 18,938,705 | ||
Fair Value, Inputs, Level 1 [Member] | |||
Assets: | |||
Cash | 136,431,785 | 43,716,205 | 2,832,567 |
Fair Value, Inputs, Level 3 [Member] | |||
Assets: | |||
Policy loans | 147,309 | 106,014 | 43,843 |
Liabilities: | |||
Policyholder deposits (Deposit-type contracts) | 455,429,384 | 171,168,785 | 7,234,927 |
Notes payable | 18,938,705 | ||
Carrying (Reported) Amount, Fair Value Disclosure [Member] | |||
Assets: | |||
Policy loans | 147,309 | 106,014 | 43,843 |
Cash | 136,431,785 | 43,716,205 | 2,832,567 |
Liabilities: | |||
Policyholder deposits (Deposit-type contracts) | 455,429,384 | 171,168,785 | 7,234,927 |
Notes payable | 18,938,705 | ||
Estimate Of Fair Value, Fair Value Disclosure [Member] | |||
Assets: | |||
Policy loans | 147,309 | 106,014 | 43,843 |
Cash | 136,431,785 | 43,716,205 | 2,832,567 |
Liabilities: | |||
Policyholder deposits (Deposit-type contracts) | $ 455,429,384 | $ 171,168,785 | 7,234,927 |
Notes payable | $ 18,938,705 |
Fair Values of Financial Inst_5
Fair Values of Financial Instruments (Recurring Basis Level 3) (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Beginning Balance | $ 16,885,002 | $ 43,843 |
Additions | 83,232,082 | 32,885,675 |
Sales | 22,589,014 | 16,075,693 |
Valuation Allowance | (1,276,973) | |
Realized gain | 169,597 | 31,177 |
Ending Balance | 76,420,694 | 16,885,002 |
Policy loans. | ||
Beginning Balance | 106,014 | 43,843 |
Additions | 41,295 | 62,171 |
Ending Balance | 147,309 | 106,014 |
Mortgage loans on real estate, held for investment | ||
Beginning Balance | 13,810,041 | |
Additions | 56,402,943 | 15,036,179 |
Sales | 8,918,066 | 1,226,138 |
Realized gain | 169,597 | |
Ending Balance | 61,464,515 | 13,810,041 |
Other invested assets | ||
Beginning Balance | 2,468,947 | |
Additions | 26,787,844 | 17,287,325 |
Sales | 13,670,948 | 14,849,555 |
Valuation Allowance | (776,973) | |
Realized gain | 31,177 | |
Ending Balance | 14,808,870 | 2,468,947 |
Preferred Stock [Member] | ||
Beginning Balance | 500,000 | |
Additions | 500,000 | |
Valuation Allowance | $ (500,000) | |
Ending Balance | $ 500,000 |
Income Tax Matters (Schedule of
Income Tax Matters (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | |||
Loss carryforwards | $ 623,258 | $ 436,777 | $ 1,429,458 |
Capitalized costs | 186,253 | 221,918 | 269,472 |
Stock option granted | 4,566 | 4,566 | |
Unrealized losses on investments | 475,720 | 390,349 | |
Policy acquisition costs | 750,034 | 1,468,030 | |
Charitable contribution carryforward | 1,020 | 1,020 | |
Property and equipment | 29,896 | 15,508 | |
Benefit reserves | 3,263,165 | 848,643 | 192,858 |
Total deferred tax assets | 5,333,912 | 2,996,462 | 2,282,137 |
Less valuation allowance | (4,631,718) | (2,618,741) | (1,928,454) |
Total deferred tax assets, net of valuation allowance | 702,194 | 377,721 | 353,683 |
Deferred tax liabilities: | |||
Unrealized losses on investments | 314,738 | 116,088 | |
Due premiums | 81,789 | 81,789 | 117,144 |
Intangible assets | 147,000 | 147,000 | 147,000 |
Policy loans | 158,667 | 32,844 | 86,246 |
Property and equipment | 3,294 | ||
Total deferred tax liabilities | 702,194 | 377,721 | 353,683 |
Net deferred tax assets | $ 0 | $ 0 | $ 0 |
Income Tax Matters (Schedule _2
