Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 01, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | MIDWEST HOLDING INC. | |
Entity Central Index Key | 0000355379 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Common Stock, Shares Outstanding | 1,023,408,553 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 | |
Entity Interactive Data Current | Yes | |
Entity Current Reporting Status | Yes | |
Entity Ex Transition Period | false | |
Entity Incorporation, State or Country Code | NE | |
Entity File Number | 000-10685 | |
Document Quarterly Report | true | |
Document Transition Report | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Investments, available for sale, at fair value maturities (amortized cost: $66,897,963 and $19,226,841, respectively) (see Note 6) | $ 67,264,433 | $ 17,384,183 |
Mortgage loans on real estate, held for investment | 10,098,478 | |
Other invested assets | 2,976,375 | |
Preferred stock | 500,000 | |
Policy loans | 42,902 | 43,843 |
Total investments | 80,882,188 | 17,428,026 |
Cash and cash equivalents | 24,369,609 | 2,832,567 |
Deferred acquisition costs, net | 2,311,232 | |
Premiums receivable | 346,137 | 346,870 |
Accrued investment income | 755,197 | 200,708 |
Reinsurance recoverables (Note 9) | 24,103,438 | 23,100,644 |
Intangible assets | 700,000 | 700,000 |
Property and equipment, net | 71,052 | 91,414 |
Operating lease right of use assets | 500,615 | 592,065 |
Other assets | 369,128 | 261,884 |
Assets associated with business held for sale (see Note 4) | 8,118,055 | 20,937,071 |
Total assets | 142,526,651 | 66,491,249 |
Liabilities: | ||
Benefit reserves | 16,251,544 | 16,012,655 |
Policy claims | 205,040 | 270,785 |
Deposit-type contracts | 87,901,054 | 7,234,927 |
Advance premiums | 927 | 490 |
Long-term debt | 18,938,705 | |
Deferred gain on coinsurance transactions | 6,721,254 | 3,899,999 |
Lease liabilities (See Note 13): | ||
Finance lease | 3,720 | 9,299 |
Operating lease | 554,921 | 646,519 |
Other liabilities | 7,189,689 | 1,062,087 |
Liabilities associated with business held for sale (see Note 4) | 8,116,325 | 21,052,733 |
Total liabilities | 126,944,474 | 69,128,199 |
Commitments and Contingencies (See Note 12) | ||
Stockholders' Equity: | ||
Common stock, $0.001 par value. Authorized 1,970,000,000 shares; issued and outstanding 1,023,408,553 as of September 30, 2019 and 22,873,764 as of December 31, 2018. | 1,023,409 | 22,874 |
Additional paid-in capital | 53,451,243 | 33,006,242 |
Accumulated deficit | (39,337,736) | (35,348,052) |
Accumulated other comprehensive income (loss) | 396,600 | (1,818,014) |
Total Midwest Holding Inc.'s stockholders' equity (deficit) | 15,533,516 | (4,136,950) |
Noncontrolling interest | 48,661 | |
Total stockholders' equity (deficit) | 15,582,177 | (4,136,950) |
Total liabilities and stockholders' equity | $ 142,526,651 | 66,491,249 |
Series C Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Preferred stock, Series C, $0.001 par value. Authorized 1,500,000 shares; issued and outstanding none as of September 30, 2019 and 1,500,000 as of December 31, 2018 | $ 1,500,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Amortized Cost | $ 66,897,963 | $ 19,226,841 |
Stockholders' Equity: | ||
Preferred stock, shares authorized | 10,000,000 | |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,970,000,000 | 1,970,000,000 |
Common stock, shares issued | 1,023,408,553 | 22,873,764 |
Common stock, shares outstanding | 1,023,408,553 | 22,873,764 |
Series C Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,500,000 | 1,500,000 |
Preferred stock, shares issued | 0 | 1,500,000 |
Preferred stock, shares outstanding | 0 | 1,500,000 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues | ||||
Insurance premiums | $ 2,327 | $ 3,589 | $ (152) | $ 16,296 |
Investment income, net of expenses | (308,100) | 210,981 | 330,910 | 615,913 |
Net realized gains (losses) on investments | 12,532 | (83,613) | 9,315 | (285,487) |
Amortization of deferred gain on reinsurance | 613,079 | 12,094 | 2,465,678 | 36,282 |
Miscellaneous income | 132,298 | 27,425 | 214,633 | 78,709 |
Total Revenues | 452,136 | 170,476 | 3,020,384 | 461,713 |
Expenses: | ||||
Interest credited | (208,292) | 478 | 42,895 | 93,646 |
Benefits | 6,904 | 1,872 | 47,936 | |
Increase in benefit reserves | 34,500 | 2,338 | 34,500 | (54,621) |
Amortization of deferred acquisition costs | 66,638 | 88,503 | ||
Salaries and benefits | 667,634 | 559,377 | 1,782,708 | 1,471,914 |
Other operating expenses | 1,393,014 | 1,575,152 | 4,898,134 | 2,529,145 |
Total Expenses | 1,953,494 | 2,144,249 | 6,848,612 | 4,088,020 |
Loss from continuing operations before taxes | (1,501,358) | (1,973,773) | (3,828,228) | (3,626,307) |
Federal income tax | (114,642) | (114,642) | ||
Loss from continuing operations | (1,616,000) | (1,973,773) | (3,942,870) | (3,626,307) |
Loss from discontinued operations | 10,494 | (15,496) | ||
Gain (loss) from discontinued operations | 10,494 | (15,496) | ||
Net loss | (1,616,000) | (1,963,279) | (3,942,870) | (3,641,803) |
Less: Gain attributable to noncontrolling interest | (46,814) | (46,814) | ||
Net loss | (1,662,814) | (1,963,279) | (3,989,684) | (3,641,803) |
Comprehensive loss: | ||||
Unrealized gains (losses) on investments arising during period | 512,773 | (137,982) | 2,223,929 | (1,232,778) |
Less: reclassification adjustment for net realized (gains) losses on investments | (12,532) | 83,613 | (9,315) | 285,487 |
Other comprehensive income (loss) | 500,241 | (54,369) | 2,214,614 | (947,291) |
Comprehensive loss: | $ (1,115,759) | $ (2,017,648) | $ (1,728,256) | $ (4,589,094) |
Basic | $ (0.002) | $ (0.090) | $ (0.009) | $ (0.160) |
Diluted | $ (0.002) | $ (0.002) | $ (0.009) | $ (0.010) |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | AOCI [Member] | Noncontrolling Interest | Total |
Balance at Dec. 31, 2017 | $ 22,861 | $ 33,006,255 | $ (30,282,518) | $ (511,219) | $ 2,235,379 | |
Preferred stock conversion adjustment | 13 | (13) | ||||
Net loss | (5,065,534) | (5,065,534) | ||||
Unrealized gains on investments | (1,306,795) | (1,306,795) | ||||
Balance at Dec. 31, 2018 | 22,874 | 33,006,242 | (35,348,052) | (1,818,014) | (4,136,950) | |
Net loss | (3,989,684) | (3,989,684) | ||||
Xenith note interest waived | 845,536 | 845,536 | ||||
Xenith note conversion | 927,681 | 18,172,319 | 19,100,000 | |||
Class C preferred stock conversion | 72,854 | 1,427,146 | 1,500,000 | |||
Change in equity of noncontrolling interests | $ 48,661 | 48,661 | ||||
Unrealized gains on investments | 2,214,614 | 2,214,614 | ||||
Balance at Sep. 30, 2019 | $ 1,023,409 | $ 53,451,243 | $ (39,337,736) | $ 396,600 | $ 48,661 | $ 15,582,177 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (3,989,684) | $ (3,641,803) |
Adjustments to arrive at cash provided by operating activities: | ||
Net premium and discount on investments | 80,563 | 80,271 |
Depreciation and amortization | 44,820 | 157,251 |
Amortization of deferred acquisition costs | 88,503 | |
Deferred acquisition costs capitalized | (2,395,710) | |
Net realized gains on investments | 13,654 | 285,487 |
Deferred coinsurance ceding commission | 2,821,255 | (36,282) |
Notes payable interest accrued | 845,536 | |
Commutation of Security National Life Insurance assumed business | (2,543,898) | |
Changes in operating assets and liabilities: | ||
Reinsurance recoverables | (1,002,794) | (436,510) |
Accrued investment income | (554,489) | 20,806 |
Premiums receivable | 733 | 23,692 |
Policy liabilities | 76,877,920 | 734,324 |
Other assets and liabilities | 6,170,613 | 133,975 |
Other assets and liabilities - discontinued operations | (117,392) | 834,678 |
Net cash provided by or used for operating activities | 78,883,528 | (4,388,009) |
Securities available for sale: | ||
Purchases | (50,253,728) | (7,381,392) |
Proceeds from sale or maturity | 2,488,387 | 9,313,456 |
Purchases of other invested assets | (2,976,375) | (100,000) |
Proceeds from sale of other invested assets | 104,892 | |
Preferred stock purchased | (500,000) | |
Mortgage loans on real estate, held for investment | ||
Mortgage loans on real estate, held for investment purposes | (10,098,478) | |
Net change in policy loans | 941 | 11,037 |
Net purchases of property and equipment | (17,349) | (6,707) |
Net cash used in or provided by investing activities | (61,356,602) | 1,941,286 |
Cash Flows from Financing Activities: | ||
Finance lease | (333) | (333) |
Proceeds from issuance of preferred stock | 1,500,000 | |
Proceeds from issuance of notes payable | 600,000 | |
Net transfers to noncontrolling interest | 48,661 | |
Receipts on deposit-type contracts | 4,088,640 | 650 |
Withdrawals on deposit-type contracts | (126,852) | (49,678) |
Net cash provided by financing activities | 4,010,116 | 2,050,639 |
Net increase (decrease) in cash and cash equivalents | 21,537,042 | (396,084) |
Cash and cash equivalents: | ||
Beginning | 2,832,567 | 951,527 |
Ending | 24,369,609 | $ 555,443 |
Conversion of notes payable | ||
Book value of note payable | (19,100,000) | |
Common stock | 927,680 | |
Additional paid in capital | 18,172,320 | |
Conversion of preferred stock | ||
Book value of preferred stock | (1,500,000) | |
Common stock | 72,855 | |
Additional paid in capital | $ 1,427,145 |
Nature of Operations and Basis
Nature of Operations and Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Nature of Operations and Basis of Presentation | MIDWEST HOLDING INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 is in the life and annuity insurance business and operates through its wholly owned subsidiary, American Life & Security Corp. (“American Life”). As discussed in Note 3, on June 28, 2018, we underwent a change in control as a result of the closing of a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement dated May 9, 2018 with a non-affiliated third party, Xenith Holdings LLC, a Delaware limited liability company (“Xenith”). On April 2, 2019, we obtained a 51% ownership in 1505 Capital LLC, a Delaware limited liability company, that was established in 2018 to provide financial and investment advisory and management services to clients and related investment, trading and financial activities. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions from the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10‑Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2018 (“2018 Form 10‑K”), should be read in connection with the reading of these interim unaudited consolidated financial statements. Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized in our 2018 Form 10‑K. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months and nine months ended September 30, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. All material inter-company accounts and transactions have been eliminated in consolidation. Investments All fixed maturities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in comprehensive loss. 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, financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost. The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the statement of comprehensive income as an other-than-temporary impairment. If the Company does not expect to recover the amortized basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default. No other-than-temporary impairments were recognized during the nine months ended September 30, 2019 or 2018. Investment income consists of interest, dividends, and real estate income, which are recognized on an accrual basis and amortization of premiums and discounts. Mortgage loans on real estate, held for investment Mortgage loans on real estate, held for investment are carried at unpaid principal balances. Interest income on mortgage loans on real estate, held for investment is recognized in net investment income at the contract interest rate when earned. A mortgage loan is considered to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the mortgage agreement. Valuation allowances on mortgage loans are established based upon losses expected by management to be realized in connection with future dispositions or settlements of mortgage loans, including foreclosures. The Company establishes valuation allowances for estimated impairments on an individual loan basis as of the balance sheet date. Such valuation allowances are based on the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan’s original effective interest rate. These evaluations are revised as conditions change and new information becomes available. No such valuation allowance was established as of September 30, 2019. Other invested assets The Company purchases and sells leases in its investment portfolio. Within the third quarter 2019, the Company had invested in and sold two leases. As of September 30th, 2019, the Company owned two lease investments. Preferred Stock Preferred stock was purchased during the third quarter of 2019. The Company believes the cost of the preferred stock equals fair market value as of September 30, 2019, timing of the investment. An evaluation of the preferred stock fair market value will be performed in the fourth quarter to 2019 to determine whether there is an impairment or increase in fair market value. Policy loans Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value. Cash and cash equivalents The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. At September 30, 2019 and December 31, 2018, the Company had no cash equivalents. At September 30, 2019, the Company held approximately 1.7 million in Great British Pounds (“GBP”) in cash in two of our custody accounts. The USD equivalent held was approximately $2.1 million. Deferred acquisition costs Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to 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 nine months ended September 30, 2019 that suggest a review should be undertaken. Property and equipment Property and equipment are stated at cost net of accumulated depreciation. Annual depreciation is primarily computed using straight-line methods for financial reporting and straight-line and accelerated methods for tax purposes. Furniture and equipment is depreciated over 3 to 7 years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $9,652 and $12,524 for the three months ended September 30, 2019 and 2018, respectively. Depreciation expense totaled $28,972 and $37,758 for the nine months ended September 30, 2019 and 2018, respectively. Accumulated depreciation totaled $964,452 and $942,323 as of September 30, 2019 and December 31, 2018, respectively. Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. Management has determined that no such events occurred in the three months ended September 30, 2019 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 as of September 30, 2019 or December 31, 2018. 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 annuity riders, premium deposit funds and supplemental contracts without life contingencies. Deferred gain on ceding commissions American Life has entered into several indemnity reinsurance contracts where it 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 ceding commissions from reinsurance transactions that represent recovery of acquisition costs. These commissions reduce the DAC associated with that block of business by offsetting the DAC amortization on the Company’s income statement. Income taxes The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state or local tax examinations by tax authorities for the years before 2015. The Company is not currently under examination for any open years. The provision for income taxes is based on income as reported in the financial statements. The income tax provision is calculated under the asset and liability method. Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. The Company has no uncertain tax positions that it believes are more-likely-than not that the benefit will not to be realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company had no accruals for payments of interest and penalties at September 30, 2019 or December 31, 2018. 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. Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts. Acquisition costs are amortized over the expected life of the annuity contracts. Comprehensive loss Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable securities classified as available for sale, net of applicable taxes. Common and preferred stock and earnings (loss) per share Common and preferred stock and earnings (loss) per share: The par value per each Company share is $0.001 with 1,970,000,000 voting common shares authorized, 20,000,000 non-voting common shares authorized, and 10,000,000 preferred shares authorized. On June 18, 2019, Xenith exercised the right to convert its 1,500,000 Series C preferred stock and the $19,100,000 notes payable to voting common stock at the conversion rate of approximately $0.02 per common share. At September 30, 2019 and December 31, 2018, the Company had 1,023,408,553 and 22,873,764 voting common shares issued and outstanding, respectively. At September 30, 2019 and December 31, 2018, the Company had none and 1,500,000 Series C preferred shares outstanding, respectively. The Series C preferred shares were converted by Xenith to voting common shares on June 18, 2019 at a rate of approximately $0.02 per share for 72,854,474 voting common shares. The stated annual dividend rate on the Series C preferred shares was 8%. At the time of the conversion, Xenith forgave all previously accrued dividends from June 28, 2018 through the conversion date. Loss per basic share attributable to the Company’s common stockholders was computed based on the weighted average number of shares outstanding during each period. The weighted average number of shares outstanding during the three months ended September 30, 2019 and 2018 was 1,023,408,553 and 22,873,716 shares, respectively. The weighted average number of shares outstanding during the nine months ended September 30, 2019 and 2018 were 426,019,650 and 22,873,764 shares, respectively. Loss per diluted share attributable to the Company’s common stockholders for the three and nine months ended September 30, 2019 was computed based on the average shares outstanding and Long-Term Incentive Plan (“LTIP”), as if all vested and converted, was 1,025,965,696 and 428,576,793, respectively. The loss per diluted share attributable to the Company’s common stockholders for 2018 was computed based on the average shares outstanding plus the notes payable, the Preferred Shares, and the LTIP as converted as if all vested and converted. The weighted average number of shares outstanding during the three and nine months ended September 30, 2018 were 1,025,965,696 and 362,607,418 shares, respectively. Reclassifications Certain reclassifications have been made on the Consolidated Balance Sheets and Statements of Comprehensive Loss for the year ended December 31, 2018 and the nine months ended September 30, 2018. 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 and nine months ended September 30, 2018. |
New Accounting Standards
New Accounting Standards | 9 Months Ended |
Sep. 30, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Standards | Note 2. New Accounting Standards Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016‑02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The lease liability is measured at the present value of the lease payments over the lease term with the right-of-use asset measured as the lease liability amount and including adjustments for certain lease incentives and initial direct costs. Lease expense recognition will continue to differentiate between finance leases and operating leases resulting in a similar pattern of lease expense recognition as under current GAAP. This ASU permitted a modified retrospective adoption approach that includes a number of optional practical expedients that entities may elect upon adoption. On January 1, 2019, the Company adopted this standard using a modified retrospective adoption approach. The adoption resulted in the Company identifying three operating leases and one financial lease which were subject to this guidance. The impact to the Consolidated Statements of Comprehensive Income (Loss) was minimal. We identified four leases with net assets of $506,441 and $592,065 and lease liabilities of $558,641 and $655,818 for the nine months ended September 30, 2019 and the year ended December 31, 2018, respectively. On February 14, 2018, the FASB issued ASU No. 2018‑02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . It allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for public business entities for reporting periods for which financial statements have not yet been issued. The Company has evaluated the impact of this update and has determined that this does not impact us currently due to not recording unrealized losses or gains net of tax. The Company has incurred net operating losses since inception so it does not record deferred tax assets or deferred tax liabilities due to establishing a valuation allowance. In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers (“ASU 2014‑09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of ASU 2014‑09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015‑14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015‑14”). This amendment deferred the effective date of the previously issued ASU 2014‑09 until the interim and annual reporting periods beginning after December 15, 2017. In addition, the FASB has issued four related ASU’s on principal versus agent guidance (ASU 2016‑08), identifying performance obligations and the licensing implementation guidance (ASU 2016‑10) a revision of certain SEC Staff Observer comments (ASU 2016‑11) and implementation guidance (ASU 2016‑12). The guidance permits two methods of transition upon adoption: full retrospective and modified retrospective. The Company adopted ASU 2014‑09 on January 1, 2018 and utilized the modified retrospective method. Insurance contracts, lease contracts and investments are not within the scope of ASU 2014‑09; therefore, this standard does not apply to the majority of our consolidated revenues. For the Company’s miscellaneous income, which is within the scope of this guidance, the Company reviewed its service fee income revenue streams and compared its historical accounting policies and practices to the new adopted standard. The Company believes its historical revenue recognition was materially consistent with the way we recognized service fee income as of September 30, 2019. Future adoption of New Accounting Standards In August 2018, the FASB issued ASU No. 2018‑15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computer Arrangement That is a Service Contract . Under ASU No. 2018‑15, the amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. In order to determine which costs can be capitalized, we are to follow the guidance in Subtopic 350‑40. Cost for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and the post-implementation stage are expensed as the activities are performed. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Management has reviewed and evaluated the impact of this pending new standard and will implement this starting in fiscal year 2020. The Company has incurred substantial implementation costs related to the new cloud based technology that was incurred in 2018 and decided not to early adopt this ASU. 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 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. |
Change in Control
Change in Control | 9 Months Ended |
Sep. 30, 2019 | |
Change In Control | |
Change in Control | Note 3. Change in Control On June 28, 2018 we underwent a change in control as a result of the closing of a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement dated May 9, 2018 (the “Agreement”) with a non-affiliated third party, Xenith Holdings LLC, a Delaware limited liability company (“Xenith”). Vespoint LLC, a Delaware limited liability company (“Vespoint”), owns 100% of the voting stock of Xenith. Vespoint is owned and managed by AMS Advisors LLC, a Delaware limited liability company, and Rendezvous Capital LLC, a New York limited liability company. Each of these three companies is a private investment company; they are controlled by A. Michael Salem and Michael Minnich, who are Co-Chief Executive Officers of Vespoint and Executive Officers of Midwest and American Life. The terms and conditions of the Agreement were described in Midwest’s Current Report on Form 8‑K filed with the SEC on May 14, 2018. All conditions to consummation of the Agreement, including approval of the transactions contemplated therein by the State of Nebraska Department of Insurance (“NDOI”), were subsequently met and a closing was held pursuant to the Agreement on June 28, 2018 (the “Closing”). Issuance of Series C Convertible Preferred Stock - At the closing of the Agreement, we issued 1,500,000 shares of newly created Series C Convertible Preferred Stock (“Series C Preferred Stock”) to Xenith for $1,500,000, which was recorded in our balance sheet as Mezzanine Equity, and it ranked senior to our voting common stock on liquidation with a preference of $1.00 per share. Subject to the availability of funds, annual dividends of 8% of the Series C Preferred Stock liquidation preference were payable by us; if not paid the dividends accrued. Also, at any time after June 28, 2025 and subject to Nebraska law, Xenith would have required us to redeem the Series C Preferred Stock at the liquidation preference (plus accrued dividends) or fair market value, whichever was greater. If the shares were not redeemed for any reason, an interest rate of 12% per year would have begun. The Preferred Stock voted along with the voting common stock as a single Series on an “as converted” basis. Also, Holders of Preferred Stock voting as a separate Series were entitled to elect five of the Company’s eight members of its Board of Directors. The Preferred Stock had several protections against the Company taking action that would adversely affect the rights of holders of Preferred Stock such as mergers, liquidation, dilutive stock issuances, among others. On June 18, 2019, the Series C Preferred Stock shares were converted, at Xenith’s election, into 72,854,474 shares of our voting common stock at approximately $0.02 per share. All accrued dividends were waived. At closing of the Agreement, Xenith loaned a total of $600,000 to Midwest, repayable upon maturity in 10 years with cash interest of 4% per annum payable quarterly and accrued interest of another 4% per annum payable upon maturity. The loans were made under two notes of $500,000 and $100,000, respectively. Both notes were converted by Xenith into an aggregate 29,141,790 voting common shares on June 18, 2019. The Agreement further provided that Xenith, in its sole discretion, could loan up to an additional $23,500,000 to Midwest. Any loans made by Xenith under this election (“Subsequent Loans”) could also to be converted into voting common stock at the price of $0.02 per share. Xenith loaned an additional $18,500,000 in the fourth quarter of 2018 following the amendment of the Midwest Articles of Incorporation to increase its authorized voting common shares to 1,970,000,000. The additional notes were converted, at Xenith’s election, into 898,538,525 shares of voting common stock on June 18, 2019. All interest on the notes through June 18, 2019 was waived for payment and was accounted for as a capital contribution to Midwest. Substantially all the proceeds from the Loans and Series C Preferred Stock were contributed to our insurance subsidiary, American Life, to be used for general business purposes. The table below summarizes conversion of the Notes and shares of Series C Preferred Stock into voting common stock and the total outstanding voting common stock as of September 30, 2019: As Converted Voting Common Stock Number Percentage Previous company shareholders 22,873,764 2.2 % Note conversion ($500,000) 24,284,825 2.4 % Note conversion ($100,000) 4,856,965 0.5 % Note conversion ($1,000,000) 48,569,650 4.7 % Note conversion ($17,500,000) 849,968,875 83.1 % Series C Preferred stock conversion 72,854,474 7.1 % Total shares outstanding as of September 30, 2019 1,023,408,553 100.0 % |
