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MIDWEST HOLDING INC.

FORM 10

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PART I.

ITEM 1. BUSINESS.

Special Note Regarding Forward-Looking Statements

Certain statements in this Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s expectations, estimates, projections and assumptions. In some cases, you can identify forward-looking statements by terminology including “could,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “intend,” or “continue,” the negative of these terms, or other comparable terminology used in connection with any discussion of future operating results or financial performance. These statements are only predictions, and reflect our management’s present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

General Information

Midwest Holding Inc. (we, us, our, Midwest, the Company or the Registrant) was formed on October 31, 2003 for the primary purpose of becoming a financial services holding company. We presently conduct our business through our wholly owned subsidiary, American Life & Security Corp. (American Life). Capital Reserve Life Insurance Company of Jefferson City, Missouri (Capital Reserve) is a dormant, wholly owned subsidiary of American Life. Security Capital Corporation(Security Capital) is a 60% owned subsidiary of Midwest. Hot Dot, Inc.Great Plains Financial Corporation (Great Plains Financial) is a 37%24.5% owned subsidiary of Midwest. Great Plains Life Assurance Company (Great Plains Life) is a wholly owned subsidiary of Great Plains Financial. Midwest and Midwest controlsis a majority of the Board of Directors.  Midwest and Hot Dot are Nebraska corporations,corporation, American Life is an Arizona corporation, Capital Reserve is a Missouri corporation, and Security Capital is an Arkansas corporation.corporation,and both Great PlainsFinancial and Great Plains Lifeare South Dakotacorporations. The principal executive offices for the companies are at 8101 “O” Street, Suite S111, Lincoln, Nebraska 68510. The phone number for the companies is (402) 489-8266.

Development of the Business

From our inception, through July 2006, we have raised approximately $6.5$17.5 million through the salesales of shares of voting common stock in several private placements. We raised approximately $11.0 million throughplacements and an intrastate public offering of voting common stock in the State of Nebraska. Each of these sales of stock was intended to provide capital for our financial services operations.

The Company was a development stage company until American Life commenced its insurance operations in 2009. We have incurred significant net losses since inception totaling approximately $10.5$12.2 million through December 31, 2011.2012. These losses have resulted primarily from costs incurred while raising capital and establishing American Life. We expect to continue to incur operating losses until we achieve a volume of in-force life insurance policies that provides premiums that are sufficient to cover our operating expenses.

On September 1, 2009, American Life was issued a certificate of authority to conduct life insurance business in the State of Nebraska. Initial capital and surplus contributed to American Life was approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. In its first four months of operation, between September 1, 2009 and December 31, 2009, American Life generated $354,352 in premium revenue. For the years ended December 31, 20112012 and 2010,2011, American Life generated $2.5approximately $4.0 million and $1.9$3.1 million in premium revenue, respectively.respectively, when combined with the operating results of Old RelianceInsurance Company, a company acquired by American Life in August 2011 as described later in this document.

On June 20, 2010, American Life acquired Capital Reserve in exchange for a cash payment of approximately $1.9 million. This transaction added approximately a like amount of assets to American Life. Further, with the insurance charters acquired from Capital Reserve, we obtained access to additional markets in Missouri Kansas and Iowa.Kansas.

In connection with the acquisition of Capital Reserve, American Life also coinsured a block of life insurance business from Capital Reserve’sformer parent corporation in a separate transaction. The purchase price for this block of business was approximately $375,000. This transaction added more than $70,000 in annual revenues to American Life’s operations, as well as approximately $3.5 million of new assets to our balance sheet, while American Life assumed approximately $3.65 million in policy reserves on the block of business.

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American Life and Great Plains Life’s underwriting is performed by its third party administrator, Midwest.

Marketing

New agents are recruited through referrals from shareholders, newspaper advertisements, and solicitation through the use of on-line job sites. Each potential candidate must go through a three interview process. If hired to sell insurance, the candidate must complete a 40 hour training course conducted by a third party as well as pass the state examination. Once licensed, they must complete a week long product and sales training class. Following course completion, they will have a training week where their manager will work side by side makingby conducting sales callsmeetings with them. The average turnover rate of our agentssince we began writing business is approximately 15% per year.

The products developed by American Life and Great Plains Life have been marketed initially by those agents cross-trained to market insurance products after selling shares of stock in our intrastate public offering.offerings. When agents were recruited to sell stock in connection with our earlier intrastate public offering,offerings, they were required to complete a similar company training program and compliance course. They also were required to be licensed by the Nebraska and South Dakota Department of Banking & Finance, Securities Bureau, under applicable securities laws and were required to spend time in the field with their managers prior to engaging in any sales activity on their own. During the period in which our intrastate offering wasofferings were on-going, the average turnover rate of our agents was approximately 10% per year.