Income Tax Matters (Schedule of Effective Tax Rate Reconciliation) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Computed expected income tax benefit | $ 339,987 | $ (813,759) | $ (1,154,890) | $ (1,063,749) |
Increase (reduction) in income taxes resulting from: | ||||
State tax, net of federal benefit | 151,680 | |||
Meals, entertainment and political contributions | 4,101 | 3,858 | 6,170 | 8,402 |
Change in loss carryforward due to 382 limitation | 5,595,636 | |||
Change in valuation allowance | 1,421,169 | 746,468 | ||
COD Interest | 177,563 | 177,563 | ||
Other | 228,173 | 512 | 8,613 | 39,143 |
Subtotal of increases | 1,805,123 | 928,401 | 192,346 | 5,643,181 |
Tax benefit before valuation allowance | (962,544) | 4,579,432 | ||
Change in loss carryforward due to 382 limitation | 1,196,724 | $ (4,579,432) | ||
Tax expense (benefit) | $ 2,145,110 | $ 114,642 | $ 234,180 |
Income Tax Matters (Narrative)
Income Tax Matters (Narrative) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 28, 2018 | Dec. 31, 2016 | |
Deferred tax assets, valuation allowance | $ 4,631,718 | $ 2,618,741 | $ 1,928,454 | |||
Income tax expense | $ 2,145,110 | $ 114,642 | $ 234,180 | |||
U.S. federal income tax rate | 21.00% | 21.00% | ||||
Net operating loss ("NOL") carryforwards | $ 2,967,895 | $ 2,079,888 | $ 890,636 | $ 798,236 | ||
Percentage of carry forward year limited taxable income | 80.00% | 80.00% | ||||
NOLs carryforwards, valuation allowance | $ 436,777 | |||||
Minimum | ||||||
Operating Loss Carryforwards, Expiration Dates | Dec. 31, 2024 | Dec. 31, 2024 | ||||
Maximum | ||||||
Operating Loss Carryforwards, Expiration Dates | Dec. 31, 2039 | Dec. 31, 2039 |
Reinsurance (Summary of Signifi
Reinsurance (Summary of Significant Reinsurance Amounts) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Balance sheets: | ||||
Amounts recoverable from reinsurers | $ 42,091,115 | $ 30,579,524 | $ 23,100,644 | |
Statements of comprehensive (loss) income: | ||||
Premiums assumed | 10,268 | |||
Premiums ceded | 677,702 | $ 702,450 | 996,711 | 848,374 |
Benefits assumed | 92,792 | |||
Benefits ceded | 99,466 | 167,895 | 201,823 | 141,896 |
Commissions assumed | 18 | |||
Commissions ceded | $ 7,595 | $ 8,146 | $ 10,445 | $ 54,346 |
Reinsurance (Schedule of Signif
Reinsurance (Schedule of Significant Reinsurance Balances) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Recoverable on Unpaid Losses | $ 89,179 | $ 153,538 | |
Recoverable on Benefit Reserves/Deposit-type Contracts | 42,352,280 | 30,765,421 | |
Ceded Due Premiums | 350,347 | 339,435 | |
Total Amount Recoverable from Reinsurer | $ 42,091,115 | $ 30,579,524 | $ 23,100,644 |
Ironbound Reinsurance Company Limited [Member] | |||
AM Best Rating | NR | NR | |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 4,141,644 | $ 4,213,699 | |
Total Amount Recoverable from Reinsurer | $ 4,141,644 | $ 4,213,699 | |
Optimum Reinsurance Company [Member] | |||
AM Best Rating | A | A | |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 524,701 | $ 489,770 | |
Total Amount Recoverable from Reinsurer | $ 524,701 | $ 489,770 | |
Sagicor Life Insurance Company [Member] | |||
AM Best Rating | A- | A- | |
Recoverable on Unpaid Losses | $ 89,179 | $ 130,538 | |
Recoverable on Benefit Reserves/Deposit-type Contracts | 11,200,888 | 11,347,962 | |
Ceded Due Premiums | 286,028 | 270,273 | |