Assets and Liabilities Held for
Assets and Liabilities Held for Sale | 9 Months Ended |
Sep. 30, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Assets and Liabilities Held for Sale | Note 4. Assets and Liabilities Held for Sale On November 30, 2018, American Life entered into an Assumption and Indemnity Reinsurance Agreement (“Reinsurance Agreement”) with Unified Life Insurance Company (“Unified”), a Texas domiciled stock insurance company. The Reinsurance Agreement provides that American Life ceded and Unified agreed to reinsure, on an indemnity reinsurance basis, 100% of the liabilities and obligations under substantially all of American Life’s life, annuity and health policies (“Policies”). The Agreement closed on December 10, 2018, as previously disclosed in Midwest’s Current Report on Form 8‑K filed with the Securities and Exchange Commission (the “SEC”) on December 12, 2018. The effective date of the Agreement was July 1, 2018. After the closing of the Reinsurance Agreement, Unified began the process of preparing and delivering certificates of assumption and other materials to policyholders of American Life in order to effect an assumption of the Policies by Unified such that all of American Life’s rights and obligations under the policies arising on and after July 1, 2018 would be completely assumed by Unified without further indemnification or other obligations, except for liabilities, claims and obligations incurred before July 1, 2018. Unified is obligated to indemnify American Life against all liabilities and claims and all of its policy obligations from and after the July 1, 2018. The consideration paid by Unified to American Life under the Reinsurance Agreement upon closing was $3,500,000 (“Ceding Commission”), subject to minor settlement adjustments. At closing, American Life transferred the Statutory Reserves and Liabilities, as defined in the Reinsurance Agreement, directly related to the policies, to Unified. The Ceding Commission is being amortized on a straight-line basis over the life of the policies. When the policies are converted to assumptive, meaning American Life has no liability exposure for those policies, the remaining Ceding Commission will be recognized in our income statement. As of September 30, 2019, 73% of the indemnity policies were converted to assumptive policies thereby releasing American Life from its legal obligations related to those policies. Our balance sheet was required to be restated for all periods shown with the assets and liabilities which were ceded by American Life to Unified into separate line items as assets and liabilities held for sale. The table below summarizes the assets and liabilities that are included in discontinued operations as of September 30, 2019 and as of December 31, 2018: As of September 30, As of December 31, 2019 2018 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 79,057 $ 366,849 Reinsurance recoverables 7,986,308 20,359,326 Premiums receivable 52,690 210,896 Total assets held for sale in the Consolidated Balance Sheet $ 8,118,055 $ 20,937,071 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 2,956,701 $ 9,799,834 Policy claims 133,203 127,666 Deposit-type contracts 5,004,273 11,050,139 Advance premiums 10,076 21,699 Accounts payable and accrued expenses 12,072 53,395 Total liabilities held for sale in the Consolidated Balance Sheet $ 8,116,325 $ 21,052,733 Our income statement was also required to be restated for all periods shown breaking out the net income between continuing operations and discontinued operations. There were no items in 2019 that were reclassified as discontinued operations, therefore, the table below summarizes only the losses that are included in discontinued operations for the three and nine months ended September 30, 2018: Three months ended September 30, Nine months ended September 30, 2018 2018 Major line items constituting pretax loss of discontinued operations: Premiums $ 440,891 $ 1,375,419 Death and other benefits (74,538) (485,651) Interest credited (106,728) (311,847) Increase in benefit reserves (164,724) (234,246) Amortization of deferred acquisition costs (58,822) (261,735) Other operating expenses (25,585) (97,436) Loss on discontinued operations $ 10,494 $ (15,496) |
Non-controlling Interest
Non-controlling Interest | 9 Months Ended |
Sep. 30, 2019 | |
Noncontrolling Interest [Abstract] | |
Non-controlling Interest | Note 5. Non-controlling Interest On April 2, 2019, Midwest entered into a contract to acquire a 51% ownership in 1505 Capital LLC (“1505 Capital”), a Delaware limited liability company, located in New York. 1505 Capital was organized to provide financial and investment advisory and management services to clients and any related investment, trading or financial activities. Class A Units were authorized to be issued up to 1,000 shares. Midwest purchased for $1 a total of 510 of the Class A Units and Aurora Financial Services, Inc. owns the remaining 490 Class A Units. As of September 30, 2019, Midwest consolidated the 1505 Capital income of $95,539 into the consolidated financials from April 2, 2019 through September 30, 2019. Midwest’s portion of income was $48,725 and the non-control interest income was $46,814. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2019 | |
Marketable Securities [Abstract] | |
Investments | Note 6. Investments The cost or amortized cost and estimated fair value of investments classified as available-for-sale as of September 30, 2019 and December 31, 2018 are as follows: Cost or Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value September 30, 2019: Fixed maturities: U.S. government obligations $ 2,097,035 $ 10,003 $ 60,787 $ 2,046,251 Mortgage-backed securities 874,209 7 13,499 860,717 Asset-backed securities 46,242,975 71,513 60,865 46,253,623 States and political subdivisions -- general obligations 262,079 5,522 — 267,601 States and political subdivisions -- special revenue 25,142 187 — 25,329 Corporate 17,396,523 611,300 196,911 17,810,912 Total fixed maturities $ 66,897,963 $ 698,532 $ 332,062 $ 67,264,433 Mortgage loans on real estate, held for investment 10,098,478 — — 10,098,478 Other invested assets 2,976,375 — — 2,976,375 Preferred stock 500,000 — — 500,000 Total Investments $ 80,472,816 $ 698,532 $ 332,062 $ 80,839,286 December 31, 2018: Fixed maturities: U.S. government obligations $ 2,112,816 $ 247 $ 117,112 $ 1,995,951 Mortgage-back securities 1,068,976 — 64,925 1,004,051 States and political subdivisions -- general obligations 265,473 — 2,289 263,184 States and political subdivisions -- special revenue 25,231 — 58 25,173 Corporate 15,754,345 14 1,658,535 14,095,824 Total fixed maturities $ 19,226,841 $ 261 $ 1,842,919 $ 17,384,183 The Company has two securities that individually exceed 10% of the total of the state and political subdivisions categories as of September 30, 2019. The amortized cost, fair value, credit ratings, and description of each security is as follows: Amortized Estimated Cost Fair Value Credit Rating September 30, 2019: Fixed maturities: States and political subdivisions -- general obligations Bellingham, Washington $ 107,999 $ 111,904 AA+ Longview, Washington Refunding 154,080 155,697 Aa3 Total $ 262,079 $ 267,601 The following table summarizes, for all securities in an unrealized loss position at September 30, 2019 and December 31, 2018, the estimated fair value, pre-tax gross unrealized loss and number of securities by consecutive months they have been in an unrealized loss position. September 30, 2019 December 31, 2018 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 1,114,692 $ 57,823 6 $ 7,862 $ 430 1 Asset-backed securities 16,023,788 60,865 12 — — — Mortgage-back securities 159,722 1,136 3 — — — Corporate 1,638,993 27,169 9 3,351,664 315,617 23 Greater than 12 months: U.S. government obligations 354,151 2,964 2 1,785,949 116,682 10 Mortgage-back securities 680,652 12,363 14 1,004,052 64,925 19 States and political subdivisions -- general obligations — — — 263,183 2,289 2 States and political subdivisions -- special revenue — — — 25,173 58 1 Corporate 2,091,953 169,742 12 10,628,745 1,342,918 58 Total fixed maturities $ 22,063,951 $ 332,062 58 $ 17,066,628 $ 1,842,919 $ 114 (1) We may reflect a security in more than one aging category based on various purchase dates. Based on our review of the securities in an unrealized loss position at September 30, 2019 and December 31, 2018, no other-than-temporary impairments were deemed necessary. Management believes that the Company will fully recover its cost basis in the securities held at September 30, 2019, and management does not have the intent to sell nor is it more likely than not that the Company will be required to sell such securities until they recover or mature. The amortized cost and estimated fair value of fixed maturities at September 30, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Estimated Cost Fair Value Due in one year or less $ — $ — Due after one year through five years 1,720,127 1,731,192 Due after five years through ten years 11,583,552 11,564,598 Due after ten years through twenty years 46,435,050 46,637,790 Due after twenty years 7,159,234 7,330,853 $ 66,897,963 $ 67,264,433 The following table presents a reconciliation of the beginning balance for investments measured at fair value on a recurring basis using Level 3 inputs at September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 Beginning balance $ — $ — Apartments and business 10,098,478 — Preferred stock 500,000 — Short-term leases 2,976,375 — Total mortgage loans $ 13,574,853 $ — The Company holds no valuation allowance as of September 30, 2019 due to impairment of these mortgages. The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At September 30, 2019 and December 31, 2018, these required deposits had a total amortized cost of $3,242,342 and $2,958,178 and fair values of $3,197,545 and $2,772,809, respectively. The components of net investment income for the three and nine months ended September 30, 2019 and 2018 are as follows: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Fixed maturities $ (289,015) $ 201,440 $ 342,104 $ 598,632 Mortgage loans 68,810 — 78,466 — Other (1,102) 15,314 6,973 44,780 (221,307) 216,754 427,543 643,412 Less investment expenses (86,793) (5,773) (96,633) (27,499) Investment (loss) income, net of expenses $ (308,100) $ 210,981 $ 330,910 $ 615,913 Proceeds for the three months ended September 30, 2019 and 2018 from sales of investments classified as available-for-sale were $82,222 and $2,977,954, respectively. Gross gains of $0 and $3,062 and gross losses of $9,512 and $91,567 were realized on those sales during the three months ended September 30, 2019 and 2018, respectively. Proceeds for the nine months ended September 30, 2019 and 2018 from sales of investments classified as available-for-sale were $2,488,387 and $9,313,456, respectively. Gross gains of $9,006 and $27,972 and gross losses of $22,660 and $318,351 were realized on those sales during the nine months ended September 30, 2019 and 2018, respectively. |
Fair Values of Financial Instru
Fair Values of Financial Instruments | 9 Months Ended |
Sep. 30, 2019 | |
Investments, All Other Investments [Abstract] | |
