Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 01, 2021 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Entity Registrant Name | MIDWEST HOLDING INC. | |
Title of 12(b) Security | Voting Common Stock, $0.001 par value | |
Trading Symbol | MDWT | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 3,737,564 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000355379 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Assets | ||
Investments, available for sale, at fair value fixed maturities (amortized cost: $526,229,389 and $369,156,068, respectively) (See Note 4) | $ 493,069,034 | $ 377,163,358 |
Mortgage loans on real estate, held for investment | 109,776,321 | 94,989,970 |
Derivative instruments (See Note 5) | 9,473,398 | 11,361,034 |
Equity securities | 42,093,166 | |
Other invested assets | 25,606,108 | 21,897,130 |
Investment escrow | 3,317,043 | 3,174,047 |
Preferred stock | 4,300,591 | 3,897,980 |
Notes receivable | 5,737,608 | 5,665,487 |
Policy loans | 48,551 | 45,573 |
Total investments | 693,421,820 | 518,194,579 |
Cash and cash equivalents | 100,927,152 | 151,679,274 |
Deferred acquisition costs, net | 19,676,745 | 13,456,303 |
Premiums receivable | 313,115 | 313,601 |
Accrued investment income | 9,095,093 | 6,806,836 |
Reinsurance recoverables (See Note 9) | 38,715,577 | 32,146,042 |
Intangible assets | 700,000 | 700,000 |
Property and equipment, net | 101,980 | 103,964 |
Operating lease right of use assets | 317,715 | 348,198 |
Other assets | 1,799,371 | 1,533,179 |
Assets associated with business held for sale (See Note 2) | 1,122,481 | 1,118,783 |
Total assets | 866,191,049 | 726,400,759 |
Liabilities: | ||
Benefit reserves | 12,784,452 | 12,775,773 |
Policy claims | 164,377 | 161,703 |
Deposit-type contracts (See note 11) | 714,300,232 | 597,868,472 |
Advance premiums | 3,111 | 2,541 |
Deferred gain on coinsurance transactions | 20,596,683 | 18,198,757 |
Lease liabilities (See Note 13): | ||
Operating lease | 364,128 | 396,911 |
Other liabilities | 31,230,201 | 9,552,791 |
Liabilities associated with business held for sale (See Note 2) | 1,115,682 | 1,114,312 |
Total liabilities | 780,558,866 | 640,071,260 |
Contingencies and Commitments (See Note 12) | ||
Stockholders’ Equity: | ||
Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and outstanding as of March 31, 2021 or December 31, 2020 | ||
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,737,564 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively; non-voting common stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding March 31, 2021 and December 31, 2020, respectively | 3,738 | 3,738 |
Additional paid-in capital | 133,853,945 | 133,592,605 |
Treasury stock | (175,333) | (175,333) |
Accumulated deficit | (55,122,540) | (53,522,078) |
Accumulated other comprehensive income | 7,072,373 | 6,430,567 |
Total Midwest Holding Inc.'s stockholders' equity | 85,632,183 | 86,329,499 |
Total stockholders' equity | 85,632,183 | 86,329,499 |
Total liabilities and stockholders' equity | $ 866,191,049 | $ 726,400,759 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Assets | ||
Cost or Amortized Cost | $ 484,140,375 | $ 369,156,068 |
Stockholders' Equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 3,737,564 | 3,737,564 |
Common stock, shares outstanding | 3,737,564 | 3,737,564 |
Non Voting Common Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Non Voting Common Stock, Shares Authorized | 2,000,000 | 2,000,000 |
Non Voting Common Stock, Shares Issued | 0 | 0 |
Non Voting Common Stock, Shares Outstanding | 0 | 0 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues | ||
Premiums | $ 21 | |
Investment income, net of expenses | 2,887,363 | 1,240,978 |
Net realized (loss) gains on investments (See Note 4) | (4,649,105) | 22,600,010 |
Amortization of deferred gain on reinsurance | 460,856 | 182,438 |
Service fee revenue, net of expenses | 438,146 | 380,267 |
Other revenue | 248,969 | 9,777 |
Total (loss) revenue | (613,771) | 24,413,491 |
Expenses | ||
Interest credited | (2,346,403) | 211,202 |
Benefits | 79 | (7,103) |
Amortization of deferred acquisition costs | 502,737 | 40,509 |
Salaries and benefits | 2,927,227 | 824,896 |
Other operating expenses | (1,529,297) | 1,325,113 |
Total expenses | (445,657) | 2,394,617 |
(Loss) income continuing from operations before taxes | (168,114) | 22,018,874 |
Income tax expense (See Note 8) | (1,432,348) | (407,916) |
Net (loss) income from continued operations | (1,600,462) | 21,610,958 |
Less: (Loss) income attributable to noncontrolling interest | (62,500) | |
Net (loss) income attributable to Midwest Holding, Inc. | (1,600,462) | 21,548,458 |
Comprehensive income (loss): | ||
Unrealized gains (losses) on investments arising during period, net of offsets, net of tax ($180,885 and $961,012 respectively) | 962,880 | (4,170,973) |
Unrealized losses on foreign currency | (405,275) | |
Less: Reclassification adjustment for net realized gains on investments, net of tax ($85,348 and $4.7 million, respectively) | (321,074) | (22,600,010) |
Other comprehensive income (loss) | 641,806 | (27,176,258) |
Comprehensive loss | $ (958,656) | $ (5,627,800) |
Earnings (loss) income per common share | ||
Basic | $ (0.43) | $ 10.55 |
Diluted | $ (0.43) | $ 10.43 |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||
Unrealized gains (losses) on investments arising during period, net of tax | $ 180,885 | $ 961,012 |
Reclassification adjustment for net realized gains on investments, net of tax | $ 85,348 | $ 4,700,000 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Treasury Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | AOCI | Noncontrolling Interest. | Total |
Balance at Dec. 31, 2019 | $ 2,042 | $ 54,494,355 | $ (41,081,710) | $ 619,584 | $ 124,477 | $ 14,158,748 | |
Net loss | (12,440,368) | (12,440,368) | |||||
Capital raise, net of $5,914,995 related expenses | 1,696 | 79,310,109 | 79,311,805 | ||||
Reverse stock split fractions retired | $ (175,333) | (175,333) | |||||
Employee stock options | 163,664 | 163,664 | |||||
Purchase of remaining 49% of 1505 Capital LLC | (375,523) | $ (124,477) | (500,000) | ||||
Unrealized gains on investments, net of taxes | 5,957,168 | 5,957,168 | |||||
Unrealized losses on foreign currency, net of taxes | (146,185) | (146,185) | |||||
Balance at Dec. 31, 2020 | (175,333) | 3,738 | 133,592,605 | (53,522,078) | 6,430,567 | 86,329,499 | |
Net loss | (1,600,462) | (1,600,462) | |||||
Reverse stock split fractions retired | (4,500) | ||||||
Employee stock options | 261,340 | 261,340 | |||||
Unrealized gains on investments, net of taxes | 641,806 | 641,806 | |||||
Balance at Mar. 31, 2021 | $ (175,333) | $ 3,738 | $ 133,853,945 | $ (55,122,540) | $ 7,072,373 | $ 85,632,183 |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Issuance costs | $ 5,914,995 |
1505 Capital LLC | |
Ownership percentage acquired | 49.00% |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Cash Flows from Operating Activities: | |||
Net (loss) income attributable to Midwest Holding, Inc. | $ (1,600,462) | $ 21,548,458 | |
Adjustments to arrive at cash provided by operating activities: | |||
Net premium and discount on investments | (279,584) | 37,978 | |
Depreciation and amortization | 13,567 | 15,321 | |
Stock options | 261,340 | 11,934 | $ 163,664 |
Net transfers to noncontrolling interest | 62,500 | ||
Amortization of deferred acquisition costs | 502,737 | 40,509 | |
Deferred acquisition costs capitalized | (6,774,293) | (1,483,941) | |
Net realized (gains) losses on investments | 4,649,105 | (22,600,010) | |
Deferred coinsurance ceding commission | 2,397,926 | 1,033,940 | |
Changes in operating assets and liabilities: | |||
Reinsurance recoverables | (6,164,935) | 2,617,495 | |
Interest and dividends due and accrued | (2,288,257) | (1,052,329) | |
Premiums receivable | 486 | 5,599 | |
Policy liabilities | (4,305,256) | 1,699,134 | |
Other assets and liabilities | 21,408,109 | 379,158 | |
Other assets and liabilities - discontinued operations | (2,328) | 703 | |
Net cash provided by operating activities | 7,818,155 | 2,316,449 | |
Securities available for sale: | |||
Purchases | (176,433,779) | (39,723,572) | |
Proceeds from sale or maturity | 61,831,341 | 3,852,943 | |
Mortgage loans on real estate, held for investment purchases | |||
Purchases | (16,446,861) | (33,342,545) | |
Proceeds from sale | 1,660,510 | 2,069,950 | |
Derivatives | |||
Purchases | (4,157,582) | (651,661) | |
Proceeds from sale | 660,355 | ||
Other invested assets | |||
Purchases | (5,159,712) | (2,715,965) | |
Proceeds from sale | 1,307,738 | 2,388,560 | |
Preferred stock | (474,732) | ||
Net change in policy loans | (2,978) | (22,720) | |
Net purchases of property and equipment | (10,350) | (8,998) | |
Net cash used in investing activities | (179,319,216) | (68,154,008) | |
Cash Flows from Financing Activities: | |||
Finance lease | (111) | ||
Receipts on deposit-type contracts | 123,653,931 | 47,815,010 | |
Withdrawals on deposit-type contracts | (2,904,992) | (186,689) | |
Net cash provided by financing activities | 120,748,939 | 47,628,210 | |
Net increase in cash and cash equivalents | (50,752,122) | (18,209,349) | |
Cash and cash equivalents: | |||
Beginning | 151,679,274 | 43,716,205 | 43,716,205 |
Ending | $ 100,927,152 | $ 25,506,856 | $ 151,679,274 |
Nature of Operations and Basis
Nature of Operations and Basis of Presentation | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Nature of Operations and Basis of Presentation | Note 1. Nature of Operations and Basis of Presentation 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”), and 1505 Capital LLC (“1505 Capital”) as well as 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 21 states and the District of Columbia. 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 May 13, 2020, Seneca Re established Seneca Protected Cell 2020-01, a protected cell of Seneca Re (“SRC1”). Effective December 21, 2020, Seneca Re converted SRC1 to Seneca Incorporated Cell, LLC 2020-01. Midwest contributed $3,000,000 to capitalize SRC1. Crestline Management, L.P. (“Crestline Management”), a Delaware limited partnership, through an affiliated entity (see below) owns approximately 11.9% of Midwest’s voting common stock. On July 24, 2020, the Nebraska Department of Insurance (“NDOI”) issued its non-disapproval of the Funds Withheld Coinsurance and Modified Coinsurance Agreement with Seneca Incorporated Cell, LLC 2020-02 (“SRC2”) of Seneca Re, now known as Crestline Re SP1. Effective December 8, 2020, American Life entered into a novation agreement with SRC2 and Crestline Re SPC, an exempted segregated portfolio company incorporated under the laws of the Cayman Islands, for and on behalf of Crestline Re SP1, a segregated portfolio company of Crestline Re SPC, under which the above-described reinsurance, trust and related asset management agreements were novated and replaced with substantially similar agreements entered into by American Life and Crestline Re SP1. On April 24, 2020, Midwest entered into a Securities Purchase Agreement with Crestline Assurance Holdings LLC, a Delaware limited liability company (“Crestline Assurance”) Xenith, and Vespoint, and Pursuant to the Agreement, Crestline Assurance 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 agreement, the Company contributed $5.0 million to American Life. Also, effective April 24, 2020, American life entered into a Master Letter Agreement with Seneca Re and Crestline Management regarding a flow of annuity reinsurance and related asset management, whereby Crestline Management agreed to provide reinsurance 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. In December 2020, the Company completed a public offering of its voting common stock for gross proceeds of $70,000,000 (see Note 17). In connection therewith, the Company's voting common stock was approved for listing and began trading on the Nasdaq Capital Market upon the closing of the public offering. 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 May 13, 2020, with SRC1. 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 MYGA, a FIA, and two bonus plans associated with the FIA product. It is not presently offering any traditional life insurance products. Basis of Presentation These consolidated financial statements for the three months ended March 31, 2021 and 2020 and year ended December 31, 2020 have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). 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 unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and noted thereto for the year ended December 31, 2020 included in the Company’s annual report on Form 10-K. 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. Premiums and discounts on fixed maturity debt instruments 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 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 impairment is bifurcated. The Company recognizes the credit loss portion as realized losses and the noncredit loss portion in accumulated other comprehensive loss. The credit component of 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 had no impairment recognized as of March 31, 2021. As of year-ended December 31, 2020, the Company analyzed the securities portfolio and determined that an impairment of approximately $35,000 should be recorded for one security, an impairment of $500,000 was recognized on a preferred stock, and a valuation allowance of $776,973 established on one lease. The valuation allowance on the lease of $776,973 was released as of March 31, 2021 due to the sale of the investment. The remaining investments were not impaired as of December 31, 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 along with the amortization of premiums and discounts. Certain available-for-sale 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 reinsurers 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 Statements of Comprehensive Loss. 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 for the as of March 31, 2021 or as of December 31, 2020, respectively. Investment escrow The Company held in escrow $3,317,043 and $3,174,047 as of March 31, 2021 and of December 31, 2020, respectively. The cash was used to settle other invested assets that closed in April 2021 and January 2021, respectively. Other invested assets The Company purchases and sells equipment leases in its investment portfolio. Other invested assets also includes loans held for investments. The Company entered into a fund investment on November 3,2020 for $15.8 million with an additional $3.9 million invested on December 16, 2020. At December 31, 2020, we had a $19.7 million investment in the fund. Effective January of 2021, this investment was repackaged into a special purpose vehicle between American Life and PF Collinwood Holdings, LLC (“PFC”) with American Life owning 100% of the entity. Subsequent to the repackaging of the fund investment into the special purpose vehicle, the classification of the investment remains in other invested assets. 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. During the last quarter of 2020, the Company began investing in foreign currency futures to hedge the fluctuations in the foreign currency. The formal documentation and hedge effectiveness was also not completed at the date we entered into those futures contracts; therefore, they do not qualify for hedge accounting. The futures fair market values were recorded on our Consolidated Statements of Comprehensive Loss as realized gains or (losses). Additionally, reinsurance agreements written on a funds withheld or Modco 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 Consolidated Statements of Comprehensive Loss. Equity Securities Equity securities at March 31, 2021 and 2020 consist of mutual funds. Equity securities are carried at fair value with the change in fair value recorded through realized gains and losses on the statement of operations. 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 impaired the full amount of $500,000 as of December 31, 2020. This was recorded as a reduction of the asset on the Consolidated Balance Sheets and a bad debt expense on the Consolidated Statements of Comprehensive Loss. There was no additional impairment of this preferred stock as of March 31, 2021. The Company authorized a series of transactions between American Life and Ascona Group Holdings Ltd (“AGH”). One of the transactions involved the acquisition of Pound Sterling (“GBP”) 3,345,022 of preferred equity in Ascona Group Holdings Limited (“the Preferred Equity”) along with warrants bearing no initial assigned value (the “Warrants” as of September 28, 2020. American Life initially created a special purpose vehicle called Ascona Asset Holding LLC (“AAH”) to hold the Preferred Equity and Warrants, and later created Ascona Collinwood HoldCo LLC (“ACH”) to be the sole member of AAH. American Life and Crestline Re SP1 own 74% and 26%, respectively, of ACH. Notes receivable The Company held in notes receivable as of March 31, 2021 and December 31, 2020, a note of $5,737,608 and $5,665,487, respectively, 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. As of March 31, 2021 and December 31, 2020, the Company held approximately GBP 47,621 and GBP 505,349 in several of our custody accounts, respectively. The USD equivalent held was approximately $65,703 and $690,787, respectively. As of March 31, 2021 and December 31, 2020, the Company held approximately EUR 527,981 and 87,633, respectively. The USD equivalent held was approximately $620,536 and $107,000, respectively. As of March 31, 2021 and December 31, 2020, we had realized losses of approximately $75,000 and gains of approximately $45,000, respectively, related to the change in the foreign currency exchange rate of the GBP and Euro that were recorded in realized (losses) gains on investments in the Consolidated Statements of Comprehensive Loss. The Company had money market investments of approximately $61.2 million and $100.6 million at March 31, 2021 and December 31, 2020, respectively. 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 determined that no events occurred in the three months ended March 31, 2021 that suggest a review should be undertaken. The Company performed a recoverability analysis during the fourth quarter of 2020 and determined that all DAC balances were recoverable as of December 31, 2020. 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 $12,334 and $10,316 for the three months ended March 31, 2021 and 2020, respectively. Accumulated depreciation totaled $1,035,668 and $1,023,334 as of March 31, 2021 and December 31, 2020, 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 three months ended March 31, 2021 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 allowances established as of March 31, 2021 or December 31, 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 8 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 become insolvent or are 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 December 31, 2020, Seneca Re has one incorporated cell, Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) which was consolidated in our financial statements. Effective December 8, 2020, American Life entered into a novation agreement with SRC2 and Crestline Re SPC, an exempted segregated portfolio company incorporated under the laws of the Cayman Islands, for and on behalf of Crestline Re SP1, an exempted segregated portfolio company of Crestline Re SPC, under which the above-described reinsurance, trust and related asset management agreements were novated and replaced with substantially similar agreements entered into by American Life and Crestline Re SP1. 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 requires 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 in 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 reinsurers, 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 5 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 gains of approximately $2.5 million and $2.9 million as of March 31, 2021 and December 31, 2020, respectively. The terms of the contracts with the third-party reinsurers provide that unrealized gains on the portfolios accrue to the third-party reinsurers. Accordingly, the unrealized gains on the assets held by American Life were offset by a gain in the embedded derivative of $400,000 and a loss $2.9 million as of March 31, 2021 and December 31, 2020, respectively. We account for this unrealized loss pass-through by recording equivalent realized losses on our Consolidated Statements of Comprehensive Loss and in amount payable to our third-party reinsurers on the Consolidated Balance Sheets. 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. 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 2016. 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 from ceding commissions on traditional life and annuity products are deferred on the Consolidated Balance Sheets and amortized over the life of the policies. 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. Revenues on service fees and third-party administration fees are recorded as income when incurred. Comprehensive loss Comprehensive 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 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 are owned by the third-party reinsurers, t |