Total Amount Recoverable from Reinsurer | $ 11,004,042 | $ 11,208,227 | $ 11,494,161 |
SDA Annuity and Life Re | |||
AM Best Rating | NR | NR | |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 4,094,584 | $ 2,506,911 | |
Total Amount Recoverable from Reinsurer | $ 4,094,584 | $ 2,506,911 | |
SRC2 | |||
AM Best Rating | NR | ||
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 5,108,908 | ||
Total Amount Recoverable from Reinsurer | $ 5,108,908 | ||
US Alliance Life And Security Company Member | |||
AM Best Rating | NR | NR | |
Recoverable on Unpaid Losses | $ 23,000 | ||
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 17,281,555 | 12,207,079 | |
Ceded Due Premiums | 64,319 | 69,162 | |
Total Amount Recoverable from Reinsurer | $ 17,217,236 | $ 12,160,917 |
Reinsurance (Ceding commissions
Reinsurance (Ceding commissions earned) (Details) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Ceded Commission Earned | $ 8,162,090 |
Expense Allowances | 14,559,705 |
Ironbound Reinsurance Company Limited [Member] | |
Ceded Commission Earned | 688,110 |
Expense Allowances | 690,169 |
SDA Annuity and Life Re | |
Ceded Commission Earned | 1,356,473 |
Expense Allowances | 2,605,014 |
SRC2 | |
Ceded Commission Earned | 3,837,996 |
Expense Allowances | 7,247,966 |
US Alliance Life And Security Company Member | |
Ceded Commission Earned | 2,279,511 |
Expense Allowances | 4,016,556 |
American Life & Security Corp [Member] | |
Ceded Commission Earned | 8,162,090 |
Expense Allowances | 14,559,705 |
American Life & Security Corp [Member] | Ironbound Reinsurance Company Limited [Member] | |
Ceded Commission Earned | 688,110 |
Expense Allowances | 690,169 |
American Life & Security Corp [Member] | SDA Annuity and Life Re | |
Ceded Commission Earned | 1,356,473 |
Expense Allowances | 2,605,014 |
American Life & Security Corp [Member] | SRC2 | |
Ceded Commission Earned | 3,837,996 |
Expense Allowances | 7,247,966 |
American Life & Security Corp [Member] | US Alliance Life And Security Company Member | |
Ceded Commission Earned | 2,279,511 |
Expense Allowances | $ 4,016,556 |
Reinsurance (Ceding commissio_2
Reinsurance (Ceding commissions deferred) (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Ceded Commission Earned | $ 8,162,090 | ||
Expense Allowances | 14,559,705 | ||
Interest On Ceding Commissions | 249,490 | ||
Earned Ceding Commission | 490,049 | ||
Deferred Ceding Commission | 15,739,264 | $ 7,578,195 | $ 3,899,999 |
Ironbound Reinsurance Company Limited [Member] | |||
Ceded Commission Earned | 688,110 | ||
Expense Allowances | 690,169 | ||
Interest On Ceding Commissions | 165,607 | ||
Earned Ceding Commission | 316,889 | ||
Deferred Ceding Commission | 5,739,427 | 5,060,359 | |
SDA Annuity and Life Re | |||
Ceded Commission Earned | 1,356,473 | ||
Expense Allowances | 2,605,014 | ||
Interest On Ceding Commissions | 47,461 | ||
Earned Ceding Commission | 43,856 | ||
Deferred Ceding Commission | 2,071,427 | 1,076,267 | |
SRC2 | |||
Ceded Commission Earned | 3,837,996 | ||
Expense Allowances | 7,247,966 | ||
Interest On Ceding Commissions | 13,251 | ||
Earned Ceding Commission | 54,838 | ||
Deferred Ceding Commission | 4,310,407 | ||
US Alliance Life And Security Company Member | |||
Ceded Commission Earned | 2,279,511 | ||
Expense Allowances | 4,016,556 | ||
Interest On Ceding Commissions | 23,171 | ||