Additionally, the recruiting, hiring and training process is continuous for American Life and Great Plains Life going forward. These captive agents will market only the life insurance subsidiary’ssubsidiaries’ products. The American Accumulator paysand Great Plains Life Accumulator pay a first year commission to our marketing agents ranging from 42% to a high of 72%79% and renewal commissionstotaling 5% to 15%. The Future Cornhusker pays a first year commission to our marketing agents of 20% and no renewal commission. The Gold Standard pays a first year commission to our marketing agents of 120% and renewal commissionstotaling 10% to 20%.

The insurance products are marketed using the same face-to-face marketing concept that was used by us to sell shares of stock in our intrastate public offeringofferings that utilized in personin-person sales meetings with prospective shareholders. When the intrastate offering wasofferings were being conducted, the shares were only offered to individuals who had been referred by another shareholder. There was no cold calling or other similar activity. The sale of stock was not allowed to be conducted in any area where insurance sales were ongoing. Our insurance agents have used our shareholder base and their referrals as potential clients for our life insurance products.

American Life also intends to pursue the U.S. Dollar-denominated life insurance market in Latin America. The products that will be offered are ordinary whole life that are designed specifically for that market. Management expects production to begin in the second quarter of 2013.

If, and when, American Life entersand Great Plains Life enter the interest-sensitive and universal life markets, it would not use its captive agents to market such products. Generally, these are sophisticated products which require a unique ability to market. Accordingly, if American Life choosesand Great Plains Life choose to enter this market, itthey would develop an independent agent distribution system using independent marketing agencies that have the experience and ability to market these products. However, American Life and Great Plains Life would not enter this market segment unless itthey could do so profitably.

Operating Results

There are certain factors unique to the life insurance business, which may have an adverse effect on the operating results of American Life and Great Plains Life. One such factor is that the cost of putting a new policy in force is usually greater than the first year’s policy premium, and, accordingly, in the early years of a new life insurance company, these initial costs and the required provisions for reserves often have an adverse effect on operating results. American Life and Great Plains Life, as is common among new or inactive life insurance companies, probably will continue to operate at a loss for a number of years because of the substantial costs of writing new life insurance. The aggregate cost of writing new life insurance includes such significant, nonrecurring items as first year commissions, medical and investigation expenses, and other expenses incidental to the issuance of new policies, together with the initial reserves required to be established. For the American Accumulator product,and Great Plains Life Accumulator products, the costs to cover expenses and the policyholder liability that must be set up at policy issuance exceed the first year premium by approximately 39%, while there is no excess of costs to cover expenses and the policyholder liability for the Future Cornhusker product. Accordingly, it is generally recognized that the cost of putting a new policy in force is substantially greater than the first year premium. As a result, a new life insurance company can be expected to sustain losses for a number of years, during which time earnings are not available for dividends. However, in accordance with accounting principles generally accepted in the United States of America (GAAP), incremental direct costs 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, are capitalized and amortized over the life of the premiums produced.

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Regulation

American Life, and Capital Reserve, and Great Plains Life, as well as any other life insurance subsidiary that we may acquire or form, are (or will be) subject to the regulation and supervision of the Arizona, Missouri, and MissouriSouth Dakota Departments of Insurance, respectively, and/or other state insurance regulators. Such regulation is primarily for the benefit of policyholders rather than shareholders. These regulators possess broad administrative powers. These powers include the authority to grant and revoke licenses to transact business, to approve the form of insurance contracts, to regulate capital requirements, to regulate the character of permitted investments, and to require deposits for the protection of investments. Arizona, Missouri, and MissouriSouth Dakota insurance law requires the filing of a detailed annual report with the Department of Insurance, as do other states’ laws. Thus, the business and financial accounts of American Life, and Capital Reserve, and Great Plains Life will be subject to examination by the Arizona, Missouri, and MissouriSouth Dakota Departments of Insurance, respectively, as well as insurance departments of any other states in which we may do business.

There can be no assurance that American Life, Capital Reserve, Great Plains Life, or any other life insurance subsidiary that we may acquire or form will be able to satisfy the regulatory requirements of the Arizona, Missouri, or MissouriSouth Dakota Department of Insurance or a similar department in any other state in which it may wish to transact business.