Assets and Liabilities Associat
Assets and Liabilities Associated with Business Held for Sale | 3 Months Ended |
Mar. 31, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Assets and Liabilities Associated with Business Held for Sale | Note 2. Assets and Liabilities Associated with Business 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”), an unaffiliated Texas domiciled stock insurance company. The Reinsurance Agreement provides that American Life will cede and Unified will agree 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 (“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 March 31, 2021 and 2020, 90% and 81%, respectively, of the indemnity policies were converted to assumptive policies thereby releasing American Life from all of 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 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 is recognized in our Consolidated Statements of Comprehensive Loss as of March 31, 2021 and 2020 were $7,628 and $67,451, respectively. Our Consolidated Balance Sheets were required to be restated under GAAP 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 March 31, 2021 and as of December 31, 2020: As of March 31, As of December 31, 2021 2020 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 33,614 $ 33,161 Reinsurance recoverables 1,057,488 1,061,979 Premiums receivable 31,379 23,643 Total assets held for sale in the Consolidated Balance Sheets $ 1,122,481 $ 1,118,783 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 600,534 $ 594,710 Policy claims 24,029 35,302 Deposit-type contracts 489,166 482,966 Advance premiums 335 71 Accounts payable and accrued expenses 1,618 1,263 Total liabilities held for sale in the Consolidated Balance Sheets $ 1,115,682 $ 1,114,312 |
Non-controlling Interest
Non-controlling Interest | 3 Months Ended |
Mar. 31, 2021 | |
Noncontrolling Interest [Abstract] | |
Non-controlling Interest | Note 3. 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 $1.00 its 51% ownership and on June 15, 2020, purchased the remaining 49% ownership in 1505 Capital for $500,000. As of March 31, 2021 we had no noncontrolling interest and as of March 31, 2020, the non-controlling interest was carried at $186,977, respectively. |
Investments
Investments | 3 Months Ended |
Mar. 31, 2021 | |
Marketable Securities [Abstract] | |
Investments | Note 4. Investments The amortized cost and estimated fair value of investments as of March 31, 2021 and December 31, 2020 were as follows: Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value March 31, 2021: Fixed maturities: U.S. government obligations $ 2,050,526 $ 72,518 $ 3,941 $ 2,119,103 Foreign governments 1,601,810 — 59,622 1,542,188 Mortgage-backed securities 25,177,296 801,599 150,316 25,828,579 Collateralized loan obligations 294,652,723 7,445,031 836,415 301,261,339 States and political subdivisions -- general obligations 106,228 11,102 — 117,330 States and political subdivisions -- special revenue 5,288,295 839,535 4,703 6,123,127 Trust preferred 2,218,142 — 65,604 2,152,538 Corporate 153,045,355 1,350,165 470,690 153,924,830 Total fixed maturities $ 484,140,375 $ 10,519,950 $ 1,591,291 $ 493,069,034 Mortgage loans on real estate, held for investment 109,776,321 — — 109,776,321 Derivatives 12,582,719 2,021,763 5,131,084 9,473,398 Equity securities 42,089,014 4,152 — 42,093,166 Other invested assets 25,606,108 — — 25,606,108 Investment escrow 3,317,043 — — 3,317,043 Preferred stock 4,300,591 — — 4,300,591 Notes receivable 5,737,608 — — 5,737,608 Policy loans 48,551 — — 48,551 Total investments $ 687,598,330 $ 12,545,865 $ 6,722,375 $ 693,421,820 December 31, 2020: Fixed maturities: U.S. government obligations 5,744,221 $ 426,427 $ 5,665 6,164,983 Mortgage-backed securities 14,638,299 276,219 157,104 14,757,414 Asset-backed securities 216,500,672 5,623,083 350,146 221,773,609 States and political subdivisions -- general obligations 106,528 10,802 — 117,330 States and political subdivisions -- special revenue 5,293,365 908,986 147 6,202,204 Trust preferred 2,218,142 66,674 — 2,284,816 Corporate 124,654,841 1,379,513 171,352 125,863,002 Total fixed maturities 369,156,068 8,691,704 684,414 377,163,358 Mortgage loans on real estate, held for investment 94,989,970 — — 94,989,970 Derivatives 8,532,252 3,257,069 428,287 11,361,034 Other invested assets 21,897,130 — — 21,897,130 Investment escrow 3,174,047 — — 3,174,047 Preferred stock 3,897,980 — — 3,897,980 Notes receivable 5,665,487 — — 5,665,487 Policy loans 45,573 — — 45,573 Total investments $ 507,358,507 $ 11,948,773 $ 1,112,701 $ 518,194,579 The following table shows the distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of March 31, 2021 and December 31, 2020. March 31, 2021 December 31, 2020 Carrying Carrying Value Percent Value Percent AAA and U.S. Government $ 16,259,820 3.3 % $ 3,070,750 0.8 % AA 60,286,560 12.2 5,818,163 1.5 A 8,295,924 1.7 49,445,266 13.1 BBB 367,244,456 74.5 247,635,730 65.7 Total investment grade 452,086,760 91.7 305,969,909 81.1 BB and other 40,982,274 8.3 71,193,449 18.9 Total $ 493,069,034 100.0 % $ 377,163,358 100.0 % Reflecting the quality of securities maintained by us, 91.7 and 81.1% of all fixed maturity securities were investment grade. The following table summarizes, for all fixed maturity securities in an unrealized loss position as of March 31, 2021 and December 31, 2020, the estimated fair value, pre-tax gross unrealized loss, and number of securities by consecutive months they have been in an unrealized loss position. March 31, 2021 December 31, 2020 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 $ 181,710 $ 856 1 $ 54,910 $ 180 2 Foreign governments 1,542,188 59,622 2 — — — Mortgage-backed securities 6,199,138 150,316 8 5,707,617 157,104 5 Collateralized loan obligations 49,601,561 783,611 81 14,878,370 246,969 19 States and political subdivisions -- special revenue 773,149 4,703 13 5,584 147 1 Trust preferred 2,152,538 65,604 3 — — — Corporate 12,024,859 411,096 18 3,859,616 104,262 7 Greater than 12 months: U.S. government obligations 75,560 3,085 3 119,700 5,485 4 Collateralized loan obligations 2,906,839 52,804 3 7,020,479 103,177 6 Corporate 411,218 59,594 4 287,473 67,090 3 Total fixed maturities $ 75,868,760 $ 1,591,291 136 $ 31,933,749 $ 684,414 47 (1) We may reflect a security in more than one aging category based on various purchase dates. Our securities positions resulted in a gross unrealized loss position as of March 31, 2021 that was greater than the gross unrealized loss position at December 31, 2020 due to a decline in the market. We performed an analysis and determined that there were no indicators that we should do a cash flow testing analysis and no impairment was required as of March 31, 2021. During the impairment analysis performed at December 31, 2020 one of our assets had been in a loss position for over two years and had a decrease in its credit rating since 2019; therefore, the cashflow testing on that security determined an impairment existed so we had an impairment of $35,000 recorded. As of March 31, 2021, management believes the Company will fully recover its cost basis in the remaining 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. 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 minimal risk of material loss in the long-term due to the quality of the underlying credits The loss on the CLOs as of March 31, 2021 and December 31, 2020 were related to interest rates and not credit related losses. See the discussion above under “Comprehensive loss” in Note 1 regarding unrealized gains/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 March 31, 2021, the Company owned several leases. An impairment analysis was completed on the only non-performing lease in the portfolio in June 2020 and it was determined that the underlying collateral value was substantially less than the outstanding remaining lease payments of $3.6 million. The Company in June 2020 recognized a valuation allowance of $776,973 on that asset. During March 2021, the non-performing asset was sold for a loss of $2.4 million. The valuation allowance was released and a loss of $2.4 million was recognized; however, this asset was held on behalf of a third-party reinsurer. Therefore, due to the terms of the reinsurance agreements, the loss was passed through to the third-party reinsurer by reducing its investment income earned. The amortized cost and estimated fair value of fixed maturities as of March 31, 2021, 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 $ 39,416,008 $ 39,490,973 Due after one year through five years 81,750,979 82,444,187 Due after five years through ten years 123,414,500 126,327,202 Due after ten years through twenty years 189,358,612 193,167,354 Due after twenty years 50,200,276 51,639,318 $ 484,140,375 $ 493,069,034 The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. As of March 31, 2021 and December 31, 2020, these required deposits had a total amortized cost of $3,425,344 and $3,361,830 and fair values of $3,534,064 and $3,486,914, respectively. Mortgage loans consist of the following: March 31, 2021 December 31, 2020 Industrial $ — $ 1,250,000 Commercial mortgage loan - multi-family 56,992,974 66,916,151 Other 52,783,347 26,823,819 Total mortgage loans $ 109,776,321 $ 94,989,970 Geographic Locations: As of March 31, 2021, the commercial mortgages loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in New York (24%), Pennsylvania (12%), California (12%)) and included loans secured by properties in Europe (11%). As of December 31, 2020, the commercial mortgages loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in New York (28%), Pennsylvania (14%), California (14%)) and included loans secured by properties in Europe (12%). The loan-to-value ratio is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A loan-to-value ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The following represents the loan-to-value ratio of the commercial mortgage loan portfolio, excluding those under development, net of valuation allowances. Commercial Mortgage Loans March 31, 2021 December 31, 2020 Loan-to-Value Ratio: 0%-59.99% $ 62,245,607 $ 49,279,601 60%-69.99% 10,123,145 22,349,295 70%-79.99% 15,724,612 23,361,074 80% or greater 21,682,957 — Total mortgage loans $ 109,776,321 $ 94,989,970 The components of net investment income for the three months ended March 31, 2021 and year ended December 31, 2020 was as follows: Three months ended March 31, 2021 2020 Fixed maturities $ 3,050,777 $ 1,167,614 Mortgage loans 173,777 2,524 Other 55,813 — Gross investment income 3,280,367 1,170,138 Less: investment (expenses) refund (393,004) 70,840 Investment income, net of expenses $ 2,887,363 $ 1,240,978 Proceeds for the three months ended March 31, 2021 and 2020 from sales of investments classified as available-for-sale were $61,831,341 and $3,852,943, respectively. Gross gains of $572,807 and $149,548 and gross losses of $166,386 and $24,832 were realized on those sales during the three months ended March 31, 2021 and 2020, respectively. The proceeds included those assets associated with the third-party reinsurers. The gains and losses relate only to the assets retained by American Life. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Note 5. Derivative Instruments The Company enters into derivative instruments to manage risk, primarily equity, interest rate, credit, foreign currency and market volatility. The following is a summary of the notional amount, number of contracts and fair value of our asset and liability derivatives of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 Location in the Consolidated Derivatives Not Designated Statement of Notional Number of Estimated Notional Number of Estimated as Hedging Instruments Balance Sheets Amount Contracts Fair Value Amount Contracts Fair Value Equity-indexed options Derivatives $ 369,592,465 328 $ 8,769,901 $ 272,853,853 252 $ 11,361,034 Equity-indexed Deposit-type 364,115,193 2,826 89,030,443 311,964,195 2,101 84,501,492 For December 31, 2020 reporting, the methodology used to bifurcate the GAAP liability into host contract and embedded derivative was refined. In prior reporting periods a simplified approach was followed given the size of the block, which set the value of the embedded derivative equal to the market value of the options held to provide for the current indexed crediting obligation. At December 31, 2020, the value of the embedded derivative now considers all amounts projected to be paid in excess of the minimum guarantee (the amounts payable without any indexation increases) over future periods. The host contract reflects the minimum guaranteed values. For informational purposes only, the GAAP liability at December 31, 2020 under the old approach would have been $320,306,031, split as $308,608,885 host contract and $11,697,146 embedded derivative. The following table summarizes the impact of those embedded derivatives related to the funds withheld provision where the total return on the asset portfolio is passed through to the third-party-reinsurers: March 31, 2021 December 31, 2020 Book Value Market Value Total Return Book Value Market Value Total Return Portfolio Assets Assets Swap Value Assets Assets Swap Value Ironbound $ 99,580,060 $ 100,714,751 $ (1,134,691) $ 98,714,156 $ 99,747,812 $ (1,033,656) SDA 30,008,920 30,177,243 (168,323) 27,224,279 27,479,836 (255,557) US Alliance 36,986,356 37,401,248 (414,892) 35,707,207 36,360,501 (653,294) Crestline Re SP1 94,802,319 95,590,421 (788,102) 62,162,766 63,130,867 (968,101) Total $ 261,377,655 $ 263,883,663 $ (2,506,008) $ 223,808,408 $ 226,719,016 $ (2,910,608) As of March 31, 2021 and December 31, 2020, the total return swap value was recorded as a decrease of $2,506,008 and an increase of $2,910,608, respectively. The decrease in our unrealized gain of $404,600 resulted in a decrease in our amounts recoverable from reinsurers on our Consolidated Balance Sheets since December 31, 2020 and a realized gain of $404,600 and realized loss of $2,910,608, respectively on our Consolidated Statements of Comprehensive Loss. |
Fair Values of Financial Instru
Fair Values of Financial Instruments | 3 Months Ended |
Mar. 31, 2021 | |
Investments, All Other Investments [Abstract] | |
Fair Values of Financial Instruments | Note 6. 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 equivalents: The carrying value of cash equivalents and short-term investments approximate the fair value because of the short maturity of the instruments. Level 2 measurements Cash: The carrying value of cash approximates the fair value because of the short maturity of the instruments. Investment escrow: The Company had one asset in escrow in escrow as of March 31, 2021 and December 31, 2020 that was used to settle a mortgage loan that did not close until April 2021 and January 2021,respectively. The asset held in escrow at March 31, 2021 and December 31, 2020 was carried at cost. Fixed maturity securities: Fixed maturity securities are recorded at fair value on a recurring basis utilizing a third-party pricing source such as the Clearwater AVS+ SVO pricing. The valuations are reviewed and validated quarterly through random testing by comparisons to separate pricing models or other third-party pricing services. For the three months ended March 31, 2021 and year ended December 31, 2020, 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 such as the Standard & Poor’s (“S&P’) 500 index and the S&P Multi-Asset Risk Control (“MARC”) 5% index. Equity securities : Equity securities at March 31, 2021 and 2020 consist of mutual funds. Equity securities are carried at fair value with the change in fair value recorded through realized gains and losses on the statement of operations. Notes receivable : The Company held in notes receivable as of March 31, 2021 and December 30, 2020, a note of $5,737,608 and $5,665,487, respectively, that includes paid-in-kind (“PIK”) interest, between American Life and a third-party that was rated by a NRSRO. This note is being carried at the fair market value. Level 3 measurements Fixed maturity securities: The carrying value of assets classified as fixed maturity securities are generally carried at fair value. The Company invests in assets that are classified as fixed maturity securities that include term loans where the cost of those securities are considered their fair value; therefore, these assets are classified as Level 3 within the fair value hierarchy. Mortgage loans on real estate, held for investment: Mortgage loans are generally stated at principal amounts outstanding, net of deferred expenses and allowance for loan loss. The Company determined that the net principal amount represents the fair value of the mortgages. Interest on loans is recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Loan origination fees and direct costs, as well as premiums and discounts, are amortized as level yield adjustments over the respective loan terms. Unamortized net fees or costs are recognized upon early repayment of the loans. Loan commitment fees are generally deferred and amortized on an effective yield basis over the term of the loan. Impaired loans are generally carried on a non-accrual status. Loans are ordinarily placed on non-accrual status when, in management’s opinion, the collection of principal or interest is unlikely, or when the collection of principal or interest is 90 days or more past due. Other invested assets: The carrying value of assets classified as other investments approximates fair value. Other invested assets include equipment leases, a fund investment, and loans held for investments. The inputs used to measure the fair value of these assets are classified as Level 3 within the fair value hierarchy. Preferred stock: The preferred stock investment was recorded at its principal value as there was no traded market values for this stock. 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. Embedded derivative for equity-indexed contracts : The Company has embedded derivatives in its FIA policyholder obligations. These embedded derivatives are being carried at the fair market value as of March 31, 2021 and December 31, 2020. The fair value of the embedded derivative component of our FIA obligation is estimated at each valuation date by projecting policy contract values and minimum guaranteed contract values over the expected lives of the contracts and discounting the excess of projected contract value amounts at the applicable risk-free interest rates adjusted for our nonperformance risk related to those obligations. The projections of FIA policy contract values are based on best estimate assumptions for future policy growth and decrements including lapse, partial withdrawal and mortality rates. The best estimate assumptions for future policy growth include assumptions for expected index credits on the next policy anniversary date which are derived from fair values of the underlying equity call options purchased to fund such index credits and the present value of expected costs of annual call options purchased in the future by us to fund index credits beyond the next policy anniversary. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as assumptions used to project policy contract values. The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value March 31, 2021 Financial assets Fixed maturity securities: U.S. government obligations $ — $ 2,119,103 $ — $ 2,119,103 Foreign governments 1,542,188 1,542,188 Mortgage-backed securities — 25,828,579 — 25,828,579 Collateralized loan obligations — 301,261,339 — 301,261,339 States and political subdivisions — general obligations — 117,330 — 117,330 States and political subdivisions — special revenue — 6,123,127 — 6,123,127 Trust preferred — 2,152,538 — 2,152,538 Corporate — 30,912,098 123,012,732 153,924,830 Total fixed maturity securities — 370,056,302 123,012,732 493,069,034 Mortgage loans on real estate, held for investment — — 109,776,321 109,776,321 Derivatives — 9,473,398 — 9,473,398 Equity securities — 42,093,166 — 42,093,166 Other invested assets — — 25,606,108 25,606,108 Investment escrow — 3,317,043 — 3,317,043 Preferred stock — — 4,300,591 4,300,591 Notes receivable — 5,737,608 — 5,737,608 Policy loans — — 48,551 48,551 Total Investments $ — $ 430,677,517 $ 262,744,303 $ 693,421,820 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 89,030,443 89,030,443 December 31, 2020 Fixed maturity securities: U.S. government obligations $ — $ 6,164,983 $ — $ 6,164,983 Mortgage-backed securities — 14,757,414 — 14,757,414 Collateralized loan obligations — 221,773,609 — 221,773,609 States and political subdivisions — general obligations — 117,330 — 117,330 States and political subdivisions — special revenue — 6,202,204 — 6,202,204 Trust preferred — 2,284,816 — 2,284,816 Corporate — 18,608,995 107,254,007 125,863,002 Total fixed maturity securities — 269,909,351 107,254,007 377,163,358 Mortgage loans on real estate, held for investment — — 94,989,970 94,989,970 Derivatives — 11,361,034 — 11,361,034 Other invested assets — — 21,897,130 21,897,130 Investment escrow — 3,174,047 — 3,174,047 Preferred stock — — 3,897,980 3,897,980 Notes receivable — 5,665,487 — 5,665,487 Policy loans — — 45,573 45,573 Total Investments $ — $ 290,109,919 $ 228,084,660 $ 518,194,579 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 84,501,492 84,501,492 There were no transfers of financial instruments between any levels during the three months ended March 31, 2021. For the year ended December 31, 2020 we transferred third-party corporate bonds between level 2 and level 3. 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 March 31, 2021 and December 31, 2020, respectively: March 31, 2021 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 $ 48,551 $ — $ — $ 48,551 $ 48,551 Cash and cash equivalents 100,927,152 61,217,719 39,709,433 — 100,927,152 Liabilities: Policyholder deposits (Deposit-type contracts) 714,300,232 — — 714,300,232 714,300,232 December 31, 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 $ 45,573 $ — $ — $ 45,573 $ 45,573 Cash and cash equivalents 151,679,274 100,566,580 51,112,694 — 151,679,274 Liabilities: Policyholder deposits (Deposit-type contracts) 597,868,472 — — 597,868,472 597,868,472 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 three months ended March 31, 2021 and December 31, 2020: As of As of December 31, March 31, 2020 Additions Sales 2021 Assets Fixed maturities $ 107,254,007 $ 30,204,134 $ 14,445,409 123,012,732 Mortgage loans on real estate, held for investment 94,989,970 16,446,861 1,660,510 109,776,321 Other invested assets 21,897,130 5,016,716 1,307,738 25,606,108 Preferred stock 3,897,980 402,611 — 4,300,591 Policy loans 45,573 2,978 — 48,551 Total Investments $ 228,084,660 $ 52,073,300 $ 17,413,657 $ 262,744,303 As of As of December 31, Valuation December 31, 2019 Additions Sales Allowance Impairment 2020 Assets Fixed maturities $ — $ 107,254,007 $ — $ — $ — $ 107,254,007 Mortgage loans on real estate, held for investment 13,810,041 99,356,435 18,176,506 — — 94,989,970 Other invested assets 2,468,947 74,722,714 54,517,558 (776,973) 21,897,130 Preferred stock 500,000 3,897,980 — — (500,000) 3,897,980 Policy loans 106,014 — 60,441 — — 45,573 Total Investments $ 16,885,002 $ 285,231,136 $ 72,754,505 $ (776,973) $ (500,000) $ 228,084,660 Significant Unobservable Inputs —Significant unobservable inputs occur when we could not obtain or corroborate the quantitative detail of the inputs. This applies to fixed maturity securities, preferred stock, mortgage loans and certain derivatives, as well as embedded derivatives in liabilities. Additional significant unobservable inputs are described below. Interest sensitive contract liabilities – embedded derivative – Significant unobservable inputs we use in the fixed indexed annuities embedded derivative of the interest sensitive contract liabilities valuation include: 1) Nonperformance risk – For contracts we issue, we use the credit spread, relative to the US Department of the Treasury (Treasury) curve based on our public credit rating as of the valuation date. This represents our credit risk for use in the estimate of the fair value of embedded derivatives. 2) Option budget – We assume future hedge costs in the derivative’s fair value estimate. The level of option budgets determines the future costs of the options and impacts future policyholder account value growth. 3) Policyholder behavior – We regularly review the lapse and withdrawal assumptions (surrender rate). These are based on our initial pricing assumptions updated for actual experience. Actual experience may be limited for recently issued products. The following summarizes the unobservable inputs for available for sale and trading securities and the embedded derivatives of fixed indexed annuities: March 31, 2021 (In millions, except for percentages) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $89.0 Option Budget Method Nonperformance risk 0.3% 1.1% 0.6% Decrease Option budget 1.4% 3.4% 2.5% Increase Surrender rate 0.5% 15% (base) 7.3% Decrease * Weighted by account value December 31, 2020 (In millions, except for percentages) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $84.5 Option Budget Method Nonperformance risk 0.3% 1.3% 0.7% Decrease Option budget 2.6% 3.4% 2.7% Increase Surrender rate 0.5% 15% (base) 7.6% Decrease * Weighted by account value |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 7. Earnings 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. With the infusion of capital in our December 2020 public offering of voting common stock and the issuance of voting common stock in 3,737,564 voting common shares issued and outstanding as of March 31, 2021 and December 31, 2020. (Loss) earnings per basic share attributable to the Company’s voting common stock was computed based on the weighted average number of shares outstanding during each period. The weighted average number of shares outstanding during the three months ended March 31, 2021 and 2020, were 3,737,564 and 2,042,670, respectively. (Loss) earnings per diluted share attributable to the Company’s voting common stock was computed based on the average shares outstanding and options granted under our 2020 and 2019 Long-Term Incentive Plans (“LTIPs”), as if all were vested and exercised. The weighted average number of diluted shares outstanding during the three months ended March 31, 2021 and 2020 were 3,737,564 and 2,065,045, respectively. |
Income Tax Matters
Income Tax Matters | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Tax Matters | Note 8. Income Tax Matters Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2021 and December 31, 2020 were as follows: March 31, 2021 December 31, 2020 Deferred tax assets: Loss carryforwards $ 1,945,126 $ 1,556,855 Capitalized costs 162,476 174,364 Stock option granted 65,796 14,270 Unrealized losses on investments 1,478,807 1,534,332 Policy acquisition costs 2,308,354 2,243,267 Charitable contribution carryforward 2,490 2,490 Sec 163(j) limitation 155,492 153,809 Benefit reserves 4,316,821 3,568,914 Total deferred tax assets 10,435,362 9,248,301 Less valuation allowance (8,403,415) (7,001,687) Total deferred tax assets, net of valuation allowance 2,031,947 2,246,614 Deferred tax liabilities: Unrealized losses on investments 1,774,671 1,994,232 Due premiums 81,789 81,789 Intangible assets 147,000 147,000 Bond Discount 24,942 20,556 Property and equipment 3,545 3,037 Total deferred tax liabilities 2,031,947 2,246,614 Net deferred tax assets $ — $ — As of March 31, 2021 and December 31, 2020, the Company recorded a valuation allowance of $8,403,415 and $7,001,687, 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 $1,432,348 and $407,916 for the three months ended March 31, 2021 and 2020, respectively. 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: Three months ended March 31, 2021 2020 Computed expected income tax benefit $ (35,304) $ 4,610,839 Increase (reduction) in income taxes resulting from: IMR and reinsurance 67,045 — Nondeductible expenses 1,454 (55,233) Change in valuation allowance 1,401,730 (4,147,690) Dividends received deduction (2,577) — Subtotal of increases 1,467,652 (4,202,923) Tax expense $ 1,432,348 $ 407,916 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 March 31, 2021, the deferred tax assets included the expected tax benefit attributable to federal NOLs of $9,164,004. 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 $752,036 prior to 2017 will expire through the year of 2032, and the NOLs generated from June 28, 2018 to March 31, 2021 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 $4,971,956 on the deferred tax assets related to these federal NOL carryforwards. Loss carry forwards for tax purposes as of March 31, 2021, have expiration dates that range from 2024 through 2040. |
Reinsurance
Reinsurance | 3 Months Ended |
Mar. 31, 2021 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance | Note 9. Reinsurance A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and, 2020, respectively, are as follows: March 31, 2021 December 31, 2020 Assets: Reinsurance recoverables $ 38,715,577 $ 32,146,042 Liabilities: Deposit-type contracts Direct $ 714,300,232 597,868,472 Reinsurance ceded (448,843,239) (405,981,150) Retained deposit-type contracts $ 265,456,993 $ 191,887,322 Three months ended March 31, 2021 2020 Premiums Direct $ 48,087 $ 231,674 Reinsurance ceded (48,087) (231,674) Total Premiums $ — $ — Future policy and other policy benefits Direct $ 6,856 31,287 Reinsurance ceded (6,856) (31,287) Total future policy and other policy benefits $ — $ — 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 March 31, 2021: 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 Optimum Re Insurance Company A $ — $ — $ 524,932 $ — $ 524,932 Sagicor Life Insurance Company A- — 143,750 11,269,714 273,495 11,139,969 SDA Annuity & Life Re NR — — 3,714,765 — 3,714,765 Crestline SP1 NR — — 16,319,419 — 16,319,419 US Alliance Life and Security Company NR — — 7,045,473 28,981 7,016,492 $ — $ 143,750 $ 38,874,303 $ 302,476 $ 38,715,577 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, 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 Optimum Re Insurance Company A $ — $ — $ 524,734 $ — $ 524,734 Sagicor Life Insurance Company A- — 141,107 11,285,364 276,596 11,149,875 SDA Annuity & Life Re NR — — 3,540,697 — 3,540,697 Crestline SP1 NR — — 9,695,427 — 9,695,427 US Alliance Life and Security Company NR — — 7,264,229 28,920 7,235,309 $ — $ 141,107 $ 32,310,451 $ 305,516 $ 32,146,042 Due to price decreases in the capital markets, our securities positions resulted in changes in the unrealized gains position as of March 31, 2021 compared to December 31, 2020, reported in accumulated other comprehensive income on the Consolidated Balance Sheets. As discussed in Note. 1, 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 5. As a result of the change in market prices, the assets had unrealized gains of approximately $2.5 million and $2.9 million as of March 31, 2021 and December 31, 2020, respectively. The terms of the contracts with the third-party reinsurers provide that unrealized gains on the portfolios accrue to the third-party reinsurers. Accordingly, the unrealized gains on the assets held by American Life were offset by a loss in the embedded derivative of $400,000 and $2.9 million, respectively. We account for this gain pass through by recording equivalent realized losses on our Consolidated Statements of Comprehensive Loss. 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, 2020 and 30% through March 31, 2021. 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 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 zero 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. Effective June 30, 2020, the FIA quota share was reduced to zero and effective July 1, 2020, the MYGA quota share was reduced to zero. Effective April 24, 2020, American life entered into a Master Letter Agreement with Seneca Re and Crestline Management regarding a flow of annuity reinsurance and related asset management, whereby Crestline Management 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 24, 2020, the Nebraska Department of Insurance (“NDOI”) issued its non-disapproval of the Funds Withheld Coinsurance and Modified Coinsurance Agreement with Seneca Incorporated Cell, LLC 2020-02 (“SRC2”) of Seneca Re, now known as Crestline RE SP1. 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 March 31, 2020 statutory financial statements. 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 2 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, value of business acquired (“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 March 31, 2021 and 2020, Unified had converted 90% and 81%, respectively, of the indemnity coinsurance to assumptive coinsurance. American Life had amortization income for the three months ended March 31, 2021 and 2020, of $7,629 and $67,451, respectively. The ending deferred ceding commission as of March 31, 2021 and December 31, 2020 was $269,306 and $276,935, respectively. Under GAAP, ceding commissions are deferred on the Consolidated Balance Sheets and are amortized over the period of the policyholder contracts. The tables below shows the ceding commissions from the reinsurers excluding SRC1 and what was earned on a GAAP basis: Three months ended March 31, 2021 2020 Reinsurer Effective Date Gross Ceding Commission Expense (1) Interest on Ceding Commissions Earned Gross Ceding Commission Expense Interest on Ceding Commissions Earned Ironbound Reinsurance Company Limited July 2019 $ — $ 14,457 $ 54,445 $ 122,216 $ 674,645 $ 673,612 $ 45,369 $ 95,740 SDA Annuity & Life Re November 2019 — 24,317 21,712 46,072 298,982 548,464 13,526 7,153 US Alliance Life and Security Company (2) November 2019 2,178 20,735 15,339 66,606 — — — — Crestline SP1 July 2020 2,345,135 4,678,207 49,855 215,762 — — — — $ 2,347,313 $ 4,737,716 $ 141,351 $ 450,656 $ 973,627 $ 1,222,076 $ 58,895 $ 102,893 (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: March 31, 2021 December 31, 2020 Reinsurer Effective Date Deferred Ceding Commission Deferred Ceding Commission US Alliance Life and Security Company (1) September 2017 $ 169,726 $ 172,297 Unified Life Insurance Company (1) July 2018 269,306 276,935 Ironbound Reinsurance Company Limited (2) July 2019 5,634,707 5,642,095 SDA Annuity & Life Re (2) November 2019 2,662,423 2,703,496 US Alliance Life and Security Company (3) April 2020 2,446,254 2,472,559 Crestline SP1 July 2020 9,414,267 6,931,375 $ 20,596,683 $ 18,198,757 (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 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. As of March 31, 2021 and December 31, 2020, 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. Retained and Reinsurer Balance Sheets The tables below shows the retained and reinsurance condensed balance sheets: March 31, 2021 December 31, 2020 Retained Reinsurance Consolidated Retained Reinsurance Consolidated Assets Total investments 305,022,890 388,398,930 693,421,820 185,367,430 332,827,149 518,194,579 Cash and cash equivalents 72,613,680 28,313,472 100,927,152 102,334,579 49,344,695 151,679,274 Accrued investment income 3,193,353 5,901,740 9,095,093 1,955,938 4,850,898 6,806,836 Deferred acquisition costs, net 19,676,745 — 19,676,745 13,456,303 — 13,456,303 Reinsurance recoverables (See Note 8) — 38,715,577 38,715,577 — 32,146,042 32,146,042 Other assets 2,918,643 1,436,019 4,354,662 2,685,341 1,432,384 4,117,725 Total assets $ 403,425,311 $ 462,765,738 $ 866,191,049 $ 305,799,591 $ 420,601,168 $ 726,400,759 Liabilities and Stockholders’ Equity Liabilities: Policyholder liabilities $ 265,456,993 $ 461,795,179 $ 727,252,172 $ 191,887,322 $ 418,921,167 $ 610,808,489 Deferred gain on coinsurance transactions 20,596,683 — 20,596,683 18,198,757 — 18,198,757 Other liabilities 31,739,452 970,559 32,710,011 9,384,013 1,680,001 11,064,014 Total liabilities $ 317,793,128 $ 462,765,738 $ 780,558,866 $ 219,470,092 $ 420,601,168 $ 640,071,260 Stockholders’ Equity: Voting common stock 3,738 — 3,738 3,738 — 3,738 Additional paid-in capital 133,678,612 — 133,678,612 133,417,272 — 133,417,272 Accumulated deficit (55,122,540) — (55,122,540) (53,522,078) — (53,522,078) Accumulated other comprehensive income 7,072,373 — 7,072,373 6,430,567 — 6,430,567 Total Midwest Holding Inc.'s stockholders' equity $ 85,632,183 $ — $ 85,632,183 $ 86,329,499 $ — $ 86,329,499 Total liabilities and stockholders' equity $ 403,425,311 $ 462,765,738 $ 866,191,049 $ 305,799,591 $ 420,601,168 $ 726,400,759 |
Long-Term Incentive Plan
Long-Term Incentive Plan | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Long-Term Incentive Plan | Note 10. Long-Term Incentive Plans 2019 Plan On June 11, 2019, our Board of Directors approved the Midwest Holding Inc. Long-Term Incentive Plan (the ”2019 Plan”) that reserves up to 102,000 shares of our voting common stock for award issuances. It provides for the grant of options, restricted stock awards, restricted stock units, stock appreciation rights, performance units, performance bonuses, stock awards and other incentive awards to eligible employees, consultants and eligible directors, subject to the conditions set forth in the 2019 Plan. All awards are required to be established, approved, and/or granted by the compensation committee of our Board. On July 19, 2019, we granted stock options for 17,900 shares of voting common stock under the 2019 Plan 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 $8.00 per share at the grant date. Using the Black Scholes Model we determined the compensation expense was $143,200 over the vesting term of the stock options. The factors we used to determine the expense were: the weighted average fair market value at grant date of $8.00 per share, the exercise price of $25.00 per share, the option term of 10 years, an annual risk-free interest rate of 1.84% based upon the 10-year U.S. Treasury rate at grant date, volatility of the price of the stock before the date of the grants, the amount of shares and the closely held nature of the stock before the grants. On July 21, 2020, we granted stock options for 26,300 shares of voting common stock. Using the Black Scholes Model we determined the compensation expense was $334,950 over the vesting term of the stock options. The factors we used to determine the expense were: the weighted average fair market value at grant date of $14.50 per share, the exercise price of per share, the time to maturity of 10 years, an 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 a valuation by an outside evaluator relating to the grants of these options. On September 15, 2020, we granted stock options for 6,667 shares of voting common stock at an exercise price of $25.00 per share. Using the Black Scholes Model we determined the compensation expense was $144,014 over the vesting term of the stock options. The factors we used to determine the expense were: the weighted average fair market value at grant date of $21.60 per share, the exercise price of $41.25 per share, the time to maturity of 10 years, an annual risk-free interest rate of .69% based upon the 10-year U.S. Treasury rate at grant date and a 66.2% volatility based on a valuation by an outside evaluator relating to the grants of these options. On November 16, 2020, we granted stock options for 35,058 shares of voting common stock at an exercise price of $41.25 per share. Using the Black Scholes Model we determined the compensation expense was $1,032,458 over the vesting term of the stock options. The factors we used to determine the expense were: the weighted average fair market value at grant date of $29.45 per share, the exercise price of $41.25 per share, the time to maturity of 10 years, an annual risk-free interest rate of .91% based upon the 10-year U.S. Treasury rate at grant date and a 66.3% volatility based on a valuation by an outside evaluator relating to the grant of these options. Also, on November 16, 2020 we granted an award of restricted stock for 18,597 shares of voting common stock to an officer. Using the Black Scholes Model we determined the compensation expense was $547,682 over the vesting term of the stock options. The factors we used to determine the expense were: the weighted average fair market value at grant date of $29.45 per share, the exercise price of $41.25 per share, an annual risk-free interest rate of .91% based upon the 10-year U.S. Treasury rate at grant date and a 66.3% volatility based on a valuation by an outside evaluator relating to this restricted stock grant. On January 16, 2021 and May 1, 2020, restricted stock and stock options for 4,650 and 200 shares with a fair market value of $29.45 and $8.00 per share, respectively, became vested on the restricted stock and in connection with the resignation of two Board members. For the three months ended March 31, 2021 and the year ended December 31, 2020 we amortized the compensation expense from the stock option grants on the three dates above, over the two and four year vesting tranches, for an expense and additional paid in capital of $261,340 and $163,664, respectively. As of March 31, 2021 and December 31, 2020, the outstanding non-vested stock under the 2019 Plan was 96,322 and 100,972, respectively with zero and 3,350 shares being forfeited as of March 31, 2021 and December 31, 2020, respectively. For the three months March 31, 2021 and 2020, we amortized the compensation expense related to the 2019 Plan, from the stock grants on the three dates above, over the two and four year vesting tranches as an expense and an increase in additional paid in capital of $261,340 and $11,933, respectively The table below shows the remaining non-vested shares under the 2019 Plan: March 31, 2021 December 31, 2020 Stock Options/ (1) Stock Options (1) Beginning balance 100,972 17,900 Options granted under the 2019 Plan — 68,025 Restricted stock granted under the 2019 Plan — 18,597 Forfeited — (3,350) Vested (4,650) (200) Ending Balance 96,322 100,972 (1) Reflects reverse stock split of 500:1 as of August 27, 2020. |