Fair Values of Financial Instruments | Note 7. 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 in the alternative 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. Notes payable: Notes payable consisted of the convertible notes entered into due to the Xenith transaction and were recorded net of issuance costs. As of September 30, 2019, Midwest had no outstanding notes payable. Fixed maturities: Fixed maturities are recorded at fair value on a recurring basis utilizing a third-party pricing source. The valuations are reviewed and validated quarterly through random testing by comparisons to separate pricing models or other third party pricing services. For the period ended September 30, 2019, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third party prices were changed from the values received. Securities with prices based on validated quotes from pricing services are reflected within Level 2. Cash: The carrying value of cash and cash equivalents and short-term investments approximate the fair value because of the short maturity of the instruments. Mortgage loans on real estate, held for investment: Mortgage loans are carried at their principal value as there are no traded market values for these loans. Mortgage loans are categorized as Level 3 in the fair value hierarchy. Other invested assets: Short-term equipment leases are carried at their principal value as there are no traded market values for these leases. Other invested assets are categorized as Level 3 in the fair value hierarchy. Preferred stock: Series C Preferred Stock was recorded at its principal value as there are no traded market values for this stock. The Series C Prefer Stock was categorized as Level 3 in the fair value hierarchy. As discussed in Note 9, the Series C Preferred Stock was converted into voting common shares on June 18, 2019. 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. Policy loans are categorized as Level 3 in the fair value hierarchy. 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. These liabilities are categorized as Level 3 in the fair value hierarchy. The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value September 30, 2019 Fixed maturities: U.S. government obligations $ — $ 2,046,251 $ — $ 2,046,251 Mortgage-backed securities — 860,717 — 860,717 Asset-backed securities — 46,253,623 — 46,253,623 States and political subdivisions — general obligations — 267,601 — 267,601 States and political subdivisions — special revenue — 25,329 — 25,329 Corporate — 17,810,912 — 17,810,912 Total fixed maturities — 67,264,433 — 67,264,433 Mortgage loans on real estate, held for investment — — 10,098,478 10,098,478 Other invested assets — — 2,976,375 2,976,375 Preferred stock — — 500,000 500,000 Total Investments $ — $ 67,264,433 $ 13,574,853 $ 80,839,286 December 31, 2018 Fixed maturities: U.S. government obligations $ — $ 1,995,951 $ — $ 1,995,951 Mortgage-back securities — 1,004,051 — 1,004,051 States and political subdivisions - general obligations — 263,184 — 263,184 States and political subdivisions - special revenue — 25,173 — 25,173 Corporate — 14,095,824 — 14,095,824 Total fixed maturities $ — $ 17,384,183 $ — $ 17,384,183 There were no transfers of financial instruments between any levels during the nine months ended September 30, 2019 or during the year ended December 31, 2018. Accounting standards require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis are discussed above. There were no financial assets or financial liabilities measured at fair value on a non-recurring basis. The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of September 30, 2019 and December 31, 2018, respectively: September 30, 2019 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 42,902 $ — $ — $ 42,902 $ 42,902 Cash 24,369,609 24,369,609 — — 24,369,609 Liabilities: Policyholder deposits (Deposit-type contracts) 87,901,054 — — 87,901,054 87,901,054 December 31, 2018 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 43,843 $ — $ — $ 43,843 $ 43,843 Cash 2,832,567 2,832,567 — — 2,832,567 Liabilities: Policyholder deposits (Deposit-type contracts) 7,234,927 — — 7,234,927 7,234,927 Notes payable 18,938,705 — — 18,938,705 18,938,705 |
Income Tax Matters
Income Tax Matters | 9 Months Ended |
Sep. 30, 2019 | |
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 September 30, 2019 and December 31, 2018 are as follows: September 30, 2019 December 31, 2018 Deferred tax assets: Loss carryforwards $ 1,062,759 $ 1,429,458 Capitalized costs 233,806 269,472 Unrealized losses on investments — 390,349 Policy acquisition costs 661,065 — Charitable contribution carryforward 2,394 — Property and equipment 15,508 — Benefit reserves 565,405 192,858 Total deferred tax assets 2,540,937 2,282,137 Less valuation allowance (2,210,492) (1,928,454) Total deferred tax assets, net of valuation allowance 330,445 353,683 Deferred tax liabilities: Unrealized losses on investments 74,080 — Due premiums 83,754 117,144 Intangible assets 147,000 147,000 Policy loans 25,611 86,245 Property and equipment — 3,294 Total deferred tax liabilities 330,445 353,683 Net deferred tax assets $ — $ — At September 30, 2019 and December 31, 2018, the Company recorded a valuation allowance of $2,2 10,492 and $1,928,454, respectively, on the deferred tax assets to reduce the total to an amount that management believes will ultimately be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income. Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss (“NOL”) carryforwards following a change of control, which occurred on June 28, 2018. As of September 30, 2019, the deferred tax assets included the expected tax benefit attributable to federal NOLs of $5,060,759. The federal NOLs generated prior to June 28, 2018 which are subject to Section 382 limitation can be carried forward. If not utilized, the NOLs of $890,636 prior to 2017 will expire through the year of 2032, and the NOLs generated from June 28, 2018 to September 30, 2019 do not expire and will carry forward indefinitely, but their utilization in any carry forward year is limited to 80% of taxable income in that year. The Company believes that it is more likely than not that the benefit from federal NOL carryforwards will not be realized; thus, we have recorded a full valuation allowance of $1,1,062,759 on the deferred tax assets related to these federal NOL carryforwards. There was income tax expense of $114,642 for the nine months ended September 30, 2019 and no income tax expense for the nine months ended September 30, 2018. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Computed expected income tax benefit $ (325,116) $ (477,395) $ (813,759) $ (764,779) Increase (reduction) in income taxes resulting from: Meals, entertainment and political contributions (1,778) 1,628 3,858 5,832 Change in loss carryforward due to 382 limitation — 202,994 — 5,735,023 COD Interest — — 177,563 — Other (38,325) (54,442) 512 (89,110) (40,103) 150,180 181,933 5,651,745 Tax benefit before valuation allowance (365,219) (327,215) (631,826) 4,886,966 Change in valuation allowance 479,861 327,215 746,468 (4,886,966) Net income tax expenses $ 114,642 $ — $ 114,642 $ — |
Reinsurance
Reinsurance | 9 Months Ended |
Sep. 30, 2019 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance | Note 9. Reinsurance A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of September 30, 2019 and December 31, 2018 and for the nine months ended September 30, 2019 and 2018 is as follows: September 30, 2019 December 31, 2018 Balance sheets: Benefit and claim reserves ceded 24,103,438 23,100,644 Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Statements of comprehensive income: Premiums assumed $ — $ 1,922 $ — $ 10,268 Premiums ceded 180,149 231,012 702,450 871,677 Benefits assumed — 357 — 92,792 Benefits ceded 51,866 46,390 167,895 149,452 Commissions assumed — 4 — 18 Commissions ceded 1,566 1,644 8,146 5,864 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: 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- $ — $ — $ 489,737 $ — $ 489,737 Sagicor Life Insurance Company A- — 116,727 11,389,369 270,196 11,235,900 Ironbound Reinsurance Company Limited NR — — 474,577 — 474,577 US Alliance Life and Security Company NR — 23,000 11,944,833 64,609 11,903,224 $ — $ 139,727 $ 24,298,516 $ 334,805 $ 24,103,438 Effective July 25, 2019, American Life entered into a Funds Withheld Coinsurance and Modified Coinsurance Agreement (“FW/Modco Agreement”) with Ironbound Reinsurance Company Limited, an unaffiliated reinsurance company organized under the laws of Barbados (“Ironbound”). In a modified coinsurance arrangement (“Modco”), the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a funds withheld coinsurance agreement (“FW”), assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurance, to reduce the potential credit risk. Under the FW/Modco Agreement, American Life will cede to Ironbound, on a funds withheld coinsurance and modified coinsurance basis, an initial ninety-five (95%) quota share of certain liabilities with respect to its multi-year guaranteed annuity (“MYGA”) business. American Life has established two accounts to hold the assets for the FW/Modco Agreement, a Funds Withheld Account and a Modco Deposit Account. In addition, a trust account was established on June 30, 2019 among American Life, Ironbound and Wells Fargo Bank, National Association for the sole benefit of American Life to fund the Funds Withheld Account and the Modco Deposit Account for any shortage in required reserves. The initial settlement included net premium income of $45,005,536 (gross premiums of $46,568,321 minus gross commissions paid of $1,562,786) and net statutory reserves of $47,271,267. The initial settlement for the Funds Withheld Account was $24,928,934 and for the Modco Deposit Account was $16,619,289 and the reserves required was $26,944,622 and $17,963,081, respectively. The amount owed to the Funds Withheld Account and the Modco Deposit Account from the trust account was $2,015,688 and $1,343,792, respectively which was funded at the closing of the Ironbound transaction. American Life earned a ceding commission plus commission allowance of $5,215,477 as of September 30, 2019. The ceding commission and commission allowance of $5,215,477 was deferred to the balance sheet and had a deferred ceding commission balance of $5,071,440 which was net of amortization as of September 30, 2019. Effective July 1, 2018, American Life entered into an assumptive and indemnity coinsurance transaction with Unified to transfer 100% of the risk related to the remaining legacy block of business, see Note 4 above for further discussion. We transferred $19,311,616 of GAAP net adjusted reserves as of July 1, 2018 to Unified for cash of $14,320,817, which was net of a ceding allowance of $3,500,000 plus the accrued interest on the transaction from July 1, 2018 until it closed on December 10, 2018. Unified assumed certain responsibilities for incurred claims, surrenders and commission from the effective date. The ceding commission of $3,500,000 was recorded net of the difference between statutory and GAAP net adjusted reserves, the elimination of DAC of $1,890,013, VOBA of $338,536, and the remaining deferred profit from our legacy business of $26,896. The remaining $3,069,690 was reflected as a deferred gain and will be recognized into income over the expected duration of the legacy blocks of business. As of September 30, 2019, Unified had converted 73% of the indemnity coinsurance to assumptive coinsurance. American Life had amortization expense for nine months ended September 30, 2019 of $82,611. As a result of the assumption of 73% of the indemnity policies, $2,131,291 was additionally released into income for the nine months ended September 30, 2019. The ending deferred ceding commission at September 30, 2019 was $779,046. American Life and Security National Life Insurance (“SNL”) reached an agreement to commutate the assumed block of life business effective July 31, 2018. American Life recorded a GAAP loss of $154,780 due to the difference between the GAAP and statutory reserves and the write-off of the remaining VOBA. Net adjusted reserves transferred back to SNL totaled $2,543,898 on a GAAP basis. At September 30, 2019 and December 31, 2018, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to Sagicor were $11,235,900 and $11,494,161, respectively. At September 30, 2019 and December 31, 2018, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to US Alliance were $11,903,224 and $11,149,888, respectively. American Life remains contingently liable on the ceded reinsurance should Sagicor or US Alliance be unable to meet their respective obligations. 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, a separate contingency reserve may be established. At September 30, 2019 and December 31, 2018, no contingency reserve was established. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Notes Payable | Note 10. Notes Payable At closing of the Agreement, Xenith loaned a total of $600,000 to Midwest, repayable upon maturity in 10 years with interest of 8% per annum of accrued interest of another 4% per annum payable upon maturity. The loans were made under two notes of $500,000 and $100,000, respectively. The Agreement further provided that Xenith, in its sole discretion, may loan up to an additional $23,500,000 to Midwest. Any loans made by Xenith under this election (“Subsequent Loans”) could also to be converted into our voting common stock at $0.02 per share. Xenith contributed an additional $18,500,000 in the fourth quarter of 2018 following the amendment of the Midwest Articles of Incorporation to increase its authorized voting common shares to 1,970,000,000. The Company had total accrued interest of $845,536 on the Xenith notes through June 18, 2019. This included interest not recorded from June 28, 2018 through December 31, 2018 of $131,711 and interest from January 1, 2019 through June 18, 2019 of $713,825. All interest on the notes from inception through June 18, 2019 were waived by Xenith. The accrued interest was accounted for as an additional capital contribution. The following table sets forth information regarding loans made to us by Xenith through June 18, 2019 and the number of shares of voting common stock each loan was converted into: Shares of Common Loan Stock into which Principal Loan Was Date of Loan Amount Converted June 28, 2018 $ 500,000 24,284,825 June 28, 2018 100,000 4,856,965 October 10, 2018 1,000,000 48,569,650 December 7, 2018 17,500,000 849,968,875 Total $ 19,100,000 927,680,315 As of September 30, 2019, Midwest had no notes outstanding to Xenith. |