As the holder of a controlling interest in an Arizona, Missouri, and MissouriSouth Dakota insurance company, the Company also is subject to regulation as an insurance holding company system under Arizona, Missouri, and MissouriSouth Dakota law. The provisions of this law generally provide for restrictions on a change in control of the insurance holding company, require the filing of certain reports with the Department of Insurance, and limit the amount of dividends which may be received by the holding company from American Life, Capital Reserve, and Capital Reserve.Great Plains Life.

On July 21, 2010, President Obama signed into law financial regulatory reform legislation, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”). The Reform Act reshapes financial regulations in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Reform Act will be subject to regulatory interpretation and implementation rules requiring rulemaking that may take several years to complete. Although the ultimate outcome of the regulatory rulemaking proceedings cannot be predicted with certainty, we do not believe that the provisions of the Reform Act will have a material impact on our consolidated financial results or financial condition.

Employees and Agents

As of December 31, 2011,2012, we have 1921 full-time employees and 23 part-time employees, as well as 50approximately 65 insurance agents who operate as independent contractors.

ITEM 1A. RISK FACTORS.

An investment in our voting common stock involves a high degree of risk. Investors should carefully consider the risks described below and the other information in this Form 10-K before investing in our voting common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed.

Risks Related to Our Business

The Company has a limited operating history and owns a limited amount of assets.

The Company was formed in October 2003 and was in the development stage until the insurance operations of American Life commenced in September 2009. We have a limited operating history and, until 2009, we generated no revenues other than interest and investment income. The start-up costs we have incurred have created a history of operating losses. We have all of the risks inherent in establishing a new business, including limited capital, uncertain markets, lack of revenues and potential competition from better capitalized companies. We have no control over general economic conditions, competitors’ products, competitive pricing, customer demand and costs of marketing or advertising to build and expand our business. Moreover, we anticipate that we will continue to incur net operating losses well into the future as we establish a revenue stream from our operating subsidiaries. There is no assurance that our activities will be successful or result in any revenues or profits to the Company and, the likelihood of any success must be considered in light of our early stage of development. These risks and our lack of substantial operating history make it difficult to predict the Company’s future revenues or results of operations. As a result, our financial results may fluctuate widely and fall below our expectations or the expectations of our shareholders. This could cause the value of our voting common stock to decline.

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Ownership of shares of our voting common stock involves substantial risk, and the entire value of those shares may be lost.

Shares of our voting common stock constitute a high-risk investment in a developing business. No assurance or guaranty can be given that any of the potential benefits envisioned by our business plan will prove to be available, nor can any assurance or guaranty be given as to the actual amount of financial return, if any, which may result from ownership of our shares.The entire value of shares of our voting common stock may be lost.

Our insurance marketing efforts are key to our success.

We market our insurance products through the services of licensed insurance agents. New agents are recruited through referrals from shareholders, newspaper advertisements, and solicitation through use of on-line job sites. Each potential candidate must go through a three interview process. If hired to sell insurance, the candidate must complete a 40 hour training course conducted by a third party as well as pass the state examination. Once licensed, they must complete a week long product and sales training class. Following course completion, they will have a training week where their manager will work side by side makingby conducting sales callsmeetings with them. The average turnover rate of our agentssince we began writing business is approximately 15% per year.

The insurance products are marketed using the same face-to-face marketing concept that was used by us to sell shares of stock in our intrastate public offering that utilized in person sales meetings with prospective shareholders. When the intrastate offering was being conducted, the shares were only offered to individuals who had been referred by another shareholder. There was no cold calling or other similar activity. The sale of stock was not allowed to be conducted in any area where insurance sales were ongoing. Our insurance agents have used our shareholder base and their referrals as potential clients for our life insurance products.

Many of these agents have no prior insurance product selling experience and, accordingly, this lack of experience may have a negative impact on the amount of premium volume we write. The extent of this negative impact on the premium volume written will depend primarily on our ability to timely and adequately train these agents to sell our insurance products and the effectiveness of our face-to-face marketing concept.

Our existing insurance subsidiaries, American Life, and Capital Reserve, and Great Plains Life, may fail as a result of being inadequately capitalized.