Deposit-Type Contracts
Deposit-Type Contracts | 3 Months Ended |
Mar. 31, 2021 | |
Separate Accounts Disclosure [Abstract] | |
Deposit-Type Contracts | Note 11. 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 three months ended March 31, 2021 and the year ended December 31, 2020: March 31, 2021 December 31, 2020 Beginning balance $ 597,868,472 $ 171,168,785 US Alliance (655,762) (3,307,587) Ironbound Reinsurance Company Limited 1,522,105 6,080,196 SDA Annuity & Life Re (includes MVA adjustment and embedded derivative) (344,905) 3,053,160 Crestline SP1 (2,492,215) 3,606,833 Deposits received 123,653,931 415,561,302 Investment earnings (includes embedded derivative) (2,346,402) 4,214,828 Withdrawals (2,904,992) (2,509,045) Ending balance $ 714,300,232 $ 597,868,472 |
Contingencies and Commitments
Contingencies and Commitments | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies and Commitments | Note 12. Contingencies and Commitments 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 in six additional states that are expected to be approved by the end of 2021. 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 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 SRC2 prior to closing of the agreement on July 27, 2020. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Leases | Note 13. Leases Our operating lease activities consist of leases for office space and equipment. Our finance lease activities consisted of one lease for hardware which we owned at the end of the lease agreement on March 31, 2020. None of our lease agreements include variable lease payments. Supplemental balance sheet information as of March 31, 2021 and December 31, 2020, are as follows: As of As of Leases Classification March 31, 2021 December 31, 2020 Assets Operating Operating lease right-of-use assets $ 317,715 $ 348,198 Liabilities Operating lease Operating lease liabilities $ 364,128 $ 396,911 Our operating and finance leases expenses for the three months ended March 31, 2021 and 2020, were as follows: Three months ended March 31, Leases Classification 2021 2020 Operating General and administrative expense $ 1,233 $ 2,092 Finance lease cost: Amortization expense — 2,913 Interest expense — 111 Minimum contractual obligations for our operating leases as of March 31, 2021, are as follows: Operating Leases 2021 (excluding three months ended March 31, 2021) $ 122,891 2022 156,608 2023 161,674 2024 13,508 Total remaining lease payments $ 454,681 Supplemental cash flow information related to leases was as follows: Three months ended March 31, 2021 2020 Cash payments Operating cash flows from operating leases $ (2,300) $ (1,035) Operating cash flows from finance leases — 1,164 The weighted average remaining lease terms of our operating leases were approximately one and a half years and two years as of March 31, 2021 and 2020, respectively. The weighted average discount rate used to determine the lease liabilities for finance leases was 6% and operating leases was 8% as of March 31, 2021 and 2020, 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 | 3 Months Ended |
Mar. 31, 2021 | |
Statutory Net Income and Surplus [Abstract] | |
Statutory Net Income and Surplus | Note 14. 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 Nebraska Department of Insurance. 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 Nebraska Department of Insurance, American Life’s statutory net gains for the three months March 31, 2021 and 2020 were $6,109,058 and $423,474, respectively. Capital and surplus of American Life as of March 31, 2021 and December 31, 2020 was $77,818,776 and $77,446,537, respectively. The net gain was primarily due to the ceding commission and reserve adjustments earned on the Ironbound, SDA, US Alliance, SRC1, and Crestline Re SP1 reinsurance transactions; offset by continuing expenses incurred to provide services on the new software and related technology to distribute products through national marketing organizations. For the quarter ended March 31, 2021, the MYGA and FIA sales were $9,368,962 and $114,284,969 compared to the MYGA and FIA sales $31,565,506 and $16,249,504 as of March 31, 2020. An additional $3,489,795 of MYGA and $36,050,004 of FIA sales were pending as of March 31, 2021. 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 of March 31, 2021 and December 31, 2020, exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements. As of December 31, 2020, American Life had an invested asset that was impaired as a result of the fair market of the underlying collateral being 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 to the third-party reinsurer through as a reduction of the investment income earned by the third-party reinsurer. As of March 31, 2021, this invested asset was sold for a loss of $2.4 million that was passed through to the third-party reinsurer as a reduction of their investment income earned. As of March 31, 2021 and December 31, 2020, American Life did not hold any participating policyholder contracts where dividends were required to be paid. |
Third Party Administration
Third Party Administration | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Third Party Administration | Note 15. 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 earned for TPA administration during the three months ended March 31, 2021 and year ended December 31, 2020 were $207,500 and $8,160, respectively. |
Reverse Stock Split
Reverse Stock Split | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Reverse Stock Split | Note 16. 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 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. The effective date, August 27, 2020, for the reverse stock split was retrospectively applied to these financial statements. Outstanding shares as of March 31, 2021 and December 31, 2020, were 3,737,564. |
Capital Raise
Capital Raise | 3 Months Ended |
Mar. 31, 2021 | |
Capital Raise [Abstract] | |
Capital Raise | Note 17. Capital Raise On December 21, 2020, Midwest completed a public offering of 1,000,000 shares of its voting common stock offered by the Company at a price to the public of $70.00 per share. The Midwest voting common stock was approved for listing on the Nasdaq Capital Market under the ticker symbol “MDWT.” Midwest raised $70,000,000 of gross proceeds from the capital raise and incurred commissions and expenses of approximately $5,914,995 that were offset against those proceeds. |
Equity
Equity | 3 Months Ended |
Mar. 31, 2021 | |
Stockholders' Equity Note [Abstract] | |
Equity | Note 18. Equity Preferred stock As of March 31, 2021 and December 31, 2020, the Company had 2,000,000 shares of preferred stock authorized but none issued or outstanding. Common Stock The voting common stock is traded on the NASDAQ Capital Market under the symbol “MDWT”. Midwest has authorized 20,000,000 shares of voting common stock. As of March 31, 2021 and December 31, 2020, Midwest had 3,737,564 shares of voting common stock issued and outstanding. Midwest holds approximately 4,500 shares of voting common stock in its treasury due to the reverse stock split discussed in Note 16 above. Additional paid-in capital Additional paid-in capital is primarily comprised of the cumulative excess cash received by the Company in conjunction with past issuances of its shares. It also is increased by the amortization expense of the consideration calculated at inception of the stock option grant as discussed in Note. 10 – Long-Term Incentive Plan above. Accumulated Other Comprehensive Income (Loss) AOCI represents the cumulative OCI items that are reported separate from net income and detailed on the Consolidated Statements of Comprehensive Loss. AOCI includes the unrealized gains and losses on investments and DAC, net of offsets and taxes are as follows: Unrealized Unrealized Accumulated other Balance at December 31, 2019 $ 473,399 $ 146,185 $ 619,584 Other comprehensive income before Reclassifications 7,398,432 — 7,398,432 Unrealized gains on foreign currency — (146,185) (146,185) Less: Reclassification adjustments for losses realized in net income (1,441,264) — (1,441,264) Balance at December 31, 2020 6,430,567 — 6,430,567 Other comprehensive income (loss) before reclassifications, net of tax 962,880 — 962,880 Less: Reclassification adjustments for losses realized in net income, net of tax (321,074) — (321,074) Balance at March 31, 2021 $ 7,072,373 $ — $ 7,072,373 |
Deferred Acquisition Costs
Deferred Acquisition Costs | 3 Months Ended |
Mar. 31, 2021 | |
Deferred Acquisition Costs | |
Deferred Acquisition Costs | Note 19. Deferred Acquisition Costs The following table represents a rollforward of DAC, net of reinsurance: March 31, 2021 December 31, 2020 Beginning balance $ 13,456,303 $ — Additions 6,681,991 13,919,206 Amortization (502,737) (670,233) Interest 36,855 138,295 Impact of unrealized investment losses 4,333 69,035 Ending Balance $ 19,676,745 $ 13,456,303 |
Nature of Operations and Basi_2
Nature of Operations and Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
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”), and 1505 Capital LLC (“1505 Capital”) as well as 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 21 states and the District of Columbia. 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 May 13, 2020, Seneca Re established Seneca Protected Cell 2020-01, a protected cell of Seneca Re (“SRC1”). Effective December 21, 2020, Seneca Re converted SRC1 to Seneca Incorporated Cell, LLC 2020-01. Midwest contributed $3,000,000 to capitalize SRC1. Crestline Management, L.P. (“Crestline Management”), a Delaware limited partnership, through an affiliated entity (see below) owns approximately 11.9% of Midwest’s voting common stock. On July 24, 2020, the Nebraska Department of Insurance (“NDOI”) issued its non-disapproval of the Funds Withheld Coinsurance and Modified Coinsurance Agreement with Seneca Incorporated Cell, LLC 2020-02 (“SRC2”) of Seneca Re, now known as Crestline Re SP1. Effective December 8, 2020, American Life entered into a novation agreement with SRC2 and Crestline Re SPC, an exempted segregated portfolio company incorporated under the laws of the Cayman Islands, for and on behalf of Crestline Re SP1, a segregated portfolio company of Crestline Re SPC, under which the above-described reinsurance, trust and related asset management agreements were novated and replaced with substantially similar agreements entered into by American Life and Crestline Re SP1. On April 24, 2020, Midwest entered into a Securities Purchase Agreement with Crestline Assurance Holdings LLC, a Delaware limited liability company (“Crestline Assurance”) Xenith, and Vespoint, and Pursuant to the Agreement, Crestline Assurance 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 agreement, the Company contributed $5.0 million to American Life. Also, effective April 24, 2020, American life entered into a Master Letter Agreement with Seneca Re and Crestline Management regarding a flow of annuity reinsurance and related asset management, whereby Crestline Management agreed to provide reinsurance 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. In December 2020, the Company completed a public offering of its voting common stock for gross proceeds of $70,000,000 (see Note 17). In connection therewith, the Company's voting common stock was approved for listing and began trading on the Nasdaq Capital Market upon the closing of the public offering. 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 May 13, 2020, with SRC1. 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 MYGA, a FIA, and two bonus plans associated with the FIA product. It is not presently offering any traditional life insurance products. |
Basis of presentation | Basis of Presentation These consolidated financial statements for the three months ended March 31, 2021 and 2020 and year ended December 31, 2020 have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). 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 unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and noted thereto for the year ended December 31, 2020 included in the Company’s annual report on Form 10-K. |
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. Premiums and discounts on fixed maturity debt instruments 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 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 impairment is bifurcated. The Company recognizes the credit loss portion as realized losses and the noncredit loss portion in accumulated other comprehensive loss. The credit component of 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 had no impairment recognized as of March 31, 2021. As of year-ended December 31, 2020, the Company analyzed the securities portfolio and determined that an impairment of approximately $35,000 should be recorded for one security, an impairment of $500,000 was recognized on a preferred stock, and a valuation allowance of $776,973 established on one lease. The valuation allowance on the lease of $776,973 was released as of March 31, 2021 due to the sale of the investment. The remaining investments were not impaired as of December 31, 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 along with the amortization of premiums and discounts. Certain available-for-sale 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 reinsurers 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 Statements of Comprehensive Loss. |
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 for the as of March 31, 2021 or as of December 31, 2020, respectively. |
Investment escrow | Investment escrow The Company held in escrow $3,317,043 and $3,174,047 as of March 31, 2021 and of December 31, 2020, respectively. The cash was used to settle other invested assets that closed in April 2021 and January 2021, respectively. |
Other invested assets | Other invested assets The Company purchases and sells equipment leases in its investment portfolio. Other invested assets also includes loans held for investments. The Company entered into a fund investment on November 3,2020 for $15.8 million with an additional $3.9 million invested on December 16, 2020. At December 31, 2020, we had a $19.7 million investment in the fund. Effective January of 2021, this investment was repackaged into a special purpose vehicle between American Life and PF Collinwood Holdings, LLC (“PFC”) with American Life owning 100% of the entity. Subsequent to the repackaging of the fund investment into the special purpose vehicle, the classification of the investment remains in other invested assets. |
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. During the last quarter of 2020, the Company began investing in foreign currency futures to hedge the fluctuations in the foreign currency. The formal documentation and hedge effectiveness was also not completed at the date we entered into those futures contracts; therefore, they do not qualify for hedge accounting. The futures fair market values were recorded on our Consolidated Statements of Comprehensive Loss as realized gains or (losses). Additionally, reinsurance agreements written on a funds withheld or Modco 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 Consolidated Statements of Comprehensive Loss. |
Equity Securities | Equity Securities Equity securities at March 31, 2021 and 2020 consist of mutual funds. Equity securities are carried at fair value with the change in fair value recorded through realized gains and losses on the statement of operations. |
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 impaired the full amount of $500,000 as of December 31, 2020. This was recorded as a reduction of the asset on the Consolidated Balance Sheets and a bad debt expense on the Consolidated Statements of Comprehensive Loss. There was no additional impairment of this preferred stock as of March 31, 2021. The Company authorized a series of transactions between American Life and Ascona Group Holdings Ltd (“AGH”). One of the transactions involved the acquisition of Pound Sterling (“GBP”) 3,345,022 of preferred equity in Ascona Group Holdings Limited (“the Preferred Equity”) along with warrants bearing no initial assigned value (the “Warrants” as of September 28, 2020. American Life initially created a special purpose vehicle called Ascona Asset Holding LLC (“AAH”) to hold the Preferred Equity and Warrants, and later created Ascona Collinwood HoldCo LLC (“ACH”) to be the sole member of AAH. American Life and Crestline Re SP1 own 74% and 26%, respectively, of ACH. |
Notes receivable | Notes receivable The Company held in notes receivable as of March 31, 2021 and December 31, 2020, a note of $5,737,608 and $5,665,487, respectively, 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. As of March 31, 2021 and December 31, 2020, the Company held approximately GBP 47,621 and GBP 505,349 in several of our custody accounts, respectively. The USD equivalent held was approximately $65,703 and $690,787, respectively. As of March 31, 2021 and December 31, 2020, the Company held approximately EUR 527,981 and 87,633, respectively. The USD equivalent held was approximately $620,536 and $107,000, respectively. As of March 31, 2021 and December 31, 2020, we had realized losses of approximately $75,000 and gains of approximately $45,000, respectively, related to the change in the foreign currency exchange rate of the GBP and Euro that were recorded in realized (losses) gains on investments in the Consolidated Statements of Comprehensive Loss. The Company had money market investments of approximately $61.2 million and $100.6 million at March 31, 2021 and December 31, 2020, respectively. |
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 determined that no events occurred in the three months ended March 31, 2021 that suggest a review should be undertaken. The Company performed a recoverability analysis during the fourth quarter of 2020 and determined that all DAC balances were recoverable as of December 31, 2020. |