Deposit-Type Contracts
Deposit-Type Contracts | 9 Months Ended |
Sep. 30, 2019 | |
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 the policyholder 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 September 30, 2019 and the year ended December 31, 2018: Nine Months Ended Year Ended September 30, 2019 December 31, 2018 Beginning balance $ 7,234,927 $ 8,314,297 US Alliance 442,370 804,187 Ironbound Reinsurance Company Limited 76,216,386 — Deposits received 4,088,640 (1,881,411) Investment earnings 42,895 650 Withdrawals (126,852) 47,936 Contract charges 2,688 (50,732) Ending balance $ 87,901,054 $ 7,234,927 Under the terms of American Life’s historical coinsurance agreement with a third party, American Life assumed certain deposit-type contract obligations. These were commutated effective July 31, 2018. The deposits, withdrawals and interest credited in the table above represents the sales of the 5% retained MYGA product for 2019 and activity from the third party through July 31, 2018. |
Contingencies and Commitments
Contingencies and Commitments | 9 Months Ended |
Sep. 30, 2019 | |
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 is seeking approval to conduct business in additional states during 2019.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 its closing in July. American Life is waiting on approval from the NDOI for a second Funds Withheld Coinsurance and Modified Coinsurance Agreement with another reinsurer. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Leases | Note 13. Leases Our operating lease activities consist of leases for office space and equipment. Our finance lease activities consist of leases for hardware which we will own at the end of the lease agreement. None of our lease agreements include variable lease payments. See discussion of the January 1, 2019 implementation impact at Note 1. Basis of Presentation and Summary of Significant Accounting Policies. Supplemental balance sheet information as of September 30, 2019 for our leases is as follows: As of As of Leases Classification September 30, 2019 December 31, 2018 Assets Noncurrent: Finance Office and other equipment, net of accumulated depreciation and amortization $ 5,826 $ 14,564 Operating Operating lease right-of-use assets 500,615 592,065 Total leased assets $ 506,441 $ 606,629 Liabilities Current: Finance lease Finance lease liabilities $ 3,720 $ 9,299 Noncurrent: Operating lease Operating lease liabilities 554,921 646,519 Total leased liabilities $ 558,641 $ 655,818 The difference between assets and liabilities includes a $5,266 adjust to the finance lease and a $54,454 adjustment to an operating lease, both at the beginning of the period as part of the ASC 842 implementation adjustment. Our operating and finance leases expenses for the three and nine months ended September 30, 2019 are as follows: Three months ended September 30, Nine months ended September 30, Leases Classification 2019 2018 2019 2018 Operating General and administrative expense $ 3,344 $ 4,609 $ 10,453 $ 13,829 Finance lease cost: Amortization expense 2,914 1,120 8,739 3,360 Interest expense 111 111 333 333 Minimum contractual obligations for our leases as of September 30, 2019 are as follows: Operating Leases Finance Lease 2019 (excluding nine months ended September 30, 2019) $ 39,079 $ 2,133 2020 160,958 2,133 2021 164,081 — 2022 156,608 — 2023 161,674 — 2024 13,508 — Total remaining lease payments $ 695,908 $ 4,266 Supplemental cash flow information related to leases was as follows: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Cash payments Operating cash flows from operating leases $ (190) $ 1,076 $ (148) $ 3,228 Operating cash flows from finance leases 1,164 (628) 2,328 (1,258) Financing cash flows from finance leases (111) (111) (333) (333) The weighted average remaining lease terms of our finance and operating leases were six months and approximately three years, respectively and as of September 30, 2019. As of December 31, 2018 the weighted average remaining lease terms of our finance and operating leases were fifteen months and three and a half years, respectively. The weighted average discount rates used to determine the lease liabilities for finance leases was 6% and operating leases was 8% as of September 30, 2019 and December 31, 2018, respectively. The discount rate used for finance leases was based on the rates implicit in the leases. The discount rate used for operating leases was based on our incremental borrowing rate. |
Statutory Net Income and Surplu
Statutory Net Income and Surplus | 9 Months Ended |
Sep. 30, 2019 | |
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. American Life’s statutory net losses for the nine months ended September 30, 2019 and 2018 were $149,247 and $3,107,135, respectively. Capital and surplus of American Life as of September 30, 2019 and December 31, 2018 was $18,035,576 and $20,979,285, respectively. The net loss was primarily due to the continuing expenses incurred to provide services on the new software and related technology to distribute products through national marketing organizations. The MYGA sales began late in January 2019 with $79,500,172 of face amount of policies issued during the nine months ending September 30, 2019. An additional $6,902,67 7 was pending as of September 30, 2019. Even though American Life had a significant increase in statutory revenue, the earnings profile of MYGA products are characterized by up-front statutory losses. As mentioned in Note 9. Reinsurance above, American Life entered into the FW/Modco Agreement with Ironbound to cede 95% of the MYGA business. Premiums net of commissions and ceding commission and administrative fees ceded to Ironbound was $70,035,588 and the reserve requirement of $75,741,809 was ceded to Ironbound as of September 30, 2019. |
Surplus Notes
Surplus Notes | 9 Months Ended |
Sep. 30, 2019 | |
Surplus Notes [Abstract] | |
Surplus Notes | Note 15. Surplus Notes Our surplus notes of $300,000 and $250,000 matured on August 1, 2016 and September 1, 2016, respectively. The Company retired the notes in full as of December 31, 2018, including any accrued interest, through the transfer of the 10 condominiums in Hawaii owned by American Life. The book value of the surplus notes, including interest, was $876,400. The book value of the 10 condominiums in Hawaii was $493,648. We recognized a gain of $382,752 on the settlement of the condos and surplus notes. |
Third Party Administration
Third Party Administration | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Third Party Administration | Note 16. 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. We have been able to perform our TPA services using our existing in-house resources. Fees earned during the three months ended September 30, 2019 and 2018 amounted to $11,880 and $24,600, respectively. Fees earned during the nine months ended September 30, 2019 and 2018 were $40,140 and $71,940, respectively. |
Long Term Incentive Plan
Long Term Incentive Plan | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Long Term Incentive Plan | Note 17. Long Term Incentive Plan On June 11, 2019 during the Company’s annual meeting of shareholders, the Company’s shareholders approved the Midwest Holding Inc. 2019 Long-Term Incentive Plan (“LTIP”). T he purposes of this plan are to create incentives which are designed to motivate participants to put forth maximum effort toward the success and growth of the Company and to enable the Company to attract and retain experienced individuals who by their position, ability and diligence are able to make important contributions to the Company’s success. Toward these objectives, this plan provides for the grant of options, restricted stock awards, restricted stock units, stock appreciation right (“SARs”), performance units, performance bonuses, stock awards and other incentive awards to eligible employees. Also the plan provides for the grant of nonqualified stock options, restricted stock awards, restricted stock units, SARs, performance units, stock awards and other incentive awards to consultants and eligible directors, subject to the conditions set forth in this plan. Under the LTIP, the aggregate number of shares of common stock that may be covered that are designated as incentive stock options may not exceed 51,000,000. On July 19, 2019, stock options for 8,950,000 shares at an exercisable conversion price of $.05 per share were granted on a company-wide basis with one-third exercisable after July 17, 2021 and two-thirds exercisable after July 17, 2023. The fair market value of the shares was approximately $.05 a share at grant date. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 18. Subsequent Events On November 5, 2019, the Nebraska Department of Insurance (“NDOI”) approved the Funds Withheld Coinsurance and Modified Coinsurance Agreement (“SDA Agreement”) between American Life and SDA Annuity & Life Re (“SDA”), a Cayman Islands-domiciled reinsurance company. The SDA Agreement closed on November 7, 2019. Under the SDA Agreement, American Life will cede to SDA, on a funds withheld coinsurance and modified coinsurance basis, an initial five (5%) quota share of certain liabilities with respect to its multi-year guaranteed annuity (“MYGA”) business. American Life will also cede to SDA, on a funds withheld coinsurance and modified coinsurance basis, an initial ninety-five (95%) quota share of certain liabilities with respect to its fixed indexed annuity (“FIA”) business through December 31, 2019 and thirty (30%) thereafter. American Life has established two accounts to hold the assets for the SDA Agreement, a SDA Funds Withheld Account and a SDA 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 NDOI approved the inclusion of the SDA coinsurance in American Life’s September 30, 2019 statutory financials. |
Nature of Operations and Basi_2
Nature of Operations and Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
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 is in the life and annuity insurance business and operates through its wholly owned subsidiary, American Life & Security Corp. (“American Life”). As discussed in Note 3, on June 28, 2018, we underwent a change in control as a result of the closing of a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement dated May 9, 2018 with a non-affiliated third party, Xenith Holdings LLC, a Delaware limited liability company (“Xenith”). On April 2, 2019, we obtained a 51% ownership in 1505 Capital LLC, a Delaware limited liability company, that was established in 2018 to provide financial and investment advisory and management services to clients and related investment, trading and financial activities. |
Basis of presentation | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions from the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10‑Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2018 (“2018 Form 10‑K”), should be read in connection with the reading of these interim unaudited consolidated financial statements. Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized in our 2018 Form 10‑K. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months and nine months ended September 30, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. All material inter-company accounts and transactions have been eliminated in consolidation. |
Investments | Investments All fixed maturities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in comprehensive loss. 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, financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost. The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the statement of comprehensive income as an other-than-temporary impairment. If the Company does not expect to recover the amortized basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default. No other-than-temporary impairments were recognized during the nine months ended September 30, 2019 or 2018. Investment income consists of interest, dividends, and real estate income, which are recognized on an accrual basis and amortization of premiums and discounts. |