Earned Ceding Commission | 74,466 | ||
Deferred Ceding Commission | 822,393 | 858,675 | |
US Alliance Life and Security Company(3) | |||
Deferred Ceding Commission | 2,508,421 | ||
Unified Life Insurance Company [Member] | |||
Deferred Ceding Commission | $ 287,189 | $ 582,894 |
Reinsurance (Narrative) (Detail
Reinsurance (Narrative) (Details) - USD ($) | Jul. 23, 2020 | Apr. 15, 2020 | Apr. 01, 2020 | Mar. 20, 2020 | Mar. 11, 2020 | Mar. 10, 2020 | Mar. 01, 2020 | Nov. 09, 2019 | Nov. 07, 2019 | Jul. 25, 2019 | Jul. 01, 2018 | Mar. 31, 2020 | Jun. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 18, 2019 |
Amounts recoverable from reinsurers | $ 42,091,115 | $ 30,579,524 | $ 23,100,644 | |||||||||||||||
Unrealized gains (losses) | 2,875,489 | (2,291,413) | 1,306,795 | |||||||||||||||
Embedded derivative gains | 4,400,000 | |||||||||||||||||
Net premium income | 24 | $ (152) | (152) | 135,387 | ||||||||||||||
Net statutory reserves | $ 47,271,267 | |||||||||||||||||
Amount owned | $ 19,100,000 | |||||||||||||||||
Deferred coinsurance ceding commission | 8,161,069 | $ 2,821,255 | 3,678,196 | 2,944,572 | ||||||||||||||
Remaining deferred gain | 3,069,690 | |||||||||||||||||
COVID 19 | ||||||||||||||||||
Unrealized gains (losses) | 2,300,000 | |||||||||||||||||
Embedded derivative gains | 4,400,000 | |||||||||||||||||
Embedded derivative losses | 4,400,000 | |||||||||||||||||
FW, Modco Agreement | ||||||||||||||||||
Net premium income | 45,005,536 | |||||||||||||||||
Gross premiums income | 46,568,321 | |||||||||||||||||
Gross Commission paid | 1,562,786 | |||||||||||||||||
Net statutory reserves | 44,904,704 | |||||||||||||||||
Percentage of indemnity coinsurance | 0.00% | 30.00% | 95.00% | |||||||||||||||
Coinsurance ceding commission and administrative allowance | 4,734,926 | |||||||||||||||||
Coinsurance ceding commission earned | 4,843,120 | |||||||||||||||||
FW, Modco Agreement | Funds Withheld Account [Member] | ||||||||||||||||||
Initial settlement | 24,928,934 | |||||||||||||||||
Amount owned | 2,015,688 | |||||||||||||||||
Adjusted reserves cash | 26,944,622 | |||||||||||||||||
FW, Modco Agreement | Modco Deposit Account [Member] | ||||||||||||||||||
Initial settlement | 16,619,289 | |||||||||||||||||
Amount owned | 1,343,792 | |||||||||||||||||
Adjusted reserves cash | $ 17,963,081 | |||||||||||||||||
FW, Modco SDA Agreement | ||||||||||||||||||
Net premium income | $ 3,970,509 | $ 3,970,509 | ||||||||||||||||
Net statutory reserves | 3,986,411 | 3,986,411 | ||||||||||||||||
Coinsurance ceding commission deferred | 1,734,184 | |||||||||||||||||
Coinsurance ceding commission earned | $ 996,701 | |||||||||||||||||
FW, Modco SDA Agreement | Funds Withheld Account [Member] | ||||||||||||||||||
Initial settlement | 2,256,802 | 2,256,802 | ||||||||||||||||
Amount owned | 135,044 | 135,044 | ||||||||||||||||
Adjusted reserves cash | 2,391,847 | 2,391,847 | ||||||||||||||||
FW, Modco SDA Agreement | Modco Deposit Account [Member] | ||||||||||||||||||
Initial settlement | 1,504,535 | 1,504,535 | ||||||||||||||||
Amount owned | 90,029 | 90,029 | ||||||||||||||||
Adjusted reserves cash | $ 1,594,564 | $ 1,594,564 | ||||||||||||||||
US Alliance Agreement | ||||||||||||||||||
Net premium income | $ 13,542,325 | |||||||||||||||||
Net statutory reserves | 14,706,862 | |||||||||||||||||