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 $12,334 and $10,316 for the three months ended March 31, 2021 and 2020, respectively. Accumulated depreciation totaled $1,035,668 and $1,023,334 as of March 31, 2021 and December 31, 2020, 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 three months ended March 31, 2021 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 allowances established as of March 31, 2021 or December 31, 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 8 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 become insolvent or are 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 December 31, 2020, Seneca Re has one incorporated cell, Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) which was consolidated in our financial statements. Effective December 8, 2020, American Life entered into a novation agreement with SRC2 and Crestline Re SPC, an exempted segregated portfolio company incorporated under the laws of the Cayman Islands, for and on behalf of Crestline Re SP1, an exempted segregated portfolio company of Crestline Re SPC, under which the above-described reinsurance, trust and related asset management agreements were novated and replaced with substantially similar agreements entered into by American Life and Crestline Re SP1. 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 requires 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 in 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 reinsurers, 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 5 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 gains of approximately $2.5 million and $2.9 million as of March 31, 2021 and December 31, 2020, respectively. The terms of the contracts with the third-party reinsurers provide that unrealized gains on the portfolios accrue to the third-party reinsurers. Accordingly, the unrealized gains on the assets held by American Life were offset by a gain in the embedded derivative of $400,000 and a loss $2.9 million as of March 31, 2021 and December 31, 2020, respectively. We account for this unrealized loss pass-through by recording equivalent realized losses on our Consolidated Statements of Comprehensive Loss and in amount payable to our third-party reinsurers on the Consolidated Balance Sheets. |
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. |
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 2016. 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 from ceding commissions on traditional life and annuity products are deferred on the Consolidated Balance Sheets and amortized over the life of the policies. 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. Revenues on service fees and third-party administration fees are recorded as income when incurred. |
Comprehensive loss | Comprehensive loss Comprehensive 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 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 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 5 below. As a result of recent market volatility, the investments carried by American Life for the third-party reinsurers contained unrealized gains of approximately $2.5 million and $2.9 million as of March 31, 2021 and December 31, 2020, respectively. The terms of the contracts with the third-party reinsurers provided that unrealized gains on the portfolios accrue to the third-party reinsurers. We account for this gain pass through by booking equivalent embedded derivative realized losses or gains in our Consolidated Statements of Comprehensive Loss. Accordingly, as of March 31, 2021 and 2020, such gains of $400,000 and of $23.2 million, respectively, were recorded. The remaining investments retained by American Life as of March 31, 2021 and December 31, 2020, had unrealized gains of approximately $5.9 million and $5.1 million, respectively, that included unrealized gains from assets held for SRC1. Basic (loss) earnings per share for the three months ended March 31, 2021 and 2020 was ($0.43) and $10.55, respectively, which included the aforementioned gain of $400,000 and $23.2 million, respectively. Basic loss per share for the three months ended March 31, 2021 and 2020 without the aforementioned gain was ($0.55) and ($0.83), respectively. Reclassifications Certain reclassifications have been made on the Statements of Comprehensive Loss for the three months ended March 31, 2020. These reclassifications do not impact the overall Net loss or Net loss per common shares line items of the Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2020. |
Reclassifications | Reclassifications Certain reclassifications have been made on the Statements of Comprehensive Loss for the three months ended March 31, 2020. These reclassifications do not impact the overall Net loss or Net loss per common shares line items of the Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2020. |
Adoption of New Accounting Standards | 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. This amendment was adopted effective January 1, 2021. As of March 31, 2021, the Company does not have any equity method transactions or options to purchases securities that would fall under this update; therefore, there is no impact to the Company at this time. Future adoption of New Accounting Standards 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 December 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as amended by ASU 2019-09, Financial Services —Insurance (Topic 944). The new guidance (i) prescribes the discount rate to be used in measuring the liability for future policy benefits for traditional and limited payment long-duration contracts, and requires assumptions for those liability valuations to be updated after contract inception, (ii) requires more market-based product guarantees on certain separate account and other account balance long-duration contracts to be accounted for at fair value, (iii) simplifies the amortization of DAC for virtually all long-duration contracts, and (iv) introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures. The new standard becomes effective after December 15, 2023 , and interim periods within fiscal years beginning after December 15, 2024 for companies eligible as smaller reporting companies . Early application of the amendments in Update 2018-12 is permitted. 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. |
Assets and Liabilities Associ_2
Assets and Liabilities Associated with Business Held for Sale (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Assets and Liabilities Discontinued Operations | The table below summarizes the assets and liabilities that are included in discontinued operations as of March 31, 2021 and as of December 31, 2020: As of March 31, As of December 31, 2021 2020 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 33,614 $ 33,161 Reinsurance recoverables 1,057,488 1,061,979 Premiums receivable 31,379 23,643 Total assets held for sale in the Consolidated Balance Sheets $ 1,122,481 $ 1,118,783 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 600,534 $ 594,710 Policy claims 24,029 35,302 Deposit-type contracts 489,166 482,966 Advance premiums 335 71 Accounts payable and accrued expenses 1,618 1,263 Total liabilities held for sale in the Consolidated Balance Sheets $ 1,115,682 $ 1,114,312 |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Schedule of Available for Sale Investments | Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value March 31, 2021: Fixed maturities: U.S. government obligations $ 2,050,526 $ 72,518 $ 3,941 $ 2,119,103 Foreign governments 1,601,810 — 59,622 1,542,188 Mortgage-backed securities 25,177,296 801,599 150,316 25,828,579 Collateralized loan obligations 294,652,723 7,445,031 836,415 301,261,339 States and political subdivisions -- general obligations 106,228 11,102 — 117,330 States and political subdivisions -- special revenue 5,288,295 839,535 4,703 6,123,127 Trust preferred 2,218,142 — 65,604 2,152,538 Corporate 153,045,355 1,350,165 470,690 153,924,830 Total fixed maturities $ 484,140,375 $ 10,519,950 $ 1,591,291 $ 493,069,034 Mortgage loans on real estate, held for investment 109,776,321 — — 109,776,321 Derivatives 12,582,719 2,021,763 5,131,084 9,473,398 Equity securities 42,089,014 4,152 — 42,093,166 Other invested assets 25,606,108 — — 25,606,108 Investment escrow 3,317,043 — — 3,317,043 Preferred stock 4,300,591 — — 4,300,591 Notes receivable 5,737,608 — — 5,737,608 Policy loans 48,551 — — 48,551 Total investments $ 687,598,330 $ 12,545,865 $ 6,722,375 $ 693,421,820 December 31, 2020: Fixed maturities: U.S. government obligations 5,744,221 $ 426,427 $ 5,665 6,164,983 Mortgage-backed securities 14,638,299 276,219 157,104 14,757,414 Asset-backed securities 216,500,672 5,623,083 350,146 221,773,609 States and political subdivisions -- general obligations 106,528 10,802 — 117,330 States and political subdivisions -- special revenue 5,293,365 908,986 147 6,202,204 Trust preferred 2,218,142 66,674 — 2,284,816 Corporate 124,654,841 1,379,513 171,352 125,863,002 Total fixed maturities 369,156,068 8,691,704 684,414 377,163,358 Mortgage loans on real estate, held for investment 94,989,970 — — 94,989,970 Derivatives 8,532,252 3,257,069 428,287 11,361,034 Other invested assets 21,897,130 — — 21,897,130 Investment escrow 3,174,047 — — 3,174,047 Preferred stock 3,897,980 — — 3,897,980 Notes receivable 5,665,487 — — 5,665,487 Policy loans 45,573 — — 45,573 Total investments $ 507,358,507 $ 11,948,773 $ 1,112,701 $ 518,194,579 |
Schedule of credit ratings of fixed maturity securities | March 31, 2021 December 31, 2020 Carrying Carrying Value Percent Value Percent AAA and U.S. Government $ 16,259,820 3.3 % $ 3,070,750 0.8 % AA 60,286,560 12.2 5,818,163 1.5 A 8,295,924 1.7 49,445,266 13.1 BBB 367,244,456 74.5 247,635,730 65.7 Total investment grade 452,086,760 91.7 305,969,909 81.1 BB and other 40,982,274 8.3 71,193,449 18.9 Total $ 493,069,034 100.0 % $ 377,163,358 100.0 % |
Schedule of Unrealized Loss of Securities | The following table summarizes, for all fixed maturity securities in an unrealized loss position as of March 31, 2021 and December 31, 2020, the estimated fair value, pre-tax gross unrealized loss, and number of securities by consecutive months they have been in an unrealized loss position. March 31, 2021 December 31, 2020 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 $ 181,710 $ 856 1 $ 54,910 $ 180 2 Foreign governments 1,542,188 59,622 2 — — — Mortgage-backed securities 6,199,138 150,316 8 5,707,617 157,104 5 Collateralized loan obligations 49,601,561 783,611 81 14,878,370 246,969 19 States and political subdivisions -- special revenue 773,149 4,703 13 5,584 147 1 Trust preferred 2,152,538 65,604 3 — — — Corporate 12,024,859 411,096 18 3,859,616 104,262 7 Greater than 12 months: U.S. government obligations 75,560 3,085 3 119,700 5,485 4 Collateralized loan obligations 2,906,839 52,804 3 7,020,479 103,177 6 Corporate 411,218 59,594 4 287,473 67,090 3 Total fixed maturities $ 75,868,760 $ 1,591,291 136 $ 31,933,749 $ 684,414 47 (1) We may reflect a security in more than one aging category based on various purchase dates. |
Schedule of Fixed Maturities | Amortized Estimated Cost Fair Value Due in one year or less $ 39,416,008 $ 39,490,973 Due after one year through five years 81,750,979 82,444,187 Due after five years through ten years 123,414,500 126,327,202 Due after ten years through twenty years 189,358,612 193,167,354 Due after twenty years 50,200,276 51,639,318 $ 484,140,375 $ 493,069,034 |
Schedule of investment in mortgage loans | March 31, 2021 December 31, 2020 Loan-to-Value Ratio: 0%-59.99% $ 62,245,607 $ 49,279,601 60%-69.99% 10,123,145 22,349,295 70%-79.99% 15,724,612 23,361,074 80% or greater 21,682,957 — Total mortgage loans $ 109,776,321 $ 94,989,970 |
Components of net investment income | Three months ended March 31, 2021 2020 Fixed maturities $ 3,050,777 $ 1,167,614 Mortgage loans 173,777 2,524 Other 55,813 — Gross investment income 3,280,367 1,170,138 Less: investment (expenses) refund (393,004) 70,840 Investment income, net of expenses $ 2,887,363 $ 1,240,978 |
Mortgage-back securities | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Schedule of Mortgage Loan Activity | March 31, 2021 December 31, 2020 Industrial $ — $ 1,250,000 Commercial mortgage loan - multi-family 56,992,974 66,916,151 Other 52,783,347 26,823,819 Total mortgage loans $ 109,776,321 $ 94,989,970 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of the derivatives not designated as hedges | March 31, 2021 December 31, 2020 Location in the Consolidated Derivatives Not Designated Statement of Notional Number of Estimated Notional Number of Estimated as Hedging Instruments Balance Sheets Amount Contracts Fair Value Amount Contracts Fair Value Equity-indexed options Derivatives $ 369,592,465 328 $ 8,769,901 $ 272,853,853 252 $ 11,361,034 Equity-indexed Deposit-type 364,115,193 2,826 89,030,443 311,964,195 2,101 84,501,492 |
Summary of embedded derivatives related to the funds withheld provision | March 31, 2021 December 31, 2020 Book Value Market Value Total Return Book Value Market Value Total Return Portfolio Assets Assets Swap Value Assets Assets Swap Value Ironbound $ 99,580,060 $ 100,714,751 $ (1,134,691) $ 98,714,156 $ 99,747,812 $ (1,033,656) SDA 30,008,920 30,177,243 (168,323) 27,224,279 27,479,836 (255,557) US Alliance 36,986,356 37,401,248 (414,892) 35,707,207 36,360,501 (653,294) Crestline Re SP1 94,802,319 95,590,421 (788,102) 62,162,766 63,130,867 (968,101) Total $ 261,377,655 $ 263,883,663 $ (2,506,008) $ 223,808,408 $ 226,719,016 $ (2,910,608) |
Fair Values of Financial Inst_2
Fair Values of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Investments, All Other Investments [Abstract] | |
Schedule of Financial Instruments at Fair Value Measured on a Recurring Basis | Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value March 31, 2021 Financial assets Fixed maturity securities: U.S. government obligations $ — $ 2,119,103 $ — $ 2,119,103 Foreign governments 1,542,188 1,542,188 Mortgage-backed securities — 25,828,579 — 25,828,579 Collateralized loan obligations — 301,261,339 — 301,261,339 States and political subdivisions — general obligations — 117,330 — 117,330 States and political subdivisions — special revenue — 6,123,127 — 6,123,127 Trust preferred — 2,152,538 — 2,152,538 Corporate — 30,912,098 123,012,732 153,924,830 Total fixed maturity securities — 370,056,302 123,012,732 493,069,034 Mortgage loans on real estate, held for investment — — 109,776,321 109,776,321 Derivatives — 9,473,398 — 9,473,398 Equity securities — 42,093,166 — 42,093,166 Other invested assets — — 25,606,108 25,606,108 Investment escrow — 3,317,043 — 3,317,043 Preferred stock — — 4,300,591 4,300,591 Notes receivable — 5,737,608 — 5,737,608 Policy loans — — 48,551 48,551 Total Investments $ — $ 430,677,517 $ 262,744,303 $ 693,421,820 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 89,030,443 89,030,443 December 31, 2020 Fixed maturity securities: U.S. government obligations $ — $ 6,164,983 $ — $ 6,164,983 Mortgage-backed securities — 14,757,414 — 14,757,414 Collateralized loan obligations — 221,773,609 — 221,773,609 States and political subdivisions — general obligations — 117,330 — 117,330 States and political subdivisions — special revenue — 6,202,204 — 6,202,204 Trust preferred — 2,284,816 — 2,284,816 Corporate — 18,608,995 107,254,007 125,863,002 Total fixed maturity securities — 269,909,351 107,254,007 377,163,358 Mortgage loans on real estate, held for investment — — 94,989,970 94,989,970 Derivatives — 11,361,034 — 11,361,034 Other invested assets — — 21,897,130 21,897,130 Investment escrow — 3,174,047 — 3,174,047 Preferred stock — — 3,897,980 3,897,980 Notes receivable — 5,665,487 — 5,665,487 Policy loans — — 45,573 45,573 Total Investments $ — $ 290,109,919 $ 228,084,660 $ 518,194,579 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 84,501,492 84,501,492 |
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 March 31, 2021 and December 31, 2020, respectively: March 31, 2021 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 $ 48,551 $ — $ — $ 48,551 $ 48,551 Cash and cash equivalents 100,927,152 61,217,719 39,709,433 — 100,927,152 Liabilities: Policyholder deposits (Deposit-type contracts) 714,300,232 — — 714,300,232 714,300,232 December 31, 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 $ 45,573 $ — $ — $ 45,573 $ 45,573 Cash and cash equivalents 151,679,274 100,566,580 51,112,694 — 151,679,274 Liabilities: Policyholder deposits (Deposit-type contracts) 597,868,472 — — 597,868,472 597,868,472 |
Schedule of Recurring Basis Using Level Three Inputs | As of As of December 31, March 31, 2020 Additions Sales 2021 Assets Fixed maturities $ 107,254,007 $ 30,204,134 $ 14,445,409 123,012,732 Mortgage loans on real estate, held for investment 94,989,970 16,446,861 1,660,510 109,776,321 Other invested assets 21,897,130 5,016,716 1,307,738 25,606,108 Preferred stock 3,897,980 402,611 — 4,300,591 Policy loans 45,573 2,978 — 48,551 Total Investments $ 228,084,660 $ 52,073,300 $ 17,413,657 $ 262,744,303 As of As of December 31, Valuation December 31, 2019 Additions Sales Allowance Impairment 2020 Assets Fixed maturities $ — $ 107,254,007 $ — $ — $ — $ 107,254,007 Mortgage loans on real estate, held for investment 13,810,041 99,356,435 18,176,506 — — 94,989,970 Other invested assets 2,468,947 74,722,714 54,517,558 (776,973) 21,897,130 Preferred stock 500,000 3,897,980 — — (500,000) 3,897,980 Policy loans 106,014 — 60,441 — — 45,573 Total Investments $ 16,885,002 $ 285,231,136 $ 72,754,505 $ (776,973) $ (500,000) $ 228,084,660 |
Summary of unobservable inputs for AFS and trading securities | March 31, 2021 (In millions, except for percentages) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $89.0 Option Budget Method Nonperformance risk 0.3% 1.1% 0.6% Decrease Option budget 1.4% 3.4% 2.5% Increase Surrender rate 0.5% 15% (base) 7.3% Decrease * Weighted by account value December 31, 2020 (In millions, except for percentages) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $84.5 Option Budget Method Nonperformance risk 0.3% 1.3% 0.7% Decrease Option budget 2.6% 3.4% 2.7% Increase Surrender rate 0.5% 15% (base) 7.6% Decrease * Weighted by account value |
Income Tax Matters (Tables)
Income Tax Matters (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets and liabilities | Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2021 and December 31, 2020 were as follows: March 31, 2021 December 31, 2020 Deferred tax assets: Loss carryforwards $ 1,945,126 $ 1,556,855 Capitalized costs 162,476 174,364 Stock option granted 65,796 14,270 Unrealized losses on investments 1,478,807 1,534,332 Policy acquisition costs 2,308,354 2,243,267 Charitable contribution carryforward 2,490 2,490 Sec 163(j) limitation 155,492 153,809 Benefit reserves 4,316,821 3,568,914 Total deferred tax assets 10,435,362 9,248,301 Less valuation allowance (8,403,415) (7,001,687) Total deferred tax assets, net of valuation allowance 2,031,947 2,246,614 Deferred tax liabilities: Unrealized losses on investments 1,774,671 1,994,232 Due premiums 81,789 81,789 Intangible assets 147,000 147,000 Bond Discount 24,942 20,556 Property and equipment 3,545 3,037 Total deferred tax liabilities 2,031,947 2,246,614 Net deferred tax assets $ — $ — |
Schedule of effective tax rate reconciliation | There was income tax expense of $1,432,348 and $407,916 for the three months ended March 31, 2021 and 2020, respectively. 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: Three months ended March 31, 2021 2020 Computed expected income tax benefit $ (35,304) $ 4,610,839 Increase (reduction) in income taxes resulting from: IMR and reinsurance 67,045 — Nondeductible expenses 1,454 (55,233) Change in valuation allowance 1,401,730 (4,147,690) Dividends received deduction (2,577) — Subtotal of increases 1,467,652 (4,202,923) Tax expense $ 1,432,348 $ 407,916 |
Reinsurance (Tables)
Reinsurance (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Reinsurance Disclosures [Abstract] | |
Summary of significant reinsurance amounts | A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and, 2020, respectively, are as follows: March 31, 2021 December 31, 2020 Assets: Reinsurance recoverables $ 38,715,577 $ 32,146,042 Liabilities: Deposit-type contracts Direct $ 714,300,232 597,868,472 Reinsurance ceded (448,843,239) (405,981,150) Retained deposit-type contracts $ 265,456,993 $ 191,887,322 Three months ended March 31, 2021 2020 Premiums Direct $ 48,087 $ 231,674 Reinsurance ceded (48,087) (231,674) Total Premiums $ — $ — Future policy and other policy benefits Direct $ 6,856 31,287 Reinsurance ceded (6,856) (31,287) Total future policy and other policy benefits $ — $ — |
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 March 31, 2021: 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 Optimum Re Insurance Company A $ — $ — $ 524,932 $ — $ 524,932 Sagicor Life Insurance Company A- — 143,750 11,269,714 273,495 11,139,969 SDA Annuity & Life Re NR — — 3,714,765 — 3,714,765 Crestline SP1 NR — — 16,319,419 — 16,319,419 US Alliance Life and Security Company NR — — 7,045,473 28,981 7,016,492 $ — $ 143,750 $ 38,874,303 $ 302,476 $ 38,715,577 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, 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 Optimum Re Insurance Company A $ — $ — $ 524,734 $ — $ 524,734 Sagicor Life Insurance Company A- — 141,107 11,285,364 276,596 11,149,875 SDA Annuity & Life Re NR — — 3,540,697 — 3,540,697 Crestline SP1 NR — — 9,695,427 — 9,695,427 US Alliance Life and Security Company NR — — 7,264,229 28,920 7,235,309 $ — $ 141,107 $ 32,310,451 $ 305,516 $ 32,146,042 |