American Life was granted a certificate of authority by the Nebraska Department of Insurance based on initial capital and surplus of approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. Following the merger of American Life with Old Reliance, American Life had approximately $4.5 million in capital and surplus at December 31, 2011. The Arizona2011 and $2.4 million at December 31, 2012. Capital Reserve had capital and surplus of $1.2 million and $1.4 million as of December 31, 2011 and 2012, respectively. Great Plains Life had capital and surplus of $2.4 million and $2.2 million as of December 31, 2011 and 2012, respectively. Each insurance company’s Department of Insurance may require American Life to add additional amounts of capital and surplus to support its business going forward, just as the Missouri Department of Insurance may require additional capitalization of Capital Reserve. Capital Reserve had capital and surplus of $1.4 million as of December 31, 2011.forward. The amount of capital and surplus ultimately required will be based on certain “risk-based capital” standards established by statute and regulation and administered by the Arizona, Missouri, and MissouriSouth Dakota Departments of Insurance and other regulators. The “risk-based capital” system establishes a framework for evaluating the adequacy of the minimum amount of capital and surplus, calculated in accordance with statutory accounting principles, necessary for an insurance company to support its overall business operations. It identifies insurers that may be inadequately capitalized by looking at certain inherent risks of each insurer’s assets and liabilities and its mix of net premiums written. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action, including supervision, rehabilitation, or liquidation. If American Life, or Capital Reserve, or Great Plains Life fails to maintain required capital levels in accordance with the “risk-based capital” system, each company’s ability to maintain the regulatory authority necessary to conduct business would be compromised.

We expect to suffer operating losses for a number of years.

We expect to sustain losses for a number of years. American Life,Our insurance subsidiaries, as is common among new or inactive life insurance companies, likely will operate at a loss for a number of years because of the substantial costs of writing new life insurance. We have incurred significant net losses since inceptionin 2003 totaling approximately $10.5$12.2 million through December 31, 2011.2012.

The aggregate cost of writing new life insurance includes such significant, nonrecurring items as first year commissions, medical and investigation expenses, and other expenses incidental to the issuance of new policies, together with the initial reserves required to be established. For the American Accumulator product,and Great Plains Life Accumulator products, the costs to cover expenses and the policyholder liability that must be set up at policy issuance exceed the first year premium by approximately 39%, while

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there is no excess of costs to cover expenses and the policyholder liability for the Future Cornhusker product. Accordingly, it is generally recognized that the cost of putting a new policy in force is substantially greater than the first year premium. As a result, a new life insurance company can be expected to sustain losses for a number of years, during which time earnings are not available for dividends. However, in accordance with accounting principles generally accepted in the United States of America (GAAP), incremental direct costs 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, are capitalized and amortized over the life of the premiums produced.

Additionally, the Company will continue to have a large portion of its business as first year business. Therefore, the overhead of the Company is not yet supported by renewal businessbusiness.

Our investments in development stage companies may expose us to loss of capital and premium growth.conflicts of interest for our officers, directors and affiliates who serve as in officer and director capacities for those development stage entities.

As set forth above in “Certain Relationships and Affiliations with Similar Businesses”, we have investmentsin development stagecompanies, which are either seeking to raise capital to form life insurance subsidiaries in their respective states of incorporation (Arkansas, Colorado, Idaho, Minnesota and New Mexico) or have recently formed a life insurance subsidiary (South Dakota and Wyoming). Our time and management attention devoted to these investments is significant, and it can be expected to divert management resources from our business. There will likely be conflicts between the operative, strategies and long term objectives of these development stage companies and us. The resolution of these conflicts may not be resolvable, or if resolved, may be at a disadvantage to us. In addition, several of our officers, directors and affiliates serve as officers, directors and consultants to these development stage entities and they individually acquire stock in these entities at extremely low prices compared to the other shareholders in these entities who buy their shares at much higher prices and upon where the financial risk of all these companies rests. Also, our affiliated parties are paid directly by these development stage entities in addition to what we pay them for our services. All of these factors result in conflicts of interests between the interests of Midwest and the interests of these companies, as well as the interests of our affiliates in personal payment of salaries and other fees of these entities in addition to what we pay such persons at present. We cannot assure that these conflicts will be resolved to the benefit of Midwest, in which case your investment may decline in value.

The insurance industry is subject to numerous laws and regulations, and compliance costs and/or changes in the regulatory environment could adversely affect our business.

We are subject to government regulation in each of the states in which we conduct business. Such regulatory authority is vested in state agencies having broad administrative power dealing with all aspects of the insurance business, including rates, policy forms, and capital adequacy, and is concerned primarily with the protection of policyholders rather than shareholders. During the past several years, increased scrutiny has been placed upon the insurance regulatory framework, and certain state legislatures have considered or enacted laws that alter, and in many cases increase, state authority to regulate insurance companies and insurance holding company systems. The National Association of Insurance Commissioners (the NAIC) and state insurance regulators are reexamining existing laws and regulations, specifically focusing on insurance company investments and solvency issues, risk-based capital guidelines, interpretations of existing laws, the development of new laws, the implementation of non-statutory guidelines and the circumstances under which dividends may be paid. Current NAIC initiatives, and other regulatory changes, could have a material adverse impact on our business. There can be no assurance that our life insurance subsidiaries or any other life insurance subsidiary that we may acquire or form will be able to satisfy the regulatory requirements of the Departments of Insurance of their respective state of domicile or a similar department in any other state in which it may wish to transact business.