Mortgage loans on real estate, held for investment | Mortgage loans on real estate, held for investment Mortgage loans on real estate, held for investment are carried at unpaid principal balances. Interest income on mortgage loans on real estate, held for investment is recognized in net investment income at the contract interest rate when earned. A mortgage loan is considered to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the mortgage agreement. Valuation allowances on mortgage loans are established based upon losses expected by management to be realized in connection with future dispositions or settlements of mortgage loans, including foreclosures. The Company establishes valuation allowances for estimated impairments on an individual loan basis as of the balance sheet date. Such valuation allowances are based on the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan’s original effective interest rate. These evaluations are revised as conditions change and new information becomes available. No such valuation allowance was established as of September 30, 2019. |
Other invested assets | Other invested assets The Company purchases and sells leases in its investment portfolio. Within the third quarter 2019, the Company had invested in and sold two leases. As of September 30th, 2019, the Company owned two lease investments. |
Preferred Stock | Preferred Stock Preferred stock was purchased during the third quarter of 2019. The Company believes the cost of the preferred stock equals fair market value as of September 30, 2019, timing of the investment. An evaluation of the preferred stock fair market value will be performed in the fourth quarter to 2019 to determine whether there is an impairment or increase in fair market value. |
Policy loans | Policy loans Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. At September 30, 2019 and December 31, 2018, the Company had no cash equivalents. At September 30, 2019, the Company held approximately 1.7 million in Great British Pounds (“GBP”) in cash in two of our custody accounts. The USD equivalent held was approximately $2.1 million. |
Deferred acquisition costs | Deferred acquisition costs Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to 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 nine months ended September 30, 2019 that suggest a review should be undertaken. |
Property and equipment | Property and equipment Property and equipment are stated at cost net of accumulated depreciation. Annual depreciation is primarily computed using straight-line methods for financial reporting and straight-line and accelerated methods for tax purposes. Furniture and equipment is depreciated over 3 to 7 years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $9,652 and $12,524 for the three months ended September 30, 2019 and 2018, respectively. Depreciation expense totaled $28,972 and $37,758 for the nine months ended September 30, 2019 and 2018, respectively. Accumulated depreciation totaled $964,452 and $942,323 as of September 30, 2019 and December 31, 2018, respectively. Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. Management has determined that no such events occurred in the three months ended September 30, 2019 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 as of September 30, 2019 or December 31, 2018. |
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 annuity riders, premium deposit funds and supplemental contracts without life contingencies. Deferred gain on ceding commissions American Life has entered into several indemnity reinsurance contracts where it 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 ceding commissions from reinsurance transactions that represent recovery of acquisition costs. These commissions reduce the DAC associated with that block of business by offsetting the DAC amortization on the Company’s income statement. |
Deferred gain on ceding commissions | Deferred gain on ceding commissions American Life has entered into several indemnity reinsurance contracts where it 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 ceding commissions from reinsurance transactions that represent recovery of acquisition costs. These commissions reduce the DAC associated with that block of business by offsetting the DAC amortization on the Company’s income statement. |
Income taxes | Income taxes The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state or local tax examinations by tax authorities for the years before 2015. The Company is not currently under examination for any open years. The provision for income taxes is based on income as reported in the financial statements. The income tax provision is calculated under the asset and liability method. Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. The Company has no uncertain tax positions that it believes are more-likely-than not that the benefit will not to be realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company had no accruals for payments of interest and penalties at September 30, 2019 or December 31, 2018. |
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. Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts. Acquisition costs are amortized over the expected life of the annuity contracts. |
Comprehensive loss | Comprehensive loss Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable securities classified as available for sale, net of applicable taxes. |
Common and preferred stock and earnings (loss) per share | Common and preferred stock and earnings (loss) per share Common and preferred stock and earnings (loss) per share: The par value per each Company share is $0.001 with 1,970,000,000 voting common shares authorized, 20,000,000 non-voting common shares authorized, and 10,000,000 preferred shares authorized. On June 18, 2019, Xenith exercised the right to convert its 1,500,000 Series C preferred stock and the $19,100,000 notes payable to voting common stock at the conversion rate of approximately $0.02 per common share. At September 30, 2019 and December 31, 2018, the Company had 1,023,408,553 and 22,873,764 voting common shares issued and outstanding, respectively. At September 30, 2019 and December 31, 2018, the Company had none and 1,500,000 Series C preferred shares outstanding, respectively. The Series C preferred shares were converted by Xenith to voting common shares on June 18, 2019 at a rate of approximately $0.02 per share for 72,854,474 voting common shares. The stated annual dividend rate on the Series C preferred shares was 8%. At the time of the conversion, Xenith forgave all previously accrued dividends from June 28, 2018 through the conversion date. Loss per basic share attributable to the Company’s common stockholders was computed based on the weighted average number of shares outstanding during each period. The weighted average number of shares outstanding during the three months ended September 30, 2019 and 2018 was 1,023,408,553 and 22,873,716 shares, respectively. The weighted average number of shares outstanding during the nine months ended September 30, 2019 and 2018 were 426,019,650 and 22,873,764 shares, respectively. Loss per diluted share attributable to the Company’s common stockholders for the three and nine months ended September 30, 2019 was computed based on the average shares outstanding and Long-Term Incentive Plan (“LTIP”), as if all vested and converted, was 1,025,965,696 and 428,576,793, respectively. The loss per diluted share attributable to the Company’s common stockholders for 2018 was computed based on the average shares outstanding plus the notes payable, the Preferred Shares, and the LTIP as converted as if all vested and converted. The weighted average number of shares outstanding during the three and nine months ended September 30, 2018 were 1,025,965,696 and 362,607,418 shares, respectively. |
Reclassifications | Reclassifications Certain reclassifications have been made on the Consolidated Balance Sheets and Statements of Comprehensive Loss for the year ended December 31, 2018 and the nine months ended September 30, 2018. 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 and nine months ended September 30, 2018. |
Change in Control (Tables)
Change in Control (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Change In Control | |
Schedule of Company's Voting Common Stock | The table below summarizes conversion of the Notes and shares of Series C Preferred Stock into voting common stock and the total outstanding voting common stock as of September 30, 2019: As Converted Voting Common Stock Number Percentage Previous company shareholders 22,873,764 2.2 % Note conversion ($500,000) 24,284,825 2.4 % Note conversion ($100,000) 4,856,965 0.5 % Note conversion ($1,000,000) 48,569,650 4.7 % Note conversion ($17,500,000) 849,968,875 83.1 % Series C Preferred stock conversion 72,854,474 7.1 % Total shares outstanding as of September 30, 2019 1,023,408,553 100.0 % |
Assets and Liabilities Held f_2
Assets and Liabilities Held for Sale (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
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 September 30, 2019 and as of December 31, 2018: As of September 30, As of December 31, 2019 2018 Carrying amounts of major classes of assets included as part of discontinued operations: Policy loans $ 79,057 $ 366,849 Reinsurance recoverables 7,986,308 20,359,326 Premiums receivable 52,690 210,896 Total assets held for sale in the Consolidated Balance Sheet $ 8,118,055 $ 20,937,071 Carrying amounts of major classes of liabilities included as part of discontinued operations: Benefit reserves $ 2,956,701 $ 9,799,834 Policy claims 133,203 127,666 Deposit-type contracts 5,004,273 11,050,139 Advance premiums 10,076 21,699 Accounts payable and accrued expenses 12,072 53,395 Total liabilities held for sale in the Consolidated Balance Sheet $ 8,116,325 $ 21,052,733 |
Schedule of Losses/Gains Discontinued Operations | the table below summarizes only the losses that are included in discontinued operations for the three and nine months ended September 30, 2018: Three months ended September 30, Nine months ended September 30, 2018 2018 Major line items constituting pretax loss of discontinued operations: Premiums $ 440,891 $ 1,375,419 Death and other benefits (74,538) (485,651) Interest credited (106,728) (311,847) Increase in benefit reserves (164,724) (234,246) Amortization of deferred acquisition costs (58,822) (261,735) Other operating expenses (25,585) (97,436) Loss on discontinued operations $ 10,494 $ (15,496) |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Marketable Securities [Abstract] | |
Schedule of Available for Sale Investments | The cost or amortized cost and estimated fair value of investments classified as available-for-sale as of September 30, 2019 and December 31, 2018 are as follows: Cost or Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value September 30, 2019: Fixed maturities: U.S. government obligations $ 2,097,035 $ 10,003 $ 60,787 $ 2,046,251 Mortgage-backed securities 874,209 7 13,499 860,717 Asset-backed securities 46,242,975 71,513 60,865 46,253,623 States and political subdivisions -- general obligations 262,079 5,522 — 267,601 States and political subdivisions -- special revenue 25,142 187 — 25,329 Corporate 17,396,523 611,300 196,911 17,810,912 Total fixed maturities $ 66,897,963 $ 698,532 $ 332,062 $ 67,264,433 Mortgage loans on real estate, held for investment 10,098,478 — — 10,098,478 Other invested assets 2,976,375 — — 2,976,375 Preferred stock 500,000 — — 500,000 Total Investments $ 80,472,816 $ 698,532 $ 332,062 $ 80,839,286 December 31, 2018: Fixed maturities: U.S. government obligations $ 2,112,816 $ 247 $ 117,112 $ 1,995,951 Mortgage-back securities 1,068,976 — 64,925 1,004,051 States and political subdivisions -- general obligations 265,473 — 2,289 263,184 States and political subdivisions -- special revenue 25,231 — 58 25,173 Corporate 15,754,345 14 1,658,535 14,095,824 Total fixed maturities $ 19,226,841 $ 261 $ 1,842,919 $ 17,384,183 |
Schedule of Amortized Cost, Fair Value, Credit Rating | The Company has two securities that individually exceed 10% of the total of the state and political subdivisions categories as of September 30, 2019. The amortized cost, fair value, credit ratings, and description of each security is as follows: Amortized Estimated Cost Fair Value Credit Rating September 30, 2019: Fixed maturities: States and political subdivisions -- general obligations Bellingham, Washington $ 107,999 $ 111,904 AA+ Longview, Washington Refunding 154,080 155,697 Aa3 Total $ 262,079 $ 267,601 |
Schedule of Unrealized Loss of Securities | The following table summarizes, for all securities in an unrealized loss position at September 30, 2019 and December 31, 2018, the estimated fair value, pre-tax gross unrealized loss and number of securities by consecutive months they have been in an unrealized loss position. September 30, 2019 December 31, 2018 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 1,114,692 $ 57,823 6 $ 7,862 $ 430 1 Asset-backed securities 16,023,788 60,865 12 — — — Mortgage-back securities 159,722 1,136 3 — — — Corporate 1,638,993 27,169 9 3,351,664 315,617 23 Greater than 12 months: U.S. government obligations 354,151 2,964 2 1,785,949 116,682 10 Mortgage-back securities 680,652 12,363 14 1,004,052 64,925 19 States and political subdivisions -- general obligations — — — 263,183 2,289 2 States and political subdivisions -- special revenue — — — 25,173 58 1 Corporate 2,091,953 169,742 12 10,628,745 1,342,918 58 Total fixed maturities $ 22,063,951 $ 332,062 58 $ 17,066,628 $ 1,842,919 $ 114 We may reflect a security in more than one aging category based on various purchase dates. |