Schedule of ceding commissions from the reinsurers | Three months ended March 31, 2021 2020 Reinsurer Effective Date Gross Ceding Commission Expense (1) Interest on Ceding Commissions Earned Gross Ceding Commission Expense Interest on Ceding Commissions Earned Ironbound Reinsurance Company Limited July 2019 $ — $ 14,457 $ 54,445 $ 122,216 $ 674,645 $ 673,612 $ 45,369 $ 95,740 SDA Annuity & Life Re November 2019 — 24,317 21,712 46,072 298,982 548,464 13,526 7,153 US Alliance Life and Security Company (2) November 2019 2,178 20,735 15,339 66,606 — — — — Crestline SP1 July 2020 2,345,135 4,678,207 49,855 215,762 — — — — $ 2,347,313 $ 4,737,716 $ 141,351 $ 450,656 $ 973,627 $ 1,222,076 $ 58,895 $ 102,893 (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 ceding commissions deferred on each reinsurance transaction | March 31, 2021 December 31, 2020 Reinsurer Effective Date Deferred Ceding Commission Deferred Ceding Commission US Alliance Life and Security Company (1) September 2017 $ 169,726 $ 172,297 Unified Life Insurance Company (1) July 2018 269,306 276,935 Ironbound Reinsurance Company Limited (2) July 2019 5,634,707 5,642,095 SDA Annuity & Life Re (2) November 2019 2,662,423 2,703,496 US Alliance Life and Security Company (3) April 2020 2,446,254 2,472,559 Crestline SP1 July 2020 9,414,267 6,931,375 $ 20,596,683 $ 18,198,757 (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 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. |
Schedule of retained and reinsurance balance sheets | March 31, 2021 December 31, 2020 Retained Reinsurance Consolidated Retained Reinsurance Consolidated Assets Total investments 305,022,890 388,398,930 693,421,820 185,367,430 332,827,149 518,194,579 Cash and cash equivalents 72,613,680 28,313,472 100,927,152 102,334,579 49,344,695 151,679,274 Accrued investment income 3,193,353 5,901,740 9,095,093 1,955,938 4,850,898 6,806,836 Deferred acquisition costs, net 19,676,745 — 19,676,745 13,456,303 — 13,456,303 Reinsurance recoverables (See Note 8) — 38,715,577 38,715,577 — 32,146,042 32,146,042 Other assets 2,918,643 1,436,019 4,354,662 2,685,341 1,432,384 4,117,725 Total assets $ 403,425,311 $ 462,765,738 $ 866,191,049 $ 305,799,591 $ 420,601,168 $ 726,400,759 Liabilities and Stockholders’ Equity Liabilities: Policyholder liabilities $ 265,456,993 $ 461,795,179 $ 727,252,172 $ 191,887,322 $ 418,921,167 $ 610,808,489 Deferred gain on coinsurance transactions 20,596,683 — 20,596,683 18,198,757 — 18,198,757 Other liabilities 31,739,452 970,559 32,710,011 9,384,013 1,680,001 11,064,014 Total liabilities $ 317,793,128 $ 462,765,738 $ 780,558,866 $ 219,470,092 $ 420,601,168 $ 640,071,260 Stockholders’ Equity: Voting common stock 3,738 — 3,738 3,738 — 3,738 Additional paid-in capital 133,678,612 — 133,678,612 133,417,272 — 133,417,272 Accumulated deficit (55,122,540) — (55,122,540) (53,522,078) — (53,522,078) Accumulated other comprehensive income 7,072,373 — 7,072,373 6,430,567 — 6,430,567 Total Midwest Holding Inc.'s stockholders' equity $ 85,632,183 $ — $ 85,632,183 $ 86,329,499 $ — $ 86,329,499 Total liabilities and stockholders' equity $ 403,425,311 $ 462,765,738 $ 866,191,049 $ 305,799,591 $ 420,601,168 $ 726,400,759 |
Long-Term Incentive Plan (Table
Long-Term Incentive Plan (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of remaining non-vested shares | March 31, 2021 December 31, 2020 Stock Options/ (1) Stock Options (1) Beginning balance 100,972 17,900 Options granted under the 2019 Plan — 68,025 Restricted stock granted under the 2019 Plan — 18,597 Forfeited — (3,350) Vested (4,650) (200) Ending Balance 96,322 100,972 Reflects reverse stock split of 500:1 as of August 27, 2020. |
Deposit-Type Contracts (Tables)
Deposit-Type Contracts (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Deposit Type Contracts [Abstract] | |
Schedule of deposit-type contracts | March 31, 2021 December 31, 2020 Beginning balance $ 597,868,472 $ 171,168,785 US Alliance (655,762) (3,307,587) Ironbound Reinsurance Company Limited 1,522,105 6,080,196 SDA Annuity & Life Re (includes MVA adjustment and embedded derivative) (344,905) 3,053,160 Crestline SP1 (2,492,215) 3,606,833 Deposits received 123,653,931 415,561,302 Investment earnings (includes embedded derivative) (2,346,402) 4,214,828 Withdrawals (2,904,992) (2,509,045) Ending balance $ 714,300,232 $ 597,868,472 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information as of March 31, 2021 and December 31, 2020, are as follows: As of As of Leases Classification March 31, 2021 December 31, 2020 Assets Operating Operating lease right-of-use assets $ 317,715 $ 348,198 Liabilities Operating lease Operating lease liabilities $ 364,128 $ 396,911 |
Schedule of Components of Lease Expenses | Our operating and finance leases expenses for the three months ended March 31, 2021 and 2020, were as follows: Three months ended March 31, Leases Classification 2021 2020 Operating General and administrative expense $ 1,233 $ 2,092 Finance lease cost: Amortization expense — 2,913 Interest expense — 111 |
Schedule of Finance and Operating Leases Minimum | Minimum contractual obligations for our operating leases as of March 31, 2021, are as follows: Operating Leases 2021 (excluding three months ended March 31, 2021) $ 122,891 2022 156,608 2023 161,674 2024 13,508 Total remaining lease payments $ 454,681 |
Schedule of Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases was as follows: Three months ended March 31, 2021 2020 Cash payments Operating cash flows from operating leases $ (2,300) $ (1,035) Operating cash flows from finance leases — 1,164 |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Stockholders' Equity Note [Abstract] | |
Summary of Balance of and Changes in Each Component of AOCI | Unrealized Unrealized Accumulated other Balance at December 31, 2019 $ 473,399 $ 146,185 $ 619,584 Other comprehensive income before Reclassifications 7,398,432 — 7,398,432 Unrealized gains on foreign currency — (146,185) (146,185) Less: Reclassification adjustments for losses realized in net income (1,441,264) — (1,441,264) Balance at December 31, 2020 6,430,567 — 6,430,567 Other comprehensive income (loss) before reclassifications, net of tax 962,880 — 962,880 Less: Reclassification adjustments for losses realized in net income, net of tax (321,074) — (321,074) Balance at March 31, 2021 $ 7,072,373 $ — $ 7,072,373 |
Deferred Acquisition Costs (Tab
Deferred Acquisition Costs (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Deferred Acquisition Costs | |
Schedule of Deferred Acquisition Costs | March 31, 2021 December 31, 2020 Beginning balance $ 13,456,303 $ — Additions 6,681,991 13,919,206 Amortization (502,737) (670,233) Interest 36,855 138,295 Impact of unrealized investment losses 4,333 69,035 Ending Balance $ 19,676,745 $ 13,456,303 |
Nature of Operations and Basi_3
Nature of Operations and Basis of Presentation (Narrative) (Details) | Dec. 21, 2020USD ($) | Dec. 16, 2020USD ($) | Nov. 03, 2020USD ($) | Sep. 28, 2020USD ($) | Jun. 15, 2020USD ($) | Apr. 24, 2020USD ($)$ / sharesshares | Mar. 30, 2020USD ($) | Dec. 31, 2020USD ($) | Mar. 31, 2021USD ($)contractplan$ / sharesshares | Mar. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2020USD ($)segmentproductplan | Mar. 31, 2021GBP (£) | Mar. 31, 2021EUR (€) | Mar. 31, 2021USD ($)$ / shares | Jan. 31, 2021 | Dec. 31, 2020GBP (£)security | Dec. 31, 2020EUR (€)security | Dec. 31, 2020USD ($)security$ / shares | Aug. 10, 2020$ / shares | Jun. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Apr. 02, 2019 |
Shares issued | shares | 231,655 | |||||||||||||||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.001 | $ 0.001 | ||||||||||||||||||||
Share Price | $ / shares | $ 22.50 | |||||||||||||||||||||
Proceeds from issuance of common shares | $ 5,227,000 | |||||||||||||||||||||
Proceeds from IPO | $ 70,000,000 | |||||||||||||||||||||
Number of reporting segment | segment | 1 | |||||||||||||||||||||
Number of Products | product | 5 | |||||||||||||||||||||
Number of Bonus Plans | plan | 2 | |||||||||||||||||||||
Valuation allowances on mortgage loans | $ 0 | $ 0 | ||||||||||||||||||||
Escrow Deposit | 3,317,043 | 3,174,047 | ||||||||||||||||||||
Fund investments | $ 3,900,000 | $ 15,800,000 | $ 5,159,712 | $ 2,715,965 | ||||||||||||||||||
Other investments in fund | 19,700,000 | |||||||||||||||||||||
Other invested assets | 25,606,108 | $ 21,897,130 | ||||||||||||||||||||
Impairment allowance on investment | 0 | $ 0 | $ 35,000 | |||||||||||||||||||
Number of securities | security | 1 | 1 | 1 | |||||||||||||||||||
Valuation Allowance on Leased Asset | $ 776,973 | $ 776,973 | ||||||||||||||||||||
Equity securities | 42,093,166 | |||||||||||||||||||||
Impairment on preferred stock | 0 | 500,000 | ||||||||||||||||||||
Notes receivable | 5,737,608 | 5,665,487 | ||||||||||||||||||||
Valuation allowance on policy loans | 0 | |||||||||||||||||||||
Realized gains (losses) on foreign exchange translation | (75,000) | 45,000 | ||||||||||||||||||||
Money market investments | 61,200,000 | 100,600,000 | ||||||||||||||||||||
Depreciation | 12,334 | 10,316 | ||||||||||||||||||||
Accumulated depreciation | 1,035,668 | 1,023,334 | ||||||||||||||||||||
Reinsurance recoverables on unpaid losses, allowance | 0 | 0 | ||||||||||||||||||||
Unrealized gains | 2,500,000 | 2,900,000 | ||||||||||||||||||||
Embedded derivative gains | 400,000 | |||||||||||||||||||||
Embedded derivative losses | $ 400,000 | 2,900,000 | ||||||||||||||||||||
Number of reinsurance contracts | contract | 4 | |||||||||||||||||||||
Unrealized gains on investments, net of taxes | $ 641,806 | 5,957,168 | ||||||||||||||||||||
Basic earnings per share | $ / shares | $ (0.43) | $ 10.55 | ||||||||||||||||||||
Weighted Average Number of Shares Outstanding, Basic (in shares) | shares | 3,737,564 | 2,042,670 | ||||||||||||||||||||
Weighted average number of shares outstanding, Diluted (in shares) | shares | 3,737,564 | 2,065,045 | ||||||||||||||||||||
Ascona Group Holdings Ltd | ||||||||||||||||||||||
Preferred equity | $ 3,345,022 | |||||||||||||||||||||
United Kingdom, Pounds | ||||||||||||||||||||||
Cash held in custody accounts | ÂŁ 47,621 | 65,703 | ÂŁ 505,349 | 690,787 | ||||||||||||||||||
Euro Member Countries, Euro | ||||||||||||||||||||||
Cash held in custody accounts | € 527,981 | $ 620,536 | € 87,633 | $ 107,000 | ||||||||||||||||||
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 | |||||||||||||||||||||
Voting common share | ||||||||||||||||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.001 | |||||||||||||||||||||
Non-voting common shares | ||||||||||||||||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.001 | |||||||||||||||||||||
SRC1 | ||||||||||||||||||||||
Capital contribution | $ 3,000,000 | |||||||||||||||||||||
Embedded derivative gains | $ 400,000 | $ 23,200,000 | ||||||||||||||||||||
Unrealized gains on investments, net of taxes | $ 5,900,000 | 5,100,000 | ||||||||||||||||||||
Basic earnings per share | $ / shares | $ (0.43) | $ 10.55 | ||||||||||||||||||||
Basic Earnings Per Share, Excluding Embedded Derivative Gain | $ / shares | $ (0.55) | $ (0.83) | ||||||||||||||||||||
Crestline Assurance Holdings LLC | Securities Purchase Agreement | ||||||||||||||||||||||
Shares issued | shares | 444,444 | |||||||||||||||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.001 | |||||||||||||||||||||
Share Price | $ / shares | $ 22.50 | |||||||||||||||||||||
Proceeds from issuance of common shares | $ 10,000,000 | |||||||||||||||||||||
Multi Year Guaranteed Annuity | ||||||||||||||||||||||
Number of Products | plan | 2 | |||||||||||||||||||||
Multi Year Guaranteed Annuity | Crestline Assurance Holdings LLC | Master Letter Agreement | ||||||||||||||||||||||
Percentage of indemnity coinsurance | 25.00% | |||||||||||||||||||||
Fixed Index Annuity | Crestline Assurance Holdings LLC | Master Letter Agreement | ||||||||||||||||||||||
Percentage of indemnity coinsurance | 40.00% | |||||||||||||||||||||
Preferred Stock | ||||||||||||||||||||||
Impairment allowance on investment | $ 500,000 | |||||||||||||||||||||
Equity securities | $ 500,000 | |||||||||||||||||||||
1505 Capital LLC | ||||||||||||||||||||||
Business Combination, Consideration Transferred | $ 500,000 | |||||||||||||||||||||
American Life | PF Collinwood Holdings LLC | ||||||||||||||||||||||
Ownership (as a percent) | 100.00% | |||||||||||||||||||||
American Life | Crestline Assurance Holdings LLC | ||||||||||||||||||||||
Percentage of Voting Common Stock | 11.90% | 11.90% | 11.90% | |||||||||||||||||||
1505 Capital LLC | ||||||||||||||||||||||
Ownership percentage acquired | 49.00% | 49.00% | 49.00% | 49.00% | 51.00% | |||||||||||||||||
American Life | Ascona Asset Holding LLC | ||||||||||||||||||||||
Ownership interest | 74.00% | 74.00% | 74.00% | |||||||||||||||||||
American Life | Crestline Assurance Holdings LLC | ||||||||||||||||||||||
Capital contribution | $ 5,000,000 | |||||||||||||||||||||
Seneca Reinsurance Company, LLC | ||||||||||||||||||||||
Contributions made | $ 300,000 | |||||||||||||||||||||
Ownership percentage acquired | 100.00% | |||||||||||||||||||||
Crestline Assurance Holdings LLC | Ascona Asset Holding LLC | ||||||||||||||||||||||
Ownership interest | 26.00% | 26.00% | 26.00% |
Assets and Liabilities Associ_3
Assets and Liabilities Associated with Business Held for Sale (Narrative) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Percentage of indemnity reinsurance basis of liabilities and obligations | 100.00% | |
Ceding commission | $ 3,500,000 | |
Percentage of indemnity policies | 90.00% | 81.00% |
Earned Ceding Commission | $ 450,656 | $ 102,893 |
Unified Life Insurance Company [Member] | ||
Earned Ceding Commission | $ 7,628 | $ 67,451 |
Assets and Liabilities Associ_4
Assets and Liabilities Associated with Business Held for Sale (Schedule of Assets and Liabilities Discontinued Operations) (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Carrying amounts of major classes of assets included as part of discontinued operations: | ||
Policy loans | $ 33,614 | $ 33,161 |
Reinsurance recoverables | 1,057,488 | 1,061,979 |
Premiums receivable | 31,379 | 23,643 |
Total assets held for sale in the Consolidated Balance Sheets | 1,122,481 | 1,118,783 |
Carrying amounts of major classes of liabilities included as part of discontinued operations: | ||
Benefit reserves | 600,534 | 594,710 |
Policy claims | 24,029 | 35,302 |
Deposit-type contracts | 489,166 | 482,966 |
Advance premiums | 335 | 71 |
Accounts payable and accrued expenses | 1,618 | 1,263 |
Total liabilities held for sale in the Consolidated Balance Sheets | $ 1,115,682 | $ 1,114,312 |
Non-controlling Interest (Detai
Non-controlling Interest (Details) - USD ($) | Jun. 15, 2020 | Apr. 02, 2019 | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 |
1505 Capital LLC | |||||
Noncontrolling Interest [Line Items] | |||||
Business Combination, Consideration Transferred | $ 500,000 | ||||
1505 Capital LLC | |||||
Noncontrolling Interest [Line Items] | |||||
Ownership percentage acquired | 49.00% | 51.00% | 49.00% | ||
Capital units acquired, purchase price | $ 1,000,000 | ||||
Noncontrolling interest | $ 0 | $ 186,977 |
Investments (Schedule of Amorti
Investments (Schedule of Amortized Cost and Estimated Fair Value of Investments) (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Cost or Amortized Cost | $ 484,140,375 | $ 369,156,068 |
Total fixed maturities | 493,069,034 | 377,163,358 |
Mortgage loans on real estate, held for investment | 109,776,321 | 94,989,970 |
Derivatives, Cost | 12,582,719 | 8,532,252 |
Derivatives, Gross Unrealized Gains | 2,021,763 | 3,257,069 |
Derivatives, Gross Unrealized Losses | 5,131,084 | 428,287 |
Estimated Fair Value | 9,473,398 | 11,361,034 |
Equity securities, Amortized Cost | 42,089,014 | |
Equity securities, Gross Unrealized Gains | 4,152 | |
Equity securities | 42,093,166 | |
Other invested assets, Cost | 25,606,108 | |
Other invested assets | 25,606,108 | 21,897,130 |
Investment escrow | 3,317,043 | 3,174,047 |
Preferred stock | 4,300,591 | 3,897,980 |
Notes receivable | 5,737,608 | 5,665,487 |
Policy Loans | 48,551 | 45,573 |
Total investments, Amortized Cost | 687,598,330 | 507,358,507 |
Investments, Gross Unrealized Gains | 12,545,865 | 11,948,773 |
Investments, Gross Unrealized Losses | 6,722,375 | 1,112,701 |
Investments, Fair Value Disclosure | 693,421,820 | 518,194,579 |
Fixed Maturities | ||
Cost or Amortized Cost | 484,140,375 | 369,156,068 |
Gross Unrealized Gains | 10,519,950 | 8,691,704 |
Gross Unrealized Losses | 1,591,291 | 684,414 |
Total fixed maturities | 493,069,034 | 377,163,358 |
U.S. government obligations | Fixed Maturities | ||
Cost or Amortized Cost | 2,050,526 | 5,744,221 |
Gross Unrealized Gains | 72,518 | 426,427 |
Gross Unrealized Losses | 3,941 | 5,665 |
Total fixed maturities | 2,119,103 | 6,164,983 |
Foreign governments | Fixed Maturities | ||
Cost or Amortized Cost | 1,601,810 | |
Gross Unrealized Losses | 59,622 | |
Total fixed maturities | 1,542,188 | |
Mortgage-back securities | Fixed Maturities | ||
Cost or Amortized Cost | 25,177,296 | 14,638,299 |
Gross Unrealized Gains | 801,599 | 276,219 |
Gross Unrealized Losses | 150,316 | 157,104 |
Total fixed maturities | 25,828,579 | 14,757,414 |
Collateralized loan obligations | Fixed Maturities | ||
Cost or Amortized Cost | 294,652,723 | |
Gross Unrealized Gains | 7,445,031 | |
Gross Unrealized Losses | 836,415 | |
Total fixed maturities | 301,261,339 | 14,757,414 |
Asset-backed securities | Fixed Maturities | ||
Cost or Amortized Cost | 216,500,672 | |
Gross Unrealized Gains | 5,623,083 | |
Gross Unrealized Losses | 350,146 | |
Total fixed maturities | 221,773,609 | |
States and Political Subdivisions - general obligations | Fixed Maturities | ||
Cost or Amortized Cost | 106,228 | 106,528 |
Gross Unrealized Gains | 11,102 | 10,802 |
Total fixed maturities | 117,330 | 117,330 |
States and Political Subdivisions - special revenue | Fixed Maturities | ||
Cost or Amortized Cost | 5,288,295 | 5,293,365 |
Gross Unrealized Gains | 839,535 | 908,986 |
Gross Unrealized Losses | 4,703 | 147 |
Total fixed maturities | 6,123,127 | 6,202,204 |
Trust preferred | Fixed Maturities | ||
Cost or Amortized Cost | 2,218,142 | 2,218,142 |
Gross Unrealized Gains | 66,674 | |
Gross Unrealized Losses | 65,604 | |
Total fixed maturities | 2,152,538 | 2,284,816 |
Corporate | Fixed Maturities | ||
Cost or Amortized Cost | 153,045,355 | 124,654,841 |
Gross Unrealized Gains | 1,350,165 | 1,379,513 |
Gross Unrealized Losses | 470,690 | 171,352 |
Total fixed maturities | $ 153,924,830 | $ 125,863,002 |
Investments (Schedule of Credit
Investments (Schedule of Credit Ratings of Fixed Maturity Securities) (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 493,069,034 | $ 377,163,358 |
Fixed Maturities | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 493,069,034 | $ 377,163,358 |
Percent | 100.00% | 100.00% |
Fixed Maturities | Investment grade | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 452,086,760 | $ 305,969,909 |
Percent | 91.70% | 81.10% |
Fixed Maturities | Investment grade | AAA and U.S. Government | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 16,259,820 | $ 3,070,750 |
Percent | 3.30% | 0.80% |
Fixed Maturities | Investment grade | AA | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 60,286,560 | $ 5,818,163 |
Percent | 12.20% | 1.50% |
Fixed Maturities | Investment grade | A | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 8,295,924 | $ 49,445,266 |
Percent | 1.70% | 13.10% |
Fixed Maturities | Investment grade | BBB | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 367,244,456 | $ 247,635,730 |
Percent | 74.50% | 65.70% |
Fixed Maturities | Non investment grade | BB and other | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 40,982,274 | $ 71,193,449 |
Percent | 8.30% | 18.90% |
Investments (Schedule of Unreal
Investments (Schedule of Unrealized Loss of Securities) (Details) | Mar. 31, 2021USD ($)security | Dec. 31, 2020USD ($)security |
Number of Securities, Total | 0 | |
Number of securities in unrealized loss position for over two years. | 1 | |
Fixed Maturities | ||
Estimated Fair Value, Total | $ 75,868,760 | $ 31,933,749 |