      A portion of our insurance policy sales are from foreign countries, primarily those in Latin America.   The government of a foreign country could determine its residents may not buy life insurance from us unless we became qualified to do business in that country or unless our policies purchased by its residents receive prior approval from its insurance regulators.  Also, new laws or regulations could be implemented or new applications of existing laws or regulations could occur, which could result in the cessation of marketing activities by our independent marketing agents.  From time to time we have become aware of new foreign laws, regulations or new interpretations of foreign laws or regulations that may have an adverse effect on the marketing efforts of our foreign independent marketing agents.  We cannot assure you any of these laws, regulations, or application of them by foreign regulatory authorities will not have an adverse effect on the marketing efforts of our independent marketing agents and, in turn, on our revenues.  Further, there is no assurance we would be able to qualify to do business in any foreign country or that its insurance regulatory authorities would approve our policies if we decided to submit our insurance policies for approval.  We could also face sanctions, including fines and penalties, if a country's authorities determined any failure to qualify or otherwise comply with its laws was willful or ongoing.  Any of the foregoing could reduce our revenues and adversely affect our results of operations and financial condition.  Additionally, we do not determine whether our independent consultants are required to be licensed to sell insurance in the countries in which they market our policies.  If our independent consultants were not in compliance with applicable laws, including licensing laws, they could be required to cease operations, which would reduce our revenues.  We have not obtained any advice of counsel in any foreign jurisdictions with respect to these matters.  We are unable to quantify the effect of foreign regulation on our business if regulation were to be imposed on us, but we believe we could expend substantial amounts of time and incur substantial expense in complying with any foreign regulation, and we may decide to withdraw from or avoid a market if additional foreign regulation were imposed.

Individual state guaranty associations assess insurance companies to pay benefits to policyholders of insolvent or failed insurance companies. The impact of such assessments may be partly offset by credits against future state premium taxes. We cannot predict the amount of any future assessments, nor have we attempted to estimate the amount of assessments to be made from known insolvencies.

We operate in a highly competitive industry, and our business will suffer if we are unable to compete effectively.

The operating results of companies in the insurance industry are subject to significant fluctuations due to competition, economic conditions, interest rates, investment performance, maintenance of insurance ratings from rating agencies such as A.M. Best and other factors. Our ability to compete with other insurance companies is dependent upon, among other things, our ability to attract and retain agents to market our insurance products, our ability to develop competitive and profitable products and our ability to obtain high ratings. In connection with the development and sale of products, we and our operating subsidiaries encounter significant competition from other insurance companies, many of whom have financial resources substantially greater than the Company, as well as competition from other investment alternatives available to our customers. We do not anticipate that American Life and Great Plains Life will be rated by industry analysts for a period of three to five years. This will have a negative impact on American Life’sthe companies’ ability to compete with rated insurance companies. Accordingly, competition for new life insurance policies will be significant which may have a negative impact on our ability to operate profitably.

We are highly dependent upon our key personnel, and the loss of any of our key personnel could materially and adversely affect our business.

Our ability to operate successfully is dependent primarily upon the efforts of our President,Vice Chairman, Travis Meyer, and our Secretary/TreasurerChief Executive Officer and Chief Executive Officer of American Life and Great Plains Life, Mark Oliver, as well as other key personnel. The loss of the services of any of these officers and employees could have a material adverse effect on our ability to operate successfully.

We do have 3 year employment contracts with each party.

Development of life insurance products involves the use of certain assumptions, and the inaccuracy of these assumptions could adversely affect our profitability.

We must make certain assumptions as to expected mortality, lapse rates and other factors in developing the pricing and other terms of our life insurance products. These assumptions are based on industry experience and are reviewed and

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revised regularly so as to reflect actual experience on a current basis. However, variation of actual experience from that assumed in developing such terms may affect a product’s profitability.profitabilityor sales volume.

If we underestimate our liability for future policy benefits, our results of operations could suffer.

The liability established for future life insurance policy benefits is based upon a number of factors, including certain assumptions, such as mortality, morbidity, lapse rate and crediting rate. If we underestimate future policy benefits, we would incur additional expenses at the time we become aware of the inadequacy. As a result, our profitability could suffer.

American LifeOur insurance subsidiaries may not be able to obtain a favorable insurance rating.