US Alliance Agreement | Funds Withheld Account [Member] | ||||||||||||||||||
Initial settlement | 12,729,785 | |||||||||||||||||
Seneca Re Agreement | MYGA | Subsequent Event | ||||||||||||||||||
Percentage of indemnity coinsurance | 25.00% | |||||||||||||||||
Seneca Re Agreement | FIA | Subsequent Event | ||||||||||||||||||
Percentage of indemnity coinsurance | 40.00% | |||||||||||||||||
American Life [Member] | ||||||||||||||||||
Percentage of indemnity coinsurance | 79.00% | |||||||||||||||||
American Life amortized amount | $ 2,410,054 | |||||||||||||||||
Unified Life Insurance Company [Member] | ||||||||||||||||||
Transferred risk insurance company | 100.00% | |||||||||||||||||
Amount transferred for reinsurance | $ 19,311,616 | |||||||||||||||||
Adjusted reserves cash | 14,320,817 | |||||||||||||||||
Percentage of indemnity coinsurance | 79.00% | |||||||||||||||||
Coinsurance ceding commission deferred | $ 582,894 | |||||||||||||||||
Remaining DAC | 1,890,013 | |||||||||||||||||
Remaining deferred gain | 26,896 | |||||||||||||||||
Value of business acquired | 338,536 | |||||||||||||||||
Unified Life Insurance Company [Member] | FW, Modco Agreement | ||||||||||||||||||
Deferred coinsurance ceding commission | $ 3,500,000 | 3,500,000 | ||||||||||||||||
Ironbound Reinsurance Company Limited [Member] | ||||||||||||||||||
Amounts recoverable from reinsurers | 4,141,644 | 4,213,699 | ||||||||||||||||
Amount to cede | 4,213,699 | |||||||||||||||||
Optimum Reinsurance Company [Member] | ||||||||||||||||||
Amounts recoverable from reinsurers | 524,701 | 489,770 | ||||||||||||||||
Sagicor Life Insurance Company [Member] | ||||||||||||||||||
Amounts recoverable from reinsurers | 11,004,042 | 11,208,227 | 11,494,161 | |||||||||||||||
SDA Annuity and Life Re | ||||||||||||||||||
Amounts recoverable from reinsurers | $ 4,094,584 | 2,506,911 | ||||||||||||||||
Amount to cede | $ 2,506,991 | |||||||||||||||||
SDA Annuity and Life Re | FW, Modco SDA Agreement | MYGA | ||||||||||||||||||
Percentage of indemnity coinsurance | 5.00% | |||||||||||||||||
SDA Annuity and Life Re | FW, Modco SDA Agreement | FIA | ||||||||||||||||||
Percentage of indemnity coinsurance | 5.00% | 30.00% | 95.00% | |||||||||||||||
American Life and Security National Life Insurance [Member] | ||||||||||||||||||
Deferred loss | $ 154,780 | |||||||||||||||||
Amount to cede | 2,543,898 | |||||||||||||||||
American Life and Security National Life Insurance [Member] | US Alliance Agreement | ||||||||||||||||||
Initial settlement | 5,000,000 | |||||||||||||||||
US Alliance Life And Security Company Member | ||||||||||||||||||
Amounts recoverable from reinsurers | $ 17,217,236 | 12,160,917 | ||||||||||||||||
Amount to cede | $ 12,160,917 | $ 11,149,888 | ||||||||||||||||
US Alliance Life And Security Company Member | US Alliance Agreement | ||||||||||||||||||
Initial settlement | $ 812,539 | |||||||||||||||||
US Alliance Life And Security Company Member | US Alliance Agreement | MYGA | ||||||||||||||||||
Percentage of indemnity coinsurance | 25.00% | 66.50% | 45.50% | |||||||||||||||
US Alliance Life And Security Company Member | US Alliance Agreement | FIA | ||||||||||||||||||
Percentage of indemnity coinsurance | 40.00% | 49.00% |
Notes Payable (Narrative) (Deta