Schedule of Fixed Maturities | The amortized cost and estimated fair value of fixed maturities at September 30, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Estimated Cost Fair Value Due in one year or less $ — $ — Due after one year through five years 1,720,127 1,731,192 Due after five years through ten years 11,583,552 11,564,598 Due after ten years through twenty years 46,435,050 46,637,790 Due after twenty years 7,159,234 7,330,853 $ 66,897,963 $ 67,264,433 |
Schedule of Mortgage Loan Activity | The following table presents a reconciliation of the beginning balance for investments measured at fair value on a recurring basis using Level 3 inputs at September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 Beginning balance $ — $ — Apartments and business 10,098,478 — Preferred stock 500,000 — Short-term leases 2,976,375 — Total mortgage loans $ 13,574,853 $ — |
Components of Net Investment Income | The components of net investment income for the three and nine months ended September 30, 2019 and 2018 are as follows: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Fixed maturities $ (289,015) $ 201,440 $ 342,104 $ 598,632 Mortgage loans 68,810 — 78,466 — Other (1,102) 15,314 6,973 44,780 (221,307) 216,754 427,543 643,412 Less investment expenses (86,793) (5,773) (96,633) (27,499) Investment (loss) income, net of expenses $ (308,100) $ 210,981 $ 330,910 $ 615,913 |
Fair Values of Financial Inst_2
Fair Values of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Investments, All Other Investments [Abstract] | |
Schedule of Financial Instruments at Fair Value Measured on a Recurring Basis | The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value September 30, 2019 Fixed maturities: U.S. government obligations $ — $ 2,046,251 $ — $ 2,046,251 Mortgage-backed securities — 860,717 — 860,717 Asset-backed securities — 46,253,623 — 46,253,623 States and political subdivisions — general obligations — 267,601 — 267,601 States and political subdivisions — special revenue — 25,329 — 25,329 Corporate — 17,810,912 — 17,810,912 Total fixed maturities — 67,264,433 — 67,264,433 Mortgage loans on real estate, held for investment — — 10,098,478 10,098,478 Other invested assets — — 2,976,375 2,976,375 Preferred stock — — 500,000 500,000 Total Investments $ — $ 67,264,433 $ 13,574,853 $ 80,839,286 December 31, 2018 Fixed maturities: U.S. government obligations $ — $ 1,995,951 $ — $ 1,995,951 Mortgage-back securities — 1,004,051 — 1,004,051 States and political subdivisions - general obligations — 263,184 — 263,184 States and political subdivisions - special revenue — 25,173 — 25,173 Corporate — 14,095,824 — 14,095,824 Total fixed maturities $ — $ 17,384,183 $ — $ 17,384,183 |
Schedule of Financial Assets and Liabilities at Fair Value | The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of September 30, 2019 and December 31, 2018, respectively: September 30, 2019 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 42,902 $ — $ — $ 42,902 $ 42,902 Cash 24,369,609 24,369,609 — — 24,369,609 Liabilities: Policyholder deposits (Deposit-type contracts) 87,901,054 — — 87,901,054 87,901,054 December 31, 2018 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 43,843 $ — $ — $ 43,843 $ 43,843 Cash 2,832,567 2,832,567 — — 2,832,567 Liabilities: Policyholder deposits (Deposit-type contracts) 7,234,927 — — 7,234,927 7,234,927 Notes payable 18,938,705 — — 18,938,705 18,938,705 |
Income Tax Matters (Tables)
Income Tax Matters (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | Significant components of the Company’s deferred tax assets and liabilities as of September 30, 2019 and December 31, 2018 are as follows: September 30, 2019 December 31, 2018 Deferred tax assets: Loss carryforwards $ 1,062,759 $ 1,429,458 Capitalized costs 233,806 269,472 Unrealized losses on investments — 390,349 Policy acquisition costs 661,065 — Charitable contribution carryforward 2,394 — Property and equipment 15,508 — Benefit reserves 565,405 192,858 Total deferred tax assets 2,540,937 2,282,137 Less valuation allowance (2,210,492) (1,928,454) Total deferred tax assets, net of valuation allowance 330,445 353,683 Deferred tax liabilities: Unrealized losses on investments 74,080 — Due premiums 83,754 117,144 Intangible assets 147,000 147,000 Policy loans 25,611 86,245 Property and equipment — 3,294 Total deferred tax liabilities 330,445 353,683 Net deferred tax assets $ — $ — |
Schedule of Effective Tax Rate Reconciliation | There was income tax expense of $114,642 for the nine months ended September 30, 2019 and no income tax expense for the nine months ended September 30, 2018. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Computed expected income tax benefit $ (325,116) $ (477,395) $ (813,759) $ (764,779) Increase (reduction) in income taxes resulting from: Meals, entertainment and political contributions (1,778) 1,628 3,858 5,832 Change in loss carryforward due to 382 limitation — 202,994 — 5,735,023 COD Interest — — 177,563 — Other (38,325) (54,442) 512 (89,110) (40,103) 150,180 181,933 5,651,745 Tax benefit before valuation allowance (365,219) (327,215) (631,826) 4,886,966 Change in valuation allowance 479,861 327,215 746,468 (4,886,966) Net income tax expenses $ 114,642 $ — $ 114,642 $ — |
Reinsurance (Tables)
Reinsurance (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Reinsurance Disclosures [Abstract] | |
Summary of Significant Reinsurance Amounts | A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of September 30, 2019 and December 31, 2018 and for the nine months ended September 30, 2019 and 2018 is as follows: September 30, 2019 December 31, 2018 Balance sheets: Benefit and claim reserves ceded 24,103,438 23,100,644 Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Statements of comprehensive income: Premiums assumed $ — $ 1,922 $ — $ 10,268 Premiums ceded 180,149 231,012 702,450 871,677 Benefits assumed — 357 — 92,792 Benefits ceded 51,866 46,390 167,895 149,452 Commissions assumed — 4 — 18 Commissions ceded 1,566 1,644 8,146 5,864 |
Schedule of Significant Reinsurance Balances | 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: 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- $ — $ — $ 489,737 $ — $ 489,737 Sagicor Life Insurance Company A- — 116,727 11,389,369 270,196 11,235,900 Ironbound Reinsurance Company Limited NR — — 474,577 — 474,577 US Alliance Life and Security Company NR — 23,000 11,944,833 64,609 11,903,224 $ — $ 139,727 $ 24,298,516 $ 334,805 $ 24,103,438 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Summary of Information Regarding Loans | The following table sets forth information regarding loans made to us by Xenith through June 18, 2019 and the number of shares of voting common stock each loan was converted into: Shares of Common Loan Stock into which Principal Loan Was Date of Loan Amount Converted June 28, 2018 $ 500,000 24,284,825 June 28, 2018 100,000 4,856,965 October 10, 2018 1,000,000 48,569,650 December 7, 2018 17,500,000 849,968,875 Total $ 19,100,000 927,680,315 |
Deposit-Type Contracts (Tables)
Deposit-Type Contracts (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Deposit Type Contracts [Abstract] | |
Schedule of Contracts | The following table provides information about deposit-type contracts for the three months ended September 30, 2019 and the year ended December 31, 2018: Nine Months Ended Year Ended September 30, 2019 December 31, 2018 Beginning balance $ 7,234,927 $ 8,314,297 US Alliance 442,370 804,187 Ironbound Reinsurance Company Limited 76,216,386 — Deposits received 4,088,640 (1,881,411) Investment earnings 42,895 650 Withdrawals (126,852) 47,936 Contract charges 2,688 (50,732) Ending balance $ 87,901,054 $ 7,234,927 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information as of September 30, 2019 for our leases is as follows: As of As of Leases Classification September 30, 2019 December 31, 2018 Assets Noncurrent: Finance Office and other equipment, net of accumulated depreciation and amortization $ 5,826 $ 14,564 Operating Operating lease right-of-use assets 500,615 592,065 Total leased assets $ 506,441 $ 606,629 Liabilities Current: Finance lease Finance lease liabilities $ 3,720 $ 9,299 Noncurrent: Operating lease Operating lease liabilities 554,921 646,519 Total leased liabilities $ 558,641 $ 655,818 The difference between assets and liabilities includes a $5,266 adjust to the finance lease and a $54,454 adjustment to an |
Schedule of Components of Leases Expenses | Our operating and finance leases expenses for the three and nine months ended September 30, 2019 are as follows: Three months ended September 30, Nine months ended September 30, Leases Classification 2019 2018 2019 2018 Operating General and administrative expense $ 3,344 $ 4,609 $ 10,453 $ 13,829 Finance lease cost: Amortization expense 2,914 1,120 8,739 3,360 Interest expense 111 111 333 333 |
Schedule of Finance and Operating Leases Minimum | Minimum contractual obligations for our leases as of September 30, 2019 are as follows: Operating Leases Finance Lease 2019 (excluding nine months ended September 30, 2019) $ 39,079 $ 2,133 2020 160,958 2,133 2021 164,081 — 2022 156,608 — 2023 161,674 — 2024 13,508 — Total remaining lease payments $ 695,908 $ 4,266 |
Schedule of Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases was as follows: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Cash payments Operating cash flows from operating leases $ (190) $ 1,076 $ (148) $ 3,228 Operating cash flows from finance leases 1,164 (628) 2,328 (1,258) Financing cash flows from finance leases (111) (111) (333) (333) |
Nature of Operations and Basi_3
Nature of Operations and Basis of Presentation (Narrative) (Details) $ / shares in Units, £ in Millions | Jun. 18, 2019USD ($)shares | May 09, 2018shares | Jun. 18, 2019USD ($)shares | Sep. 30, 2019USD ($)itemshares | Sep. 30, 2018USD ($)shares | Sep. 30, 2019USD ($)shares | Sep. 30, 2018USD ($)shares | Sep. 30, 2019GBP (£)itemshares | Sep. 30, 2019USD ($)item$ / sharesshares | Apr. 02, 2019 | Dec. 31, 2018USD ($)$ / sharesshares |
Number of lease investments purchased | item | 2 | ||||||||||
Number of lease investments sold | item | 2 | ||||||||||
Number of lease investments | item | 2 | 2 | |||||||||
Cash equivalents | $ | $ 0 | $ 0 | |||||||||
Cash held in custody accounts | £ 1.7 | $ 2,100,000 | |||||||||
Number of custody accounts | $ | $ 2 | ||||||||||
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 | |||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.001 | $ 0.001 | |||||||||
Common stock, shares authorized | 1,970,000,000 | 1,970,000,000 | 1,970,000,000 | 1,970,000,000 | |||||||
Common stock, shares issued (in shares) | 1,023,408,553 | 1,023,408,553 | 22,873,764 | ||||||||
Common stock, shares outstanding (in shares) | 1,023,408,553 | 1,023,408,553 | 22,873,764 | ||||||||
Weighted Average Number of Shares Outstanding, Basic (in shares) | 1,023,408,553 | 22,873,716 | 426,019,650 | 22,873,764 | |||||||
Depreciation | $ | $ 9,652 | $ 12,524 | $ 28,972 | $ 37,758 | |||||||
Accumulated Depreciation, net of disposals | $ | $ 964,452 | $ 942,323 | |||||||||
Reinsurance recoverables on unpaid losses, allowance | $ | 0 | 0 | |||||||||
Accrual for payments of interest and penalties | $ | $ 0 | $ 0 | |||||||||
Weighted Average Number of Shares Outstanding, Diluted (in shares) | 1,025,965,696 | 1,025,965,696 | 428,576,793 | 362,607,418 | |||||||
Xenith [Member] | |||||||||||
Voting common stock | 29,141,790 | ||||||||||
Series C Preferred Stock [Member] | |||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | |||||||||
Preferred stock, shares authorized (in shares) | 1,500,000 | 1,500,000 | 1,500,000 | ||||||||
Preferred stock, shares outstanding (in shares) | 0 | 0 | 1,500,000 | ||||||||
Preferred stock, shares issued | 0 | 0 | 1,500,000 | ||||||||
Conversion Rate | 0.02 | ||||||||||
Series C Preferred Stock [Member] | Xenith [Member] | |||||||||||
Stated dividend rate | 8.00% | 8.00% | |||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.001 | ||||||||||
Conversion amount | $ | $ 19,100,000 | $ 19,100,000 | |||||||||
Voting common stock | 72,854,474 | ||||||||||
Conversion Rate | 0.02 | ||||||||||
Series C Preferred Stock [Member] | Xenith1Member | |||||||||||
Voting common stock | 1,500,000 | ||||||||||
Conversion Rate | 0.02 | ||||||||||
Non-voting common shares [Member] | |||||||||||
Common stock, shares authorized | 20,000,000 | 20,000,000 | |||||||||
Maximum | |||||||||||
Common stock, shares authorized | 1,970,000,000 | ||||||||||
Furniture and Fixtures [Member] | Minimum | |||||||||||
Property, Plant and Equipment, Useful Life | 3 years | ||||||||||
Furniture and Fixtures [Member] | Maximum | |||||||||||
Property, Plant and Equipment, Useful Life | 7 years | ||||||||||
Computer Software, Intangible Asset [Member] | |||||||||||
Property, Plant and Equipment, Useful Life | 3 years | ||||||||||
1505 Capital LLC | |||||||||||
Ownership percentage acquired | 51.00% |
New Accounting Standards (Detai
New Accounting Standards (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ||
Total leased assets | $ 500,615 | $ 592,065 |
Total leased assets | 506,441 | 606,629 |
Total leased liabilities | $ 558,641 | $ 655,818 |
Change in Control (Narrative) (
Change in Control (Narrative) (Details) | Jun. 18, 2019shares | May 09, 2018USD ($)item$ / sharesshares | Jun. 18, 2019shares | Sep. 30, 2019USD ($)$ / sharesshares | Dec. 31, 2018$ / sharesshares |