Insurance ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Ratings reflect the rating agencies’ opinion of an insurance company’s financial strength, operating performance and ability to meet its obligations to policyholders. American LifeOur insurance subsidiaries will not receive a rating until it hasthey have maintained operations for a minimum of three to five years. There can be no assurance that American Lifeour insurance subsidiaries will be rated by a rating agency or that any rating, if and when received, will be favorable to the insurance subsidiary. The lack of a rating could impact the Company’s ability to make sales in the broad insurance marketplace. For example, customers may choose not to purchase a policy from an unrated company, or we may be required to charge lower rates and offer discounts to attract business.  Capital Reserve also has no rating at the present time; however it is currently not marketing products.

Fluctuations in interest rates could adversely affect our business and profitability.

Interest rate fluctuations could impair the ability to pay policyholder benefits with operating and investment cash flows, cash on hand and other cash sources. Our annuity product exposes us to the risk that changes in interest rates will reduce our spread, or the difference between the amounts that we are required to pay under the contracts and the amounts we are able to earn on our investments intended to support our obligations under the contracts. Our spread is a key component of our net income.

To the extent that interest rates credited are less than those generally available in the marketplace, policyholder lapses, policy loans and surrenders, and withdrawals of life insurance policies and annuity contracts may increase as contract holders seek to buy products with perceived higher returns. This process may result in cash outflows requiring that we sell investments at a time when the prices of those investments are adversely affected by the increase in market interest rates, which may result in realized investment losses.

Increases in market interest rates may also negatively affect our profitability. In periods of increasing interest rates, the Company may not be able to replace invested assets with higher yielding assets needed to fund the higher crediting rates that may be necessary to keep interest sensitive products competitive. We therefore may have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts.

Changes in the tax laws could adversely affect our business.

Congress has from time to time considered possible legislation that would eliminate the deferral of taxation on the accretion of value within certain annuities and life insurance products. This and similar legislation, including a simplified “flat tax” income tax structure with an exemption from taxation for investment income, could adversely affect the sale of life insurance compared with other financial products if such legislation were to be enacted. There can be no assurance as to whether such legislation will be enacted or, if enacted, whether such legislation would contain provisions with possible adverse effects on any annuity and life insurance products that we and our operating subsidiaries develop.

We may not be able to successfully execute our acquisition strategy, which could cause our business and future growth prospects to suffer.

One component of our business plan is to pursue strategic acquisitions of companies that meet our acquisition criteria. However, suitable acquisition candidates may not be available on terms and conditions that we find acceptable. In pursuing acquisitions, we compete with other companies, many of which have greater financial and other resources than the Company. If we are unable to secure sufficient funding for potential acquisitions, we may not be able to complete strategic acquisitions that we otherwise find desirable. Further, if we succeed in consummating strategic acquisitions, our business, financial condition and results of operations may be negatively affected because:

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Because we do not intend to pay cash dividends in the foreseeable future, shareholders will benefit from an investment in our voting common stock only if it appreciates in value and becomes liquid.

Because we do not expect to pay any cash dividends in the foreseeable future, the success of any investment in our stock will depend upon any future appreciation in its value. We cannot guarantee that our stock will appreciate in value or even achieve or maintain a value equal to the price at which shares were purchased. Further, a market may never develop to sell shares of our stock even if they appreciate in value based on an increase in book value or other valuation criteria.

Our business and future growth prospects may suffer if the acquisition and merger of Old Reliance with American Life does not achieve expected results.

Our business, financial condition and results of operations may be negatively affected if: (i) the acquired business does not achieve anticipated revenues, earnings or cash flows; (ii) we assume liabilities that were not disclosed or exceed estimates; (iii) we are unable to integrate the acquired business successfully and realize anticipated economic, operational and other benefits in a timely manner; (iv) the acquisition itself disrupts our on-going business, distracts management or diverts resources from other more beneficial uses; (v) we experience difficulties operating in markets in which we have no or only limited direct experience; or (vi) there is a loss of customers and key employees of the acquired company.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

As a “smaller reporting company,” the Company is not required to provide disclosure pursuant to this item.

ITEM 2. PROPERTIES.

The Company currently leases office space at 8101 “O” Street, Suite S111, Lincoln, Nebraska 68510. This lease was executed August 28, 2009, amended on January 21, 2011, and expires on January 31, 2014. As part of the acquisition of Old Reliance, the Company assumed a lease for the headquarters of Old Reliance in Colorado Springs, Colorado that expiresexpired on December 31, 2012. Rent expenseThe Company also subleases office space for the years ended December 31,a satellite office in Kearney, Nebraska, which was executed on June 11, 2012 and expires on May 1, 2015. Great Plains Financial entered into a lease on May 1, 2011 and 2010 was $113,207 and $93,369, respectively. Future minimum payments for 2012, 2013 and 2014 are $145,076, $128,240 and $10,687, respectively.office space in Pierre, South Dakota, which expires on April 30,2014.