Notes Payable (Narrative) (Details) | May 09, 2018USD ($)item | Dec. 31, 2018USD ($)$ / shares | Sep. 30, 2020USD ($) | Jun. 18, 2019USD ($) |
Vespoint LLC | Xenith | ||||
Ownership (as a percent) | 100.00% | |||
Xenith | ||||
Proceeds From Issuance of Debt | $ 600,000 | |||
Debt term | 10 years | |||
Debt instrument, stated interest rate (as a percent) | 8.00% | |||
Additional per annum interest due at maturity (as a percent) | 4.00% | |||
Number of notes | item | 2 | |||
Accrued interest | $ 845,536 | |||
Debt issuance costs | $ 161,000 | |||
Notes outstanding | $ 0 | |||
Xenith | Note One [Member] | ||||
Proceeds From Issuance of Debt | 500,000 | |||
Xenith | Note Two [Member] | ||||
Proceeds From Issuance of Debt | $ 100,000 | |||
Xenith | Additional Loan [Member] | ||||
Proceeds From Issuance of Debt | $ 18,500,000 | |||
Conversion price | $ / shares | $ 10.29 | |||
Xenith | Additional Loan [Member] | Maximum | ||||
Borrowing capacity | $ 23,500,000 |
Notes Payable (Summary of Infor
Notes Payable (Summary of Information Regarding Loans) (Details) | Jun. 18, 2019USD ($)shares |
Loan Principal Amount | $ | $ 19,100,000 |
Shares of Common Stock into which Loan Were Converted | shares | 1,855,361 |
June 28, 2018 [Member] | |
Loan Principal Amount | $ | $ 500,000 |
Shares of Common Stock into which Loan Were Converted | shares | 48,570 |
June 28, 2018 [Member] | |
Loan Principal Amount | $ | $ 100,000 |
Shares of Common Stock into which Loan Were Converted | shares | 9,714 |
October 10, 2018 [Member] | |
Loan Principal Amount | $ | $ 1,000,000 |
Shares of Common Stock into which Loan Were Converted | shares | 97,139 |
December 7, 2018 [Member] | |
Loan Principal Amount | $ | $ 17,500,000 |
Shares of Common Stock into which Loan Were Converted | shares | 1,699,938 |
Long-Term Incentive Plan (Detai
Long-Term Incentive Plan (Details) | Sep. 13, 2020$ / sharesshares | Jul. 21, 2020USD ($)$ / sharesshares | May 01, 2020directorOptions | Jul. 19, 2019$ / sharesshares | Sep. 30, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)shares |
Share based compensation | $ | $ 29,805 | $ 21,745 | ||||
Stock Options | ||||||
Grants, weighted average exercise price (in dollars per share) | $ / shares | $ 25 | $ 25 | $ 25 | |||
Grant date fair value (in dollars per share) | $ / shares | $ 14.50 | $ 8 | ||||
Consideration | $ | $ 333,500 | $ 143,200 | ||||
Time to maturity | 10 years | 10 years | ||||
Risk free interest rate (as a percent) | 0.55% | 1.84% | ||||
Volatility rate (as a percent) | 60.00% | 200.00% | ||||
Share based compensation | $ | $ 54,827 | $ 21,745 | ||||
Number of stock options | Options | 200 | |||||
Number of directors | director | 2 | |||||
Schedule of remaining non-vested shares | ||||||
Granted (in shares) | 6,667 | 26,300 | ||||
Minimum | Stock Options | ||||||
Vesting period | 2 years | |||||
Maximum | Stock Options | ||||||
Vesting period | 4 years | |||||
2019 LTIP | Stock Options | ||||||
Grants, weighted average exercise price (in dollars per share) | $ / shares | $ 25 | |||||
Grant date fair value (in dollars per share) | $ / shares | $ 8 | |||||
Schedule of remaining non-vested shares | ||||||
Non-vested at beginning | 17,900 | 17,900 | ||||
Granted (in shares) | 17,900 | |||||
Non-vested at ending | 17,900 | |||||
2020 LTIP | Stock Options | ||||||
Schedule of remaining non-vested shares | ||||||