Common Stock, Shares Authorized | shares | 1,970,000,000 | 1,970,000,000 | 1,970,000,000 | ||
Common stock par value | $ / shares | $ 0.001 | $ 0.001 | |||
Xenith [Member] | |||||
Proceeds from issuance of loan | $ | $ 600,000 | $ 600,000 | |||
Loan term | 10 years | 10 years | |||
Interest rate | 4.00% | ||||
Voting common stock | shares | 29,141,790 | ||||
Proceeds from additional loan | $ | $ 23,500,000 | $ 18,500,000 | |||
Additional conversion of stock | shares | 898,538,525 | ||||
Preferred stock liquidation preference | $ / shares | $ 0.02 | ||||
Xenith [Member] | Notes One | |||||
Proceeds from issuance of notes and preferred stock | $ | $ 500,000 | ||||
Xenith [Member] | Notes Two | |||||
Proceeds from issuance of notes and preferred stock | $ | $ 100,000 | ||||
Xenith [Member] | Series C Preferred Stock [Member] | |||||
Debt interest rate, if not redeemed | 12 | ||||
Voting common stock | shares | 72,854,474 | ||||
Common stock par value | $ / shares | $ 0.001 | ||||
Shares sold | shares | 1,500,000 | ||||
Shares sold, value | $ | $ 1,500,000 | ||||
Preferred stock liquidation preference | $ / shares | $ 1 | ||||
Stated dividend rate | 8.00% | 8.00% | |||
Number of Board of Directors entitled to elect | item | 5 | ||||
Number of Board of Directors | item | 8 | ||||
Voting stock of Xenith in Vespoint LLC [Member] | |||||
Ownership interest | 100.00% |
Change in Control (Schedule of
Change in Control (Schedule of Company's Voting Common Stock) (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Previous Company Shareholders, Number (in shares) | 1,023,408,553 | 22,873,764 |
Previous Company Shareholders, percentage | 2.20% | |
Note Conversion, Number (in Shares) | 927,680,315 | |
Total Outstanding, Number | 1,023,408,553 | |
Total Outstanding, Percentage | 100.00% | |
Loan Principal Amount | $ 19,100,000 | |
Series C Preferred Stock [Member] | ||
Converted shares as a percent of the total shares outstanding | 7.10% | |
Preferred Stock Conversion, Number | 72,854,474 | |
Xenith [Member] | Notes One | ||
Note Conversion, Number (in Shares) | 24,284,825 | |
Converted shares as a percent of the total shares outstanding | 2.40% | |
Xenith [Member] | Notes Two | ||
Note Conversion, Number (in Shares) | 4,856,965 | |
Converted shares as a percent of the total shares outstanding | 0.50% | |
Xenith [Member] | Notes Three | ||
Note Conversion, Number (in Shares) | 48,569,650 | |
Converted shares as a percent of the total shares outstanding | 4.70% | |
Xenith [Member] | Notes Four | ||
Note Conversion, Number (in Shares) | 849,968,875 | |
Converted shares as a percent of the total shares outstanding | 83.10% | |
June 28, 2018 [Member] | ||
Note Conversion, Number (in Shares) | 24,284,825 | |
Loan Principal Amount | $ 500,000 | |
June 28, 2018 [Member] | ||
Note Conversion, Number (in Shares) | 4,856,965 | |
Loan Principal Amount | $ 100,000 | |
October 10, 2018 [Member] | ||
Note Conversion, Number (in Shares) | 48,569,650 | |
Loan Principal Amount | $ 1,000,000 | |
December 7, 2018 [Member] | ||
Note Conversion, Number (in Shares) | 849,968,875 | |
Loan Principal Amount | $ 17,500,000 |
Assets and Liabilities Held f_3
Assets and Liabilities Held for Sale (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Discontinued Operations and Disposal Groups [Abstract] | |
Percentage of indemnity reinsurance basis of liabilities and obligations | 100.00% |
Ceding commission | $ 3,500,000 |
Percentage of indemnity policies | 73.00% |
Assets and Liabilities Held f_4
Assets and Liabilities Held for Sale (Schedule of Assets and Liabilities Discontinued Operations) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Carrying amounts of major classes of assets included as part of discontinued operations: | ||
Policy loans | $ 79,057 | $ 366,849 |
Amounts recoverable from reinsurers | 7,986,308 | 20,359,326 |
Premium recoverable | 52,690 | 210,896 |
Total assets held for sale in the Consolidated Balance Sheet | 8,118,055 | 20,937,071 |
Carrying amounts of major classes of liabilities included as part of discontinued operations: | ||
Benefit reserves | 2,956,701 | 9,799,834 |
Policy claims | 133,203 | 127,666 |
Deposit-type contracts | 5,004,273 | 11,050,139 |
Advance premiums | 10,076 | 21,699 |
Accounts payable and accrued expenses | 12,072 | 53,395 |
Total liabilities held for sale in the Consolidated Balance Sheet | $ 8,116,325 | $ 21,052,733 |
Assets and Liabilities Held f_5
Assets and Liabilities Held for Sale (Schedule of Losses/Gains Discontinued Operations) (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | ||
Premiums | $ 440,891 | $ 1,375,419 |
Death and other benefits | (74,538) | (485,651) |
Interest credited | (106,728) | (311,847) |
Increase in benefit reserves | (164,724) | (234,246) |
Amortization of deferred acquisition costs | (58,822) | (261,735) |
Other operating expenses | (25,585) | (97,436) |
Loss on discontinued operations | $ 10,494 | $ (15,496) |
Non-controlling Interest (Detai
Non-controlling Interest (Details) - USD ($) | Apr. 02, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 |
Noncontrolling Interest [Line Items] | |||||||
Net income, including portion attributable to non-controlling interest | $ (1,616,000) | $ (1,963,279) | $ (3,942,870) | $ (3,641,803) | |||
Net income | $ (1,662,814) | $ (1,963,279) | $ (3,989,684) | $ (3,641,803) | $ (5,065,534) | ||
1505 Capital LLC | Class A Units | Maximum | |||||||
Noncontrolling Interest [Line Items] | |||||||
Capital units authorized | 1,000 | ||||||
Aurora Financial Services, Inc. | Class A Units | |||||||
Noncontrolling Interest [Line Items] | |||||||
Capital units outstanding | 490 | ||||||
1505 Capital LLC | |||||||
Noncontrolling Interest [Line Items] | |||||||
Ownership percentage acquired | 51.00% | ||||||
Number of capital units acquired | 510 | ||||||
Net income, including portion attributable to non-controlling interest | $ 95,539 | ||||||
Income attributable to non-controlling interest | 46,814 | ||||||
Net income | $ 48,725 | ||||||
1505 Capital LLC | Class A Units | |||||||
Noncontrolling Interest [Line Items] | |||||||
Capital units acquired, purchase price | $ 1 |
Investments (Schedule of Availa
Investments (Schedule of Available for Sale Investments) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Cost or Amortized Cost | $ 66,897,963 | |
Gross Unrealized Gains | 698,532 | |
Gross Unrealized Losses | 332,062 | |
Mortgage loans on real estate, held for investment | 10,098,478 | |
Other invested assets | 2,976,375 | |
Preferred stock | 500,000 | |
Total Cost or Amortized Cost | 80,472,816 | |
Investments, Fair Value Disclosure | 80,839,286 | |
Fixed Maturities | ||
Cost or Amortized Cost | 66,897,963 | $ 19,226,841 |
Gross Unrealized Gains | 698,532 | 261 |
Gross Unrealized Losses | 332,062 | 1,842,919 |
Investments, Fair Value Disclosure | 67,264,433 | 17,384,183 |
U.S. government obligations | Fixed Maturities | ||
Cost or Amortized Cost | 2,097,035 | 2,112,816 |
Gross Unrealized Gains | 10,003 | 247 |
Gross Unrealized Losses | 60,787 | 117,112 |
Investments, Fair Value Disclosure | 2,046,251 | 1,995,951 |
Mortgage-back securities | Fixed Maturities | ||
Cost or Amortized Cost | 874,209 | 1,068,976 |
Gross Unrealized Gains | 7 | |
Gross Unrealized Losses | 13,499 | 64,925 |
Investments, Fair Value Disclosure | 860,717 | 1,004,051 |
Asset-backed Securities [Member] | Fixed Maturities | ||
Cost or Amortized Cost | 46,242,975 | |
Gross Unrealized Gains | 71,513 | |
Gross Unrealized Losses | 60,865 | |
Investments, Fair Value Disclosure | 46,253,623 | |
States and Political Subdivisions - general obligations | Fixed Maturities | ||
Cost or Amortized Cost | 262,079 | 265,473 |
Gross Unrealized Gains | 5,522 | |
Gross Unrealized Losses | 2,289 | |
Investments, Fair Value Disclosure | 267,601 | 263,184 |
States and Political Subdivisions - special revenue | Fixed Maturities | ||
Cost or Amortized Cost | 25,142 | 25,231 |
Gross Unrealized Gains | 187 | |
Gross Unrealized Losses | 58 | |
Investments, Fair Value Disclosure | 25,329 | 25,173 |
Corporate | Fixed Maturities | ||
Cost or Amortized Cost | 17,396,523 | 15,754,345 |
Gross Unrealized Gains | 611,300 | 14 |
Gross Unrealized Losses | 196,911 | 1,658,535 |
Investments, Fair Value Disclosure | $ 17,810,912 | $ 14,095,824 |
Investments (Schedule of Amorti
Investments (Schedule of Amortized Cost, Fair Value, Credit Rating) (Details) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Amortized Cost | $ 66,897,963 |
States and Political Subdivisions - general obligations | US States and Political Subdivisions Debt Securities | |
Amortized Cost | 262,079 |
Estimated Fair Value | 267,601 |
States and Political Subdivisions - general obligations | US States and Political Subdivisions Debt Securities | Bellingham, Washington | |
Amortized Cost | 107,999 |
Estimated Fair Value | $ 111,904 |
Credit Rating | AA+ |
States and Political Subdivisions - general obligations | US States and Political Subdivisions Debt Securities | Longview, Washington | |
Amortized Cost | $ 154,080 |
Estimated Fair Value | $ 155,697 |
Credit Rating | Aa3 |
Investments (Schedule of Unreal
Investments (Schedule of Unrealized Loss of Securities) (Details) - Fixed Maturities | Sep. 30, 2019USD ($) | Dec. 31, 2018USD ($) |
Estimated Fair Value, Total | $ 22,063,951 | $ 17,066,628 |
Gross Unrealized Loss, Total | $ 332,062 | $ 1,842,919 |
Number of Securities, Total | 58 | 114 |
U.S. government obligations | ||
Estimated Fair Value, Less than 12 months | $ 1,114,692 | $ 7,862 |
Gross Unrealized Loss, Less than 12 months | $ 57,823 | $ 430 |
Number of Securities, Less than 12 months | 6 | 1 |
Estimated Fair value, Greater than 12 months | $ 354,151 | $ 1,785,949 |
Gross Unrealized Loss, Greater than 12 months | $ 2,964 | $ 116,682 |
Number of Securities, Greater than 12 months | 2 | 10 |
Asset-backed Securities [Member] | ||
Estimated Fair Value, Less than 12 months | $ 16,023,788 | |
Gross Unrealized Loss, Less than 12 months | $ 60,865 | |
Number of Securities, Less than 12 months | 12 | |
Mortgage-back securities | ||
Estimated Fair Value, Less than 12 months | $ 159,722 | |
Gross Unrealized Loss, Less than 12 months | $ 1,136 | |
Number of Securities, Less than 12 months | 3 | |
Estimated Fair value, Greater than 12 months | $ 680,652 | $ 1,004,052 |
Gross Unrealized Loss, Greater than 12 months | $ 12,363 | $ 64,925 |
Number of Securities, Greater than 12 months | 14 | 19 |
States and Political Subdivisions - general obligations | ||
Estimated Fair value, Greater than 12 months | $ 263,183 | |
Gross Unrealized Loss, Greater than 12 months | $ 2,289 | |
Number of Securities, Greater than 12 months | 2 | |
States and Political Subdivisions - special revenue | ||
Estimated Fair value, Greater than 12 months | $ 25,173 | |
Gross Unrealized Loss, Greater than 12 months | $ 58 | |
Number of Securities, Greater than 12 months | 1 | |
Corporate | ||
Estimated Fair Value, Less than 12 months | $ 1,638,993 | $ 3,351,664 |
Gross Unrealized Loss, Less than 12 months | $ 27,169 | $ 315,617 |
Number of Securities, Less than 12 months | 9 | 23 |
Estimated Fair value, Greater than 12 months | $ 2,091,953 | $ 10,628,745 |
Gross Unrealized Loss, Greater than 12 months | $ 169,742 | $ 1,342,918 |
Number of Securities, Greater than 12 months | 12 | 58 |
Investments (Schedule of Fixed
Investments (Schedule of Fixed Maturities) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Marketable Securities [Abstract] | ||
Amortized Cost, Due after one year through five years | $ 1,720,127 | |
Amortized Cost, Due after five years through ten years | 11,583,552 | |
Amortized Cost, Due after ten years through twenty years | 46,435,050 | |
Amortized Cost, Due after twenty years | 7,159,234 | |
Available-for-sale Securities, Debt Maturities, Amortized Cost | 66,897,963 | |
Estimated Fair Value, Due after one year through five years | 1,731,192 | |
Estimated Fair Value, Due after five years through ten years | 11,564,598 | |
Estimated Fair Value, Due after ten years through twenty years | 46,637,790 | |
Estimated Fair Value, Due after twenty years | 7,330,853 | |
Available-for-sale Securities, Debt Securities, Estimated Fair Value | $ 67,264,433 | $ 17,384,183 |
Investments (Schedule of Mortga
Investments (Schedule of Mortgage Loan Activity) (Details) | Sep. 30, 2019USD ($) |
Marketable Securities [Abstract] | |
Apartments and business | $ 10,098,478 |
Preferred stock | 500,000 |
Short-term leases | 2,976,375 |
Total mortgage loans | $ 13,574,853 |
Investments (Components of Net
Investments (Components of Net Investment Income) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Net investment income | $ (221,307) | $ 216,754 | $ 427,543 | $ 643,412 |
Less investment expenses | (86,793) | (5,773) | (96,633) | (27,499) |
Investment income, net of expenses | (308,100) | 210,981 | 330,910 | 615,913 |
Fixed Maturities | ||||
Net investment income | (289,015) | 201,440 | 342,104 | 598,632 |
Mortgage loans | ||||
Net investment income | 68,810 | 78,466 | ||
Other | ||||
Net investment income | $ (1,102) | $ 15,314 | $ 6,973 | $ 44,780 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Marketable Securities [Abstract] | |||||
Assets on Deposit, Amortized Cost | $ 3,242,342 | $ 3,242,342 | $ 2,958,178 | ||
Assets on Deposit