ITEM 3. 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.

ITEM 4. MINE SAFTEYSAFETY DISCLOSURES.

Not applicable.

PART II.

ITEM 5. MARKET FOR REGISTRANTS’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

       On February 20, 2013, the Company commenced a private placement offeringof its common stock under Regulation D of the Securities Act of 1933. The Company is offering a maximum amount of $10,000,000.

There is no established public trading market for our voting common stock. Our securities are not listed for trading on any national securities exchange nor are bid or asked quotations reported in any over-the-counter quotation service.

On December 31, 2011,2012, the Company had issued and outstanding 8,670,1469,106,717 shares of voting common stock and 74,159 shares of preferred non-voting stock. No other voting securities of the Company are outstanding.

Holders of Record

As of March 22, 2012,1, 2013, there were approximately 5,500 holders of record of our voting common stock.

Dividends

We have not paid cash dividends on our voting common stock and do not anticipate paying cash dividends in the foreseeable future. Instead, we intend to retain any future earnings for reinvestment in our business. Any future determination

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to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

Securities Authorized for Issuance Under Equity Compensation Plans

We have not established any equity compensation plans or granted any equity awards under such plans. As a result, there are no securities authorized for issuance under such plans.

ITEM 6. SELECTED FINANCIAL DATA.

As a “smaller reporting company,” the Company is not required to provide disclosure pursuant to this Item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report. In addition to

Cautionary Note Regarding Forward-Looking Statements

       Except for certain historical information contained herein, this discussionreport contains certain statements that may be considered "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and analysis may containSection 27A of the Securities Act of 1933, as amended, and such statements are subject to the safe harbor created by those sections. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, that involve risk,including without limitation: any projections of revenues, earnings, cash flows, capital expenditures, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed acquisition plans, new services, or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statement of assumptions underlying any of the foregoing. Words such as "believe," "may," "could," "expects," "hopes," "estimates," "projects," "intends," "anticipates," and "likely," and variations of these words, or similar expressions, terms, or phrases, are intended to identify such forward-looking statements. Forward-looking statements are inherently subject to risks, assumptions, and uncertainties, some of which cannot be predicted or quantified, which could cause future events and assumptions. Actualactual results mayto differ materially from those anticipatedset forth in, thesecontemplated by, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Item 1A. Risk Factors," along with any supplements in Part II below.

       All such forward-looking statements speak only as of the date of this Form 10-K. You are cautioned not to place undue reliance on such forward-looking statements. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in the events, conditions, or circumstances on which any such statement is based.

Overview

Midwest was formed on October 31, 2003 for the primary purpose of becoming a financial services holding company. We presently conduct our business through our wholly owned subsidiary, American Life & Security Corp. Capital Reserve Life Insurance Company of Jefferson City, Missouri is a dormant, wholly owned subsidiary of American Life. Security Capital Corporation is a 60% owned subsidiary of Midwest. Hot Dot, Inc.Great Plains Financial Corporation is a 37%24.5% owned subsidiary of Midwest and Midwest controlsMidwest. Great Plains Life Assurance Company is a majoritywholly owned subsidiary of the Board of Directors.Great Plains Financial.

From our inception, through July 2006, we have raised approximately $6.5$17.5 million through the salesales of shares of voting common stock in several private placements. We raised approximately $11.0 million throughplacements and an intrastate public offering of voting common stock in the State of Nebraska.

On September 1, 2009, American Life was issued a certificate of authority to conduct life insurance business in the State of Nebraska. Initial capital and surplus contributed to American Life was approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. In its first four months of operation, between September 1, 20092012 and December 31, 2009,2011, American Life generated $354,352 in premium revenue. In 2011 and 2010, American Life generated $2.5approximately $4.0 million and $1.9$3.1 million in premium revenue, respectively.respectively, when combined with the operating results of Old RelianceInsurance Company, a company acquired by American Life in August 2011 as described later in this document.

On June 20, 2010, American Life acquired Capital Reserve in exchange for a cash payment of approximately $1.9 million. This transaction added approximately a like amount of assets to American Life. Further, with the insurance charters acquired from Capital Reserve, we obtained access to additional markets in Missouri Kansas and Iowa.Kansas.Capital and surplus of Capital Reserve as of December 31, 2012 and 2011 was $1,396,147 and $1,206,355, respectively. Capital Reserve generated a $66,813 and $112,327 net loss for the years ended December 31, 2012 and 2011, respectively.