Non-vested at beginning | 17,900 | |||||
Granted (in shares) | 32,967 | |||||
Forfeited (in shares) | (3,350) | |||||
Vested (in shares) | (200) | |||||
Non-vested at ending | 47,317 | 17,900 |
Deposit-Type Contracts (Details
Deposit-Type Contracts (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Beginning balance | $ 171,168,785 | $ 7,234,927 | $ 8,314,297 |
US Alliance | 547,193 | 657,986 | 804,187 |
Commutation of assumption agreement | (1,881,411) | ||
Deposit contract | 279,537,157 | 161,392,700 | |
Ironbound Reinsurance Company Limited | 1,839,551 | ||
Deposits received | 161,392,700 | 650 | |
Investment earnings (includes embedded derivative) | 5,910,237 | 2,043,762 | |
Investment earnings (includes MVA adjustment and embedded derivative) | 9,271 | 47,936 | |
Withdrawals | (1,718,288) | (160,590) | (50,732) |
Contract charges | (15,700) | ||
Ending balance | $ 455,429,384 | 171,168,785 | $ 7,234,927 |
SDA Annuity and Life Re | |||
Investment earnings (includes MVA adjustment and embedded derivative) | $ 194,940 |
Leases (Schedule of Supplementa
Leases (Schedule of Supplemental Balance Sheet Information Related to Leases) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Noncurrent: | |||
Finance lease (Office and other equipment, net of accumulated depreciation and amortization) | $ 2,913 | $ 14,564 | |
Operating lease right-of-use assets | $ 378,682 | 470,132 | 592,065 |
Total leased assets | 378,682 | 473,045 | 606,629 |
Current: | |||
Finance lease | 1,860 | 9,299 | |
Noncurrent: | |||
Operating lease | 428,851 | 524,248 | 646,519 |
Total leased liabilities | $ 428,851 | $ 526,108 | $ 655,818 |
Leases (Schedule of Components
Leases (Schedule of Components of Leases Expenses) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Leases | ||||
Operating lease cost (General and administrative expense) | $ 6,654 | $ 10,453 | $ 13,797 | $ 16,810 |
Finance lease cost: | ||||
Amortization of right of use assets | 2,913 | 8,739 | 11,651 | 4,481 |
Interest on lease liabilities | $ 111 | $ 333 | $ 444 | $ 444 |
Leases (Schedule of Finance and
Leases (Schedule of Finance and Operating Leases Mature) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Operating Leases | ||
2020 (excluding nine months ended September 30,2020) | $ 40,345 | $ 160,958 |
2021 | 164,081 | 164,081 |
2022 | 156,608 | 156,608 |
2023 | 161,674 | 161,674 |
2024 | 13,508 | 13,508 |
Total remaining lease payments | $ 536,216 | 656,829 |
Finance Lease | ||
2020 (excluding year ended December 31, 2019) | 2,133 | |
Total remaining lease payments | $ 2,133 |
Leases (Schedule of Supplemen_2
Leases (Schedule of Supplemental Cash Flow Information Related to Leases) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash payments | ||||
Operating cash flows from operating leases | $ (1,035) | $ (148) | $ (337) | $ 4,306 |
Operating cash flows from finance leases | 4,657 | 2,328 | 4,657 | (2,514) |
Financing cash flows from finance leases | $ (111) | $ (333) | $ (444) | $ (444) |
Leases (Schedule of Weighted Av
Leases (Schedule of Weighted Average Lease Term And Discount Rate) (Details) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Leases | |||
Weighted Average Remaining Term - Finance lease | 0 months | 3 months | 15 months |
Weighted Average Remaining Term - Operating lease | 1 year 8 months 12 days | 2 years 6 months | 3 years 6 months |