Gross Unrealized Loss, Total | $ 1,591,291 | $ 684,414 |
Number of Securities, Total | security | 136 | 47 |
U.S. government obligations | Fixed Maturities | ||
Estimated Fair Value, Less than 12 months | $ 181,710 | $ 54,910 |
Gross Unrealized Loss, Less than 12 months | $ 856 | $ 180 |
Number of Securities, Less than 12 months | security | 1 | 2 |
Estimated Fair value, Greater than 12 months | $ 75,560 | $ 119,700 |
Gross Unrealized Loss, Greater than 12 months | $ 3,085 | $ 5,485 |
Number of Securities, Greater than 12 months | security | 3 | 4 |
Foreign governments | Fixed Maturities | ||
Estimated Fair Value, Less than 12 months | $ 1,542,188 | |
Gross Unrealized Loss, Less than 12 months | $ 59,622 | |
Number of Securities, Less than 12 months | security | 2 | |
Mortgage-back securities | Fixed Maturities | ||
Estimated Fair Value, Less than 12 months | $ 6,199,138 | $ 5,707,617 |
Gross Unrealized Loss, Less than 12 months | $ 150,316 | $ 157,104 |
Number of Securities, Less than 12 months | security | 8 | 5 |
Collateralized loan obligations | Fixed Maturities | ||
Estimated Fair Value, Less than 12 months | $ 49,601,561 | $ 14,878,370 |
Gross Unrealized Loss, Less than 12 months | $ 783,611 | $ 246,969 |
Number of Securities, Less than 12 months | security | 81 | 19 |
Estimated Fair value, Greater than 12 months | $ 2,906,839 | $ 7,020,479 |
Gross Unrealized Loss, Greater than 12 months | $ 52,804 | $ 103,177 |
Number of Securities, Greater than 12 months | security | 3 | 6 |
States and Political Subdivisions - special revenue | Fixed Maturities | ||
Estimated Fair Value, Less than 12 months | $ 773,149 | $ 5,584 |
Gross Unrealized Loss, Less than 12 months | $ 4,703 | $ 147 |
Number of Securities, Less than 12 months | security | 13 | 1 |
Trust preferred | Fixed Maturities | ||
Estimated Fair Value, Less than 12 months | $ 2,152,538 | |
Gross Unrealized Loss, Less than 12 months | $ 65,604 | |
Number of Securities, Less than 12 months | security | 3 | |
Corporate | Fixed Maturities | ||
Estimated Fair Value, Less than 12 months | $ 12,024,859 | $ 3,859,616 |
Gross Unrealized Loss, Less than 12 months | $ 411,096 | $ 104,262 |
Number of Securities, Less than 12 months | security | 18 | 7 |
Estimated Fair value, Greater than 12 months | $ 411,218 | $ 287,473 |
Gross Unrealized Loss, Greater than 12 months | $ 59,594 | $ 67,090 |
Number of Securities, Greater than 12 months | security | 4 | 3 |
Investments (Schedule of Fixed
Investments (Schedule of Fixed Maturities) (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Marketable Securities [Abstract] | ||
Amortized Cost, Due in one year or less | $ 39,416,008 | |
Amortized Cost, Due after one year through five years | 81,750,979 | |
Amortized Cost, Due after five years through ten years | 123,414,500 | |
Amortized Cost, Due after ten years through twenty years | 189,358,612 | |
Amortized Cost, Due after twenty years | 50,200,276 | |
Amortized Cost | 484,140,375 | $ 369,156,068 |
Estimated Fair Value, Due in one year or less | 39,490,973 | |
Estimated Fair Value, Due after one year through five years | 82,444,187 | |
Estimated Fair Value, Due after five years through ten years | 126,327,202 | |
Estimated Fair Value, Due after ten years through twenty years | 193,167,354 | |
Estimated Fair Value, Due after twenty years | 51,639,318 | |
Estimated Fair Value | $ 493,069,034 | $ 377,163,358 |
Investments (Schedule of Invest
Investments (Schedule of Investments Measured at Fair Value on a Recurring Basis) (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | $ 109,776,321 | $ 94,989,970 |
Industrial | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 1,250,000 | |
Commercial mortgage loan - multi-family | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 56,992,974 | 66,916,151 |
Other. | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 52,783,347 | 26,823,819 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | $ 109,776,321 | $ 94,989,970 |
Investments (Schedule of Mortga
Investments (Schedule of Mortgage Loan Investments) (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Mortgage loans on real estate, held for investment | $ 109,776,321 | $ 94,989,970 |
0%-59.99% | ||
Mortgage loans on real estate, held for investment | 62,245,607 | 49,279,601 |
60%-69.99% | ||
Mortgage loans on real estate, held for investment | 10,123,145 | 22,349,295 |
70%-79.99% | ||
Mortgage loans on real estate, held for investment | 15,724,612 | $ 23,361,074 |
80% or greater | ||
Mortgage loans on real estate, held for investment | $ 21,682,957 |
Investments (Components of Net
Investments (Components of Net Investment Income) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Gross investment income | $ 3,280,367 | $ 1,170,138 |
Less: investment (expenses) refund | (393,004) | 70,840 |
Investment income, net of expenses | 2,887,363 | 1,240,978 |
Fixed Maturities | ||
Gross investment income | 3,050,777 | 1,167,614 |
Mortgage loans | ||
Gross investment income | 173,777 | $ 2,524 |
Other | ||
Gross investment income | $ 55,813 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2021USD ($)contract | Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($) | Jun. 30, 2020USD ($) | |
Impairment on fixed maturities | $ 0 | $ 0 | $ 35,000 | |
Outstanding remaining lease payments | $ 3,600,000 | |||
Valuation allowance on leased assets | 776,973 | $ 776,973 | ||
Loss on sale of non-performing asset | (2,400,000) | |||
Amortized cost | 3,425,344 | 3,361,830 | ||
Fair value | 3,534,064 | $ 3,486,914 | ||
Proceeds from sales of available-for-sale investments | 61,831,341 | 3,852,943 | ||
Gross realized gain | 572,807 | 149,548 | ||
Gross realized losses | $ 166,386 | $ 24,832 | ||
Number of third party reinsurers | contract | 4 | |||
Mortgage Loans Secured by Property | NEW YORK | Geographic Concentration Risk [Member] | ||||
Concentration risk percentage | 24.00% | 28.00% | ||
Mortgage Loans Secured by Property | PENNSYLVANIA | Geographic Concentration Risk [Member] | ||||
Concentration risk percentage | 12.00% | 14.00% | ||
Mortgage Loans Secured by Property | CALIFORNIA | Geographic Concentration Risk [Member] | ||||
Concentration risk percentage | 12.00% | 14.00% | ||
Mortgage Loans Secured by Property | Europe [Member] | Geographic Concentration Risk [Member] | ||||
Concentration risk percentage | 11.00% | 12.00% |
Derivative Instruments (Details
Derivative Instruments (Details) | Mar. 31, 2021USD ($)contract | Dec. 31, 2020USD ($)contract |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Estimated Fair Value | $ 9,473,398 | $ 11,361,034 |
Derivatives not designated as hedge | Equity options | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 369,592,465 | $ 272,853,853 |
Number of Contracts | contract | 328 | 252 |
Estimated Fair Value | $ 8,769,901 | $ 11,361,034 |
Derivatives not designated as hedge | Equity-indexed embedded derivative | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 364,115,193 | $ 311,964,195 |
Number of Contracts | contract | 2,826 | 2,101 |
Estimated Fair Value | $ 89,030,443 | $ 84,501,492 |
Derivative Instruments - Funds
Derivative Instruments - Funds Withheld Provision (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Reinsurance recoverables | $ 38,715,577 | $ 32,146,042 |
SDA Annuity and Life Re | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Reinsurance recoverables | 3,714,765 | 3,540,697 |
US Alliance Life and Security Company [Member] | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Reinsurance recoverables | 7,016,492 | 7,235,309 |
Crestline SP 1 | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Reinsurance recoverables | 16,319,419 | 9,695,427 |
Funds With held Provision Agreement | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 261,377,655 | 223,808,408 |
Market value of assets | 263,883,663 | 226,719,016 |
Total return swap value | (2,506,008) | (2,910,608) |
Funds With held Provision Agreement | Ironbound Reinsurance Company Limited | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 99,580,060 | 98,714,156 |
Market value of assets | 100,714,751 | 99,747,812 |
Total return swap value | (1,134,691) | (1,033,656) |
Funds With held Provision Agreement | SDA Annuity and Life Re | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 30,008,920 | 27,224,279 |
Market value of assets | 30,177,243 | 27,479,836 |
Total return swap value | (168,323) | (255,557) |
Funds With held Provision Agreement | US Alliance Agreement | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 36,986,356 | 35,707,207 |
Market value of assets | 37,401,248 | 36,360,501 |
Total return swap value | (414,892) | (653,294) |
Funds With held Provision Agreement | Crestline SP 1 | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 94,802,319 | 62,162,766 |
Market value of assets | 95,590,421 | 63,130,867 |
Total return swap value | $ (788,102) | $ (968,101) |
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 ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 493,069,034 | $ 377,163,358 |
Mortgage loans on real estate, held for investment | 109,776,321 | 94,989,970 |
Derivative instruments (See Note 5) | 9,473,398 | 11,361,034 |
Equity securities | 42,093,166 | |
Other Investments | 25,606,108 | 21,897,130 |
Investment escrow | 3,317,043 | 3,174,047 |
Preferred stock | 4,300,591 | 3,897,980 |
Notes receivable | 5,737,608 | 5,665,487 |
Policy loans | 48,551 | 45,573 |
Total Investments | 693,421,820 | 518,194,579 |
Embedded derivative for equity-indexed contracts | 89,030,443 | 84,501,492 |
Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments (See Note 5) | 9,473,398 | 11,361,034 |
Equity securities | 42,093,166 | |
Investment escrow | 3,317,043 | 3,174,047 |
Notes receivable | 5,737,608 | 5,665,487 |
Total Investments | 430,677,517 | 290,109,919 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage loans on real estate, held for investment | 109,776,321 | 94,989,970 |
Other Investments | 25,606,108 | 21,897,130 |
Preferred stock | 4,300,591 | 3,897,980 |
Policy loans | 48,551 | 45,573 |
Total Investments | 262,744,303 | 228,084,660 |
Embedded derivative for equity-indexed contracts | 89,030,443 | 84,501,492 |
Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 493,069,034 | 377,163,358 |
Fixed Maturities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 370,056,302 | 269,909,351 |
Fixed Maturities | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 123,012,732 | 107,254,007 |
Fixed Maturities | U.S. government obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,119,103 | 6,164,983 |
Fixed Maturities | U.S. government obligations | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,119,103 | 6,164,983 |
Fixed Maturities | Foreign governments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 1,542,188 | |
Fixed Maturities | Foreign governments | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 1,542,188 | |
Fixed Maturities | Mortgage-back securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 25,828,579 | 14,757,414 |
Fixed Maturities | Mortgage-back securities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 25,828,579 | |
Fixed Maturities | Collateralized loan obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 301,261,339 | 14,757,414 |
Fixed Maturities | Collateralized loan obligations | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 301,261,339 | 14,757,414 |
Fixed Maturities | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 221,773,609 | |
Fixed Maturities | Asset-backed securities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 221,773,609 | |
Fixed Maturities | States and Political Subdivisions - general obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 117,330 | 117,330 |
Fixed Maturities | States and Political Subdivisions - general obligations | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 117,330 | 117,330 |
Fixed Maturities | States and Political Subdivisions - special revenue | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 6,123,127 | 6,202,204 |
Fixed Maturities | States and Political Subdivisions - special revenue | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 6,123,127 | 6,202,204 |
Fixed Maturities | Trust preferred | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,152,538 | 2,284,816 |
Fixed Maturities | Trust preferred | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,152,538 | 2,284,816 |
Fixed Maturities | Corporate | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 153,924,830 | 125,863,002 |
Fixed Maturities | Corporate | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 30,912,098 | 18,608,995 |
Fixed Maturities | Corporate | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 123,012,732 | $ 107,254,007 |
Fair Values of Financial Inst_4
Fair Values of Financial Instruments (Schedule of Financial Assets and Liabilities at Fair Value) (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Assets: | ||
Cash | $ 100,927,152 | $ 151,679,274 |
Fair Value, Inputs, Level 1 | ||
Assets: | ||
Cash | 61,217,719 | 100,566,580 |
Fair Value, Inputs, Level 2 | ||
Assets: | ||
Cash | 39,709,433 | 51,112,694 |
Fair Value, Inputs, Level 3 | ||
Assets: | ||
Policy loans | 48,551 | 45,573 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 714,300,232 | 597,868,472 |
Carrying Amount | ||
Assets: | ||
Policy loans | 48,551 | 45,573 |
Cash | 100,927,152 | 151,679,274 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 714,300,232 | 597,868,472 |
Fair Value | ||
Assets: | ||
Policy loans | 48,551 | 45,573 |
Cash | 100,927,152 | 151,679,274 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | $ 714,300,232 | $ 597,868,472 |
Fair Values of Financial Inst_5
Fair Values of Financial Instruments (Recurring Basis Level 3) (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Beginning Balance | $ 228,084,660 | |
Additions | 52,073,300 | |
Sales | 17,413,657 | |
Ending Balance | 262,744,303 | $ 228,084,660 |
Fixed Maturities | ||
Beginning Balance | 107,254,007 | |
Additions | 30,204,134 | |
Sales | 14,445,409 | |
Ending Balance | 123,012,732 | 107,254,007 |
Mortgage loans on real estate, held for investment | ||
Beginning Balance | 94,989,970 | |
Additions | 16,446,861 | |
Sales | 1,660,510 | |
Ending Balance | 109,776,321 | 94,989,970 |
Other invested assets | ||
Beginning Balance | 21,897,130 | |
Additions | 5,016,716 | |
Sales | 1,307,738 | |
Ending Balance | 25,606,108 | 21,897,130 |
Preferred Stock | ||
Beginning Balance | 3,897,980 | |
Additions | 402,611 | |
Ending Balance | 4,300,591 | 3,897,980 |
Policy loans. | ||
Beginning Balance | 45,573 | |
Additions | 2,978 | |
Ending Balance | 48,551 | 45,573 |
Fair Value, Inputs, Level 3 | ||
Beginning Balance | 228,084,660 | 16,885,002 |
Additions | 285,231,136 | |
Sales | 72,754,505 | |
Valuation Allowance | (776,973) | |
Impairment | (500,000) | |
Ending Balance | 228,084,660 | |
Fair Value, Inputs, Level 3 | Fixed Maturities | ||
Beginning Balance | 107,254,007 | |
Additions | 107,254,007 | |
Ending Balance | 107,254,007 | |
Fair Value, Inputs, Level 3 | Mortgage loans on real estate, held for investment | ||
Beginning Balance | 94,989,970 | 13,810,041 |
Additions | 99,356,435 | |
Sales | 18,176,506 | |
Ending Balance | 94,989,970 | |
Fair Value, Inputs, Level 3 | Other invested assets | ||
Beginning Balance | 21,897,130 | 2,468,947 |
Additions | 74,722,714 | |
Sales | 54,517,558 | |
Valuation Allowance | (776,973) | |
Ending Balance | 21,897,130 | |
Fair Value, Inputs, Level 3 | Preferred Stock | ||
Beginning Balance | 3,897,980 | 500,000 |
Additions | 3,897,980 | |
Impairment | (500,000) | |
Ending Balance | 3,897,980 | |
Fair Value, Inputs, Level 3 | Policy loans. | ||
Beginning Balance | $ 45,573 | 106,014 |
Sales | 60,441 | |
Ending Balance | $ 45,573 |
Fair Values of Financial Inst_6
Fair Values of Financial Instruments (summary of unobservable inputs) (Details) - Fair Value, Inputs, Level 3 $ in Millions | Mar. 31, 2021USD ($) | Dec. 31, 2020USD ($) |
Non performance risk | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 89 | $ 84.5 |
Embedded Derivative Liability, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueOptionPricingModelMember | |
Non performance risk | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 0.3 | 0.3 |
Non performance risk | Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 1.1 | 1.3 |
Non performance risk | Weighted average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 0.6 | 0.7 |
Option budget | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 1.4 | 2.6 |
Option budget | Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 3.4 | 3.4 |
Option budget | Weighted average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 2.5 | 2.7 |
Surrender rate | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 0.5 | 0.5 |
Surrender rate | Maximum | Base | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 15 | 15 |
Surrender rate | Maximum | Additional Shock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 30 | 30 |
Surrender rate | Weighted average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities (as a percent) | 7.3 | 7.6 |
Fair Values of Financial Inst_7
Fair Values of Financial Instruments (Narrative) (Details) | Mar. 31, 2021USD ($)Asset | Dec. 31, 2020USD ($) |
Investments, All Other Investments [Abstract] | ||
Number of assets held in escrow | Asset | 1 | |
Notes receivable | $ 5,737,608 | $ 5,665,487 |
Other Investments in Fund | 19,700,000 | |
Other Investments | 25,606,108 | $ 21,897,130 |
Transfers between levels | $ 0 |
Earnings Per Share (Details)
Earnings Per Share (Details) - $ / shares | 3 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Aug. 10, 2020 | |
Earnings Per Share [Abstract] | ||||
Common stock par value | $ 0.001 | $ 0.001 | ||
Common stock, shares authorized | 20,000,000 | 20,000,000 | 22,000,000 | |
Non-voting common shares authorized | 2,000,000 | 2,000,000 | ||
Preferred stock, shares authorized | 2,000,000 | 2,000,000 | 2,000,000 | |
Common stock, shares issued | 3,737,564 | 3,737,564 | ||
Common stock, shares outstanding | 3,737,564 | 3,737,564 | ||
Weighted average number of shares outstanding, Basic (in shares) | 3,737,564 | 2,042,670 | ||
Weighted average number of shares outstanding, Diluted (in shares) | 3,737,564 | 2,065,045 |
Income Tax Matters (Schedule of
Income Tax Matters (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Deferred tax assets: | ||
Loss carryforwards | $ 1,945,126 | $ 1,556,855 |
Capitalized costs | 162,476 | 174,364 |
Stock option granted | 65,796 | 14,270 |
Unrealized losses on investments | 1,478,807 | 1,534,332 |
Policy acquisition costs | 2,308,354 | 2,243,267 |
Charitable contribution carryforward | 2,490 | 2,490 |
Sec 163(j) limitation | 155,492 | 153,809 |
Benefit reserves | 4,316,821 | 3,568,914 |
Total deferred tax assets | 10,435,362 | 9,248,301 |
Less valuation allowance | (8,403,415) | (7,001,687) |
Total deferred tax assets, net of valuation allowance | 2,031,947 | 2,246,614 |
Deferred tax liabilities: | ||
Unrealized losses on investments | 1,774,671 | 1,994,232 |
Due premiums | 81,789 | 81,789 |
Intangible assets | 147,000 | 147,000 |
Bond Discount | 24,942 | 20,556 |
Property and equipment | 3,545 | 3,037 |
Total deferred tax liabilities | $ 2,031,947 | $ 2,246,614 |
Income Tax Matters (Schedule _2
Income Tax Matters (Schedule of Effective Tax Rate Reconciliation) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Computed expected income tax benefit | $ (35,304) | $ 4,610,839 |
Increase (reduction) in income taxes resulting from: | ||
IMR and reinsurance | 67,045 | |
Non deductible expenses | 1,454 | (55,233) |
Change in valuation allowance | 1,401,730 | (4,147,690) |
Dividends received deduction | (2,577) | |
Subtotal of increases | 1,467,652 | (4,202,923) |
Tax expense (benefit) | $ 1,432,348 | $ 407,916 |
Income Tax Matters (Narrative)
Income Tax Matters (Narrative) (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2016 | |
Deferred tax assets, valuation allowance | $ 8,403,415 | $ 7,001,687 | ||
Income tax expense | $ 1,432,348 | $ 407,916 | ||
U.S. federal income tax rate | 21.00% | |||
Net operating loss ("NOL") carryforwards | $ 9,164,004 | $ 752,036 | ||
Percentage of carry forward year limited taxable income | 80.00% | |||
NOLs carryforwards, valuation allowance | $ 4,971,956 | |||
Minimum | ||||
Operating Loss Carryforwards, Expiration Dates | Dec. 31, 2024 | |||
Maximum | ||||
Operating Loss Carryforwards, Expiration Dates | Dec. 31, 2040 |
Reinsurance (Summary of Signifi