In connection with the acquisition of Capital Reserve, American Life also coinsured a block of life insurance business from Capital Reserve’sformer parent corporation in a separate transaction. The purchase price for this block of business was approximately $375,000. This transaction added more than $70,000 in annual revenues to American Life’s operations, as well as approximately $3.5 million of new assets and $3.2 million of policy liabilities to our balance sheet.

In January 2011, we completed the private sale of 74,159 shares of our Series A Preferred Stock to certain qualified investors in Latin America. The net proceeds of this sale, after expenses, were approximately $415,750. These proceeds were used to further capitalize our insurance operations, for working capital andfor other general corporate purposes.

On July 12, 2010, in order to provide additional capital to support our continued growth, we commenced an offering of up to 2,000,000 additional shares of voting common stock to existing shareholders who were residents of the State of Nebraska. This offering was completed on February 28, 2011 and a total of 1,554,326 additional shares of voting common stock were sold. The gross proceeds of this sale were approximately $7.7 million. These proceeds were used to fund the acquisition of Old Reliance Insurance Company as described below, and will be used to further capitalize our insurance operations, for working capitaland for other general corporate purposes.

On November 8, 2010, the Company entered into an agreement to acquire all of the issued and outstanding capital stock of Old Reliance. American Life merged into Old Reliance following the purchase, with the survivor changing its name to American Life & Security Corp. In the transaction, the sole shareholder of Old Reliance received: (i) approximately

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regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default.

Deferred Acquisition Costs

Incremental direct costs 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, are capitalized and amortized over the life of the premiums produced. 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 prospectively adopted Accounting Standards Update (ASU) 2010-26 “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts,” effective January 1, 2012. Under the new guidance, incremental direct costs 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, are capitalized and amortized over the life of the premiums produced. The amount of acquisition costs capitalized during the year ended December 31, 2012 were $1,173,683. The amount of acquisition costs that would have been capitalized during the year ended December 31, 2012 if the Company’s previous policy had been applied during that period would have been $1,005,538. Thus, the adoption of this guidance resulted in a $168,145 increase in the amount of acquisition costs capitalized during the year.

Value of Business Acquired

Value of business acquired (VOBA) represents the estimated value assigned to purchased companies or insurance in force of the assumed policy obligations at the date of acquisition of a block of policies. At least annually, a review is performed of the models and the assumptions used to develop expected future profits, based upon management’s current view of future events. VOBA is reviewed on an ongoing basis to determine that the unamortized portion does not exceed the expected recoverable amounts. Management’s view primarily reflects Company experience but can also reflect emerging trends within the industry. Short-term deviations in experience affect the amortization of VOBA in the period, but do not necessarily indicate that a change to the long-term assumptions of future experience is warranted. If it is determined that it is appropriate to change the assumptions related to future experience, then an unlocking adjustment is recognized for the block of business being evaluated. Certain assumptions, such as interest spreads and surrender rates, may be interrelated. As such, unlocking adjustments often reflect revisions to multiple assumptions. The VOBA balance is immediately impacted by any assumption changes, with the change reflected throughthe statements of comprehensive income statement as an unlocking adjustment in the amount of VOBA amortized. These adjustments can be positive or negative with adjustments reducing amortization limited to amounts previously deferred plus interest accrued through the date of the adjustment.

In addition, the Company may consider refinements in estimates due to improved capabilities resulting from administrative or actuarial system upgrades. The Company considers such enhancements to determine whether and to what extent they are associated with prior periods or simply improvements in the projection of future expected gross profits due to improved functionality. To the extent they represent such improvements, these items are applied to the appropriate financial statement line items in a manner similar to unlocking adjustments.

VOBA is also reviewed on an ongoing basis to determine that the unamortized portion does not exceed the expected recoverable amounts. If it is determined from emerging experience that the premium margins or gross profits are insufficient to amortizeless than unamortized deferred acquisition costs, then the asset will be adjusted downward with the adjustment recorded as an expense in the current period.

Goodwill and Intangibles

Goodwill represents the excess of the amounts paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. Goodwill is tested for impairment at least annually in the fourth quarter or more frequently if events or circumstances change that would indicate that a triggering event has occurred.

In September 2011, the FASB issued ASU 2011-08 which amends the rules for testing goodwill for impairment. Under the new rules, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. We early adopted ASU 2011-08 for our December 31, 2011 annual goodwill impairment test.

In assessing the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we assess relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting units’ fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, specific events and share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

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