Weighted Average Discount Rate - Finance lease | 0.00% | 6.00% | |
Weighted Average Discount Rate - Operating lease | 8.00% | 8.00% | 8.00% |
Leases (Narrative) (Details)
Leases (Narrative) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Leases | |||
Adjustment finance lease | $ 5,266 | ||
Adjustment operating lease | $ 54,454 | ||
Weighted Average Remaining Term - Finance lease | 0 months | 3 months | 15 months |
Weighted Average Remaining Term - Operating lease | 1 year 8 months 12 days | 2 years 6 months | 3 years 6 months |
Weighted Average Discount Rate - Finance lease | 0.00% | 6.00% | |
Weighted Average Discount Rate - Operating lease | 8.00% | 8.00% | 8.00% |
Statutory Net Income and Surp_2
Statutory Net Income and Surplus (Details) - American Life and Security Corporation - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Capital and Surplus | $ 20,033,157 | $ 20,979,285 | ||
Nebraska Department of Insurance | ||||
Statutory Net Loss | $ 4,541,349 | $ (149,247) | 1,843,725 | $ (4,283,351) |
Capital and Surplus | 27,350,123 | 19,507,325 | ||
Nebraska Department of Insurance | Multi Year Guaranteed Annuity | ||||
Annuity sales | 86,502,950 | $ 79,500,172 | 145,747,737 | |
Annuity sales pending | 9,568,290 | |||
Nebraska Department of Insurance | Fixed Index Annuity | ||||
Annuity sales | $ 193,034,208 | 15,616,831 | ||
Annuity sales pending | $ 2,571,687 |
Surplus Notes - Narrative (Deta
Surplus Notes - Narrative (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Face Amount | $ 876,400 |
Book value of condominiums | 493,648 |
Gain on settlement of transaction | $ 382,752 |
Surplus Notes One | |
Maturity Date | Aug. 1, 2016 |
Face Amount | $ 300,000 |
Surplus Notes Two | |
Maturity Date | Sep. 1, 2016 |
Face Amount | $ 250,000 |
Third Party Administration (Det
Third Party Administration (Details) - TPA - USD ($) | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | |||
Amount of transaction | $ 48,300 | $ 89,240 | |
Reinsurance transactions | $ 90,796 |
Reverse Stock Split (Details)
Reverse Stock Split (Details) | Aug. 10, 2020USD ($)$ / sharesshares | Sep. 30, 2020$ / sharesshares | Dec. 31, 2019$ / sharesshares | Dec. 31, 2018$ / sharesshares |
Common stock, shares authorized | 20,000,000 | |||
Common stock par value | $ / shares | $ 0.001 | |||
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 | ||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | |||
Common stock, shares outstanding (in shares) | 45,746 | |||
Reverse stock split ratio | 1 | |||
Value of fractional shares paid | $ | $ 175,000 | |||
Voting Common Stock Member | ||||
Common stock, shares authorized | 22,000,000 | 20,000,000 | 20,000,000 | 20,000,000 |
Voting common stock | 20,000,000 | |||
Common stock par value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares issued (in shares) | 500 | 2,718,967 | 2,042,670 | 41,601 |
Common stock, shares outstanding (in shares) | 500 | 2,718,967 | 2,042,670 | 41,601 |
Non-voting common shares | ||||
Common stock, shares authorized | 2,000,000 | |||
Common stock par value | $ / shares | $ 0.001 | |||
Non- voting common stock | 2,000,000 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | Nov. 04, 2020USD ($) |
Subsequent Event | |
Subsequent Event [Line Items] | |
Capital contribution | $ 4.5 |