Reinsurance (Summary of Significant Reinsurance Amounts) (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Reinsurance Disclosures [Abstract] | ||||
Reinsurance recoverables | $ 38,715,577 | $ 32,146,042 | ||
Deposit-type contracts Direct | 714,300,232 | 597,868,472 | $ 171,168,785 | |
Deposit-type contracts Reinsurance ceded | (448,843,239) | (405,981,150) | ||
Retained deposit-type contracts | 265,456,993 | $ 191,887,322 | ||
Premiums | ||||
Direct | 48,087 | $ 231,674 | ||
Reinsurance ceded | (48,087) | (231,674) | ||
Total Premiums | 21 | |||
Future policy and other policy benefits | ||||
Direct | 6,856 | 31,287 | ||
Reinsurance ceded | $ (6,856) | $ (31,287) |
Reinsurance (Schedule of Signif
Reinsurance (Schedule of Significant Reinsurance Balances) (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Recoverable on Unpaid Losses | $ 143,750 | $ 141,107 |
Recoverable on Benefit Reserves/Deposit-type Contracts | 38,874,303 | 32,310,451 |
Ceded Due Premiums | 302,476 | 305,516 |
Reinsurance recoverables (See Note 9) | $ 38,715,577 | $ 32,146,042 |
Optimum Reinsurance Company [Member] | ||
AM Best Rating | A | A |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 524,932 | $ 524,734 |
Reinsurance recoverables (See Note 9) | $ 524,932 | $ 524,734 |
Sagicor Life Insurance Company [Member] | ||
AM Best Rating | A- | A- |
Recoverable on Unpaid Losses | $ 143,750 | $ 141,107 |
Recoverable on Benefit Reserves/Deposit-type Contracts | 11,269,714 | 11,285,364 |
Ceded Due Premiums | 273,495 | 276,596 |
Reinsurance recoverables (See Note 9) | $ 11,139,969 | $ 11,149,875 |
SDA Annuity and Life Re | ||
AM Best Rating | NR | NR |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 3,714,765 | $ 3,540,697 |
Reinsurance recoverables (See Note 9) | $ 3,714,765 | $ 3,540,697 |
Crestline SP 1 | ||
AM Best Rating | NR | NR |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 16,319,419 | $ 9,695,427 |
Reinsurance recoverables (See Note 9) | $ 16,319,419 | $ 9,695,427 |
US Alliance Life and Security Company [Member] | ||
AM Best Rating | NR | NR |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 7,045,473 | $ 7,264,229 |
Ceded Due Premiums | 28,981 | 28,920 |
Reinsurance recoverables (See Note 9) | $ 7,016,492 | $ 7,235,309 |
Reinsurance (Ceding commissions
Reinsurance (Ceding commissions deferred) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Ceded Commission Earned | $ 2,347,313 | $ 973,627 | |
Expense Allowances | 4,737,716 | 1,222,076 | |
Interest On Ceding Commissions | 141,351 | 58,895 | |
Earned Ceding Commission | 450,656 | 102,893 | |
Deferred gain on coinsurance transactions | 20,596,683 | $ 18,198,757 | |
Ironbound Reinsurance Company Limited [Member] | |||
Ceded Commission Earned | 674,645 | ||
Expense Allowances | 14,457 | 673,612 | |
Interest On Ceding Commissions | 54,445 | 45,369 | |
Earned Ceding Commission | 122,216 | 95,740 | |
Deferred gain on coinsurance transactions | 5,634,707 | 5,642,095 | |
SDA Annuity and Life Re | |||
Ceded Commission Earned | 298,982 | ||
Expense Allowances | 24,317 | 548,464 | |
Interest On Ceding Commissions | 21,712 | 13,526 | |
Earned Ceding Commission | 46,072 | 7,153 | |
Deferred gain on coinsurance transactions | 2,662,423 | 2,703,496 | |
US Alliance Life and Security Company [Member] | |||
Ceded Commission Earned | 2,178 | ||
Expense Allowances | 20,735 | ||
Interest On Ceding Commissions | 15,339 | ||
Earned Ceding Commission | 66,606 | ||
Deferred gain on coinsurance transactions | 169,726 | 172,297 | |
Crestline SP 1 | |||
Ceded Commission Earned | 2,345,135 | ||
Expense Allowances | 4,678,207 | ||
Interest On Ceding Commissions | 49,855 | ||
Earned Ceding Commission | 215,762 | ||
Deferred gain on coinsurance transactions | 9,414,267 | 6,931,375 | |
US Alliance Life and Security Company(3) | |||
Deferred gain on coinsurance transactions | 2,446,254 | 2,472,559 | |
Unified Life Insurance Company [Member] | |||
Earned Ceding Commission | 7,628 | $ 67,451 | |
Deferred gain on coinsurance transactions | $ 269,306 | $ 276,935 |
Reinsurance (Retained and Reins
Reinsurance (Retained and Reinsurer Balance Sheets) (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Assets | ||
Total investments | $ 693,421,820 | $ 518,194,579 |
Cash and cash equivalents | 100,927,152 | 151,679,274 |
Accrued investment income | 9,095,093 | 6,806,836 |
Deferred acquisition costs, net | 19,676,745 | 13,456,303 |
Reinsurance recoverables (See Note 9) | 38,715,577 | 32,146,042 |
Other assets | 4,354,662 | 4,117,725 |
Total assets | 866,191,049 | 726,400,759 |
Liabilities: | ||
Policyholder liabilities | 727,252,172 | 610,808,489 |
Deferred gain on coinsurance transactions | 20,596,683 | 18,198,757 |
Other liabilities | 32,710,011 | 11,064,014 |
Total liabilities | 780,558,866 | 640,071,260 |
Stockholders’ Equity: | ||
Voting common stock | 3,738 | 3,738 |
Additional paid-in capital | 133,678,612 | 133,417,272 |
Accumulated deficit | (55,122,540) | (53,522,078) |
Accumulated other comprehensive income | 7,072,373 | 6,430,567 |
Total Midwest Holding Inc.'s stockholders' equity | 85,632,183 | 86,329,499 |
Total liabilities and stockholders' equity | 866,191,049 | 726,400,759 |
Retained | ||
Assets | ||
Total investments | 305,022,890 | 185,367,430 |
Cash and cash equivalents | 72,613,680 | 102,334,579 |
Accrued investment income | 3,193,353 | 1,955,938 |
Deferred acquisition costs, net | 19,676,745 | 13,456,303 |
Other assets | 2,918,643 | 2,685,341 |
Total assets | 403,425,311 | 305,799,591 |
Liabilities: | ||
Policyholder liabilities | 265,456,993 | 191,887,322 |
Deferred gain on coinsurance transactions | 20,596,683 | 18,198,757 |
Other liabilities | 31,739,452 | 9,384,013 |
Total liabilities | 317,793,128 | 219,470,092 |
Stockholders’ Equity: | ||
Voting common stock | 3,738 | 3,738 |
Additional paid-in capital | 133,678,612 | 133,417,272 |
Accumulated deficit | (55,122,540) | (53,522,078) |
Accumulated other comprehensive income | 7,072,373 | 6,430,567 |
Total Midwest Holding Inc.'s stockholders' equity | 85,632,183 | 86,329,499 |
Total liabilities and stockholders' equity | 403,425,311 | 305,799,591 |
Reinsurance | ||
Assets | ||
Total investments | 388,398,930 | 332,827,149 |
Cash and cash equivalents | 28,313,472 | 49,344,695 |
Accrued investment income | 5,901,740 | 4,850,898 |
Reinsurance recoverables (See Note 9) | 38,715,577 | 32,146,042 |
Other assets | 1,436,019 | 1,432,384 |
Total assets | 462,765,738 | 420,601,168 |
Liabilities: | ||
Policyholder liabilities | 461,795,179 | 418,921,167 |
Other liabilities | 970,559 | 1,680,001 |
Total liabilities | 462,765,738 | 420,601,168 |
Stockholders’ Equity: | ||
Total liabilities and stockholders' equity | $ 462,765,738 | $ 420,601,168 |
Reinsurance (Narrative) (Detail
Reinsurance (Narrative) (Details) | Aug. 25, 2020 | Jul. 23, 2020 | Jul. 01, 2020 | Jun. 30, 2020 | Apr. 01, 2020 | Mar. 10, 2020 | Nov. 07, 2019USD ($) | Jul. 01, 2018USD ($) | Mar. 31, 2020USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2021USD ($)item | Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($) |
Unrealized gains and losses | $ 2,500,000 | $ 2,900,000 | |||||||||||
Embedded derivative losses | 400,000 | 2,900,000 | |||||||||||
Net premium income | $ 21 | ||||||||||||
Remaining deferred gain | 3,069,690 | ||||||||||||
Contingency reserves | $ 0 | $ 0 | |||||||||||
FW, Modco Agreement | |||||||||||||
Net premium income | $ 3,970,509 | ||||||||||||
Net statutory reserves | $ 14,706,862 | 3,986,411 | |||||||||||
Initial settlement | 13,542,325 | ||||||||||||
FW, Modco Agreement | MYGA | |||||||||||||
Percentage of indemnity coinsurance | 0.00% | ||||||||||||
FW, Modco Agreement | Funds Withheld Account [Member] | |||||||||||||
Initial settlement | 12,729,785 | 2,256,802 | |||||||||||
Adjusted reserves cash | 2,391,847 | ||||||||||||
Amount owed | 135,044 | ||||||||||||
FW, Modco Agreement | Modco Deposit Account [Member] | |||||||||||||
Initial settlement | 1,504,535 | ||||||||||||
Adjusted reserves cash | 1,594,564 | ||||||||||||
Amount owed | $ 90,029 | ||||||||||||
FW, Modco SDA Agreement | |||||||||||||
Number of accounts established to hold assets | item | 2 | ||||||||||||
FW, Modco SDA Agreement | MYGA | |||||||||||||
Percentage of indemnity coinsurance | 0.00% | ||||||||||||
FW, Modco SDA Agreement | FIA | |||||||||||||
Percentage of indemnity coinsurance | 0.00% | ||||||||||||
US Alliance Agreement | |||||||||||||
Initial settlement | 5,000,000 | ||||||||||||
Seneca Re Agreement | MYGA | |||||||||||||
Percentage of indemnity coinsurance | 25.00% | ||||||||||||
Seneca Re Agreement | FIA | |||||||||||||
Percentage of indemnity coinsurance | 40.00% | ||||||||||||
Statutory Revenue | FIA | |||||||||||||
Percentage of indemnity coinsurance | 0.00% | ||||||||||||
American Life | |||||||||||||
Percentage of indemnity coinsurance | 90.00% | 81.00% | |||||||||||
American Life amortized amount | $ 7,629 | $ 67,451 | |||||||||||
Coinsurance ceding commission deferred | $ 276,935 | 269,306 | $ 276,935 | ||||||||||
American Life | FW, Modco Agreement | |||||||||||||
Initial settlement | $ 812,539 | ||||||||||||
Unified Life Insurance Company [Member] | |||||||||||||
Adjusted reserves cash | $ 14,320,817 | ||||||||||||
Transferred risk insurance company | 100.00% | ||||||||||||
Amount transferred for reinsurance | $ 19,311,616 | ||||||||||||
Net of ceding allowance | $ 3,500,000 | 3,500,000 | |||||||||||
Remaining DAC | 1,890,013 | ||||||||||||
Value of business acquired | 338,536 | ||||||||||||
Remaining deferred gain | $ 26,896 | ||||||||||||
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 | 30.00% | 95.00% | |||||||||||
American Life and Security National Life Insurance [Member] | US Alliance Agreement | MYGA | |||||||||||||
Percentage of indemnity coinsurance | 25.00% | 45.50% | 66.50% | ||||||||||
American Life and Security National Life Insurance [Member] | US Alliance Agreement | FIA | |||||||||||||
Percentage of indemnity coinsurance | 40.00% | ||||||||||||
US Alliance Life and Security Company [Member] | US Alliance Agreement | FIA | |||||||||||||
Percentage of indemnity coinsurance | 49.00% |
Long-Term Incentive Plan (Detai
Long-Term Incentive Plan (Details) | Jan. 16, 2021item$ / sharesshares | Nov. 16, 2020USD ($)$ / sharesshares | Aug. 27, 2020 | Aug. 10, 2020 | Jul. 21, 2020USD ($)$ / sharesshares | May 01, 2020item$ / sharesshares | Sep. 15, 2019USD ($)$ / sharesshares | Jul. 19, 2019USD ($)$ / sharesshares | Mar. 31, 2021USD ($)$ / sharesshares | Mar. 31, 2020USD ($)shares | Dec. 31, 2020USD ($)shares | Jun. 11, 2019shares |
Share based compensation | $ | $ 261,340 | $ 11,934 | $ 163,664 | |||||||||
Number of board members resigned | item | 2 | 2 | ||||||||||
Reverse stock split ratio | 0.002 | 0.002 | ||||||||||
Stock Options | ||||||||||||
Granted (in shares) | 35,058 | 26,300 | 6,667 | |||||||||
Exercise price (per share) | $ / shares | $ 41.25 | $ 25 | ||||||||||
Grants, weighted average exercise price (in dollars per share) | $ / shares | 41.25 | 41.25 | ||||||||||
Grant date fair value (in dollars per share) | $ / shares | $ 29.45 | $ 14.50 | $ 21.60 | |||||||||
Share based compensation | $ | $ 1,032,458 | $ 334,950 | $ 144,014 | |||||||||
Time to maturity | 10 years | 10 years | 10 years | |||||||||
Risk free interest rate (as a percent) | 0.91% | 0.55% | 0.69% | |||||||||
Volatility rate (as a percent) | 66.30% | 60.00% | 66.20% | |||||||||
Vested (in shares) | 200 | |||||||||||
Vested fair market value (in dollars per share) | $ / shares | $ 8 | |||||||||||
Schedule of remaining non-vested shares | ||||||||||||
Vested (in shares) | (200) | |||||||||||
Restricted Stock | ||||||||||||
Granted (in shares) | 18,597 | |||||||||||
Grant date fair value (in dollars per share) | $ / shares | $ 29.45 | |||||||||||
Exercise price of restricted stock | $ / shares | $ 41.25 | |||||||||||
Share based compensation | $ | $ 547,682 | |||||||||||
Risk free interest rate (as a percent) | 0.91% | |||||||||||
Volatility rate (as a percent) | 66.30% | |||||||||||
Vested (in shares) | 4,650 | |||||||||||
Vested fair market value (in dollars per share) | $ / shares | $ 29.45 | |||||||||||
2019 LTIP | Stock Options | ||||||||||||
Granted (in shares) | 17,900 | 68,025 | ||||||||||
Exercisable period | 10 years | |||||||||||
Grants, weighted average exercise price (in dollars per share) | $ / shares | $ 25 | $ 25 | ||||||||||
Grant date fair value (in dollars per share) | $ / shares | $ 8 | $ 8 | ||||||||||
Share based compensation | $ | $ 143,200 | $ 261,340 | $ 11,933 | |||||||||
Time to maturity | 10 years | |||||||||||
Risk free interest rate (as a percent) | 1.84% | |||||||||||
Vested (in shares) | 4,650 | 200 | ||||||||||
Outstanding non-vested stock (in shares) | 96,322 | 17,900 | 100,972 | |||||||||
Forfeited stock (in shares) | 0 | 3,350 | ||||||||||
Schedule of remaining non-vested shares | ||||||||||||
Non-vested at beginning | 100,972 | 17,900 | 17,900 | |||||||||
Forfeited (in shares) | 0 | (3,350) | ||||||||||
Vested (in shares) | (4,650) | (200) | ||||||||||
Non-vested at ending | 96,322 | 100,972 | ||||||||||
2019 LTIP | Restricted Stock | ||||||||||||
Granted (in shares) | 18,597 | |||||||||||
2019 LTIP | Maximum | Stock Options | ||||||||||||
Shares authorized | 102,000 | |||||||||||
Exercisable after July 17, 2021 | 2019 LTIP | Stock Options | ||||||||||||
Vesting percentage | 33.33% | |||||||||||
Exercisable after July 17, 2023 | 2019 LTIP | Stock Options | ||||||||||||
Vesting percentage | 66.60% |
Deposit-Type Contracts (Details
Deposit-Type Contracts (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Beginning balance | $ 597,868,472 | $ 171,168,785 |
US Alliance | (655,762) | (3,307,587) |
Deposit contract | 1,522,105 | 6,080,196 |
Deposits received | 123,653,931 | 415,561,302 |
Investment earnings (includes embedded derivative) | (2,346,402) | 4,214,828 |
Withdrawals | (2,904,992) | (2,509,045) |
Ending balance | 714,300,232 | 597,868,472 |
SDA Annuity and Life Re | ||
Deposit contract | (344,905) | 3,053,160 |
Crestline SP 1 | ||
Deposit contract | $ (2,492,215) | $ 3,606,833 |
Leases (Schedule of Supplementa
Leases (Schedule of Supplemental Balance Sheet Information Related to Leases) (Details) | 3 Months Ended | |
Mar. 31, 2021USD ($)item | Dec. 31, 2020USD ($) | |
Leases [Abstract] | ||
Number of finance leases that the company owned at the end of the reporting period | $ 1 | |
Number of lease agreements that include variable lease payments | item | 0 | |
Noncurrent: | ||
Operating lease right-of-use assets | $ 317,715 | $ 348,198 |
Noncurrent: | ||
Operating lease | $ 364,128 | $ 396,911 |
Leases (Schedule of Components
Leases (Schedule of Components of Leases Expenses) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Leases [Abstract] | ||
Operating lease cost (General and administrative expense) | $ 1,233 | $ 2,092 |
Finance lease cost: | ||
Amortization expense | 2,913 | |
Interest expense | $ 111 |
Leases (Schedule of Finance and
Leases (Schedule of Finance and Operating Leases Mature) (Details) | Mar. 31, 2021USD ($) |
Operating Leases | |
2021 (excluding three months ended March 31, 2021) | $ 122,891 |
2022 | 156,608 |
2023 | 161,674 |
2024 | 13,508 |
Total remaining lease payments | $ 454,681 |
Leases (Schedule of Supplemen_2
Leases (Schedule of Supplemental Cash Flow Information Related to Leases) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash payments | ||
Operating cash flows from operating leases | $ (2,300) | $ (1,035) |
Operating cash flows from finance leases | 1,164 | |
Financing cash flows from finance leases | $ (111) |
Leases (Schedule of Weighted Av
Leases (Schedule of Weighted Average Lease Term And Discount Rate) (Details) | Mar. 31, 2021 | Mar. 31, 2020 |
Leases [Abstract] | ||
Weighted Average Remaining Term - Operating lease | 1 year 6 months | 2 years |
Weighted Average Discount Rate - Finance lease | 6.00% | 8.00% |
Statutory Net Income and Surp_2
Statutory Net Income and Surplus (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Statutory net income (loss) | $ 6,109,058 | $ 423,474 | |
Capital and surplus | 77,818,776 | $ 77,446,537 | |
Net realized gains (losses) on investments | (4,649,105) | 22,600,010 | |
Ceded Premiums Written | 48,087 | 231,674 | |
Multi Year Guaranteed Annuity | |||
Annuity sales | 9,368,962 | 31,565,506 | |
Annuity sales pending | 3,489,795 | ||
Fixed Index Annuity | |||
Annuity sales | 114,284,969 | $ 16,249,504 | |
Annuity sales pending | 36,050,004 | ||
Ironbound Reinsurance Company Limited | FW, Modco Agreement | |||
Net realized gains (losses) on investments | $ (2,400,000) |
Third Party Administration (Det
Third Party Administration (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
TPA | ||
Related Party Transaction [Line Items] | ||
Amount of transaction | $ 207,500 | $ 8,160 |
Reverse Stock Split (Details)
Reverse Stock Split (Details) | Aug. 27, 2020 | Aug. 10, 2020USD ($)$ / sharesshares | Mar. 31, 2021USD ($)$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares |
Common Stock, Shares Authorized | 22,000,000 | 20,000,000 | 20,000,000 | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | ||
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 | 2,000,000 | |
Preferred stock, par value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |
Reverse stock split ratio | 0.002 | 0.002 | ||
Reverse stock split fractions retired | $ | $ 175,000 | $ 4,500 | $ 175,333 | |
Common stock, shares outstanding | 3,737,564 | 3,737,564 | ||
Voting common share | ||||
Common Stock, Shares Authorized | 20,000,000 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | |||
Non-voting common shares | ||||
Common Stock, Shares Authorized | 2,000,000 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 |
Capital Raise (Details)
Capital Raise (Details) - USD ($) | Dec. 21, 2020 | Apr. 24, 2020 | Dec. 31, 2020 |
Capital Raise | |||
Shares issued | 231,655 | ||
Public offering | |||
Capital Raise | |||
Shares issued | 1,000,000 | ||
Price per share | $ 70 | ||
Proceeds from the capital raise | $ 70,000,000 | ||
Deal expenses incurred | $ 5,914,995 |
Equity (Narrative) (Details)
Equity (Narrative) (Details) - USD ($) | Aug. 10, 2020 | Mar. 31, 2021 | Dec. 31, 2020 |
Preferred stock | |||
Preferred stock, shares authorized | 2,000,000 | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 | |
Preferred stock, shares outstanding | 0 | 0 | |
Common Stock | |||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |
Common stock, shares authorized | 22,000,000 | 20,000,000 | 20,000,000 |
Common stock, shares issued | 3,737,564 | 3,737,564 | |
Common stock, shares outstanding | 3,737,564 | 3,737,564 | |
Reverse stock split fractions retired | $ 175,000 | $ 4,500 | $ 175,333 |
Equity (AOCI) (Details)
Equity (AOCI) (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance | $ 86,329,499 | $ 14,158,748 | $ 14,158,748 |
Other comprehensive income (loss) before reclassifications, net of tax | 962,880 | (4,170,973) | |
Unrealized gains on foreign currency | (405,275) | ||
Less: Reclassification adjustments for losses realized in net income, net of tax | (321,074) | (22,600,010) | |
Balance | 85,632,183 | 86,329,499 | |
Unrealized investment gains (losses) on AFS securities, net of offsets | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance | 6,430,567 | 473,399 | 473,399 |
Other comprehensive income (loss) before reclassifications, net of tax | 962,880 | 7,398,432 | |
Less: Reclassification adjustments for losses realized in net income, net of tax | (321,074) | (1,441,264) | |
Balance | 7,072,373 | 6,430,567 | |
Unrealized gains on foreign currency | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance | 146,185 | 146,185 | |
Unrealized gains on foreign currency | (146,185) | ||
Accumulated other comprehensive income (loss) | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance | 6,430,567 | $ 619,584 | 619,584 |
Other comprehensive income (loss) before reclassifications, net of tax | 962,880 | 7,398,432 | |
Unrealized gains on foreign currency | (146,185) | ||
Less: Reclassification adjustments for losses realized in net income, net of tax | (321,074) | (1,441,264) | |
Balance | $ 7,072,373 | $ 6,430,567 |
Deferred Acquisition Costs (Det
Deferred Acquisition Costs (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Deferred Acquisition Costs | ||
Deferred Policy Acquisition Cost, Beginning Balance | $ 13,456,303 | |
Additions | 6,681,991 | $ 13,919,206 |
Amortization | (502,737) | (670,233) |
Interest | 36,855 | 138,295 |
Impact of unrealized investment losses | 4,333 | 69,035 |
Deferred Policy Acquisition Cost, Ending Balance | $ 19,676,745 | $ 13,456,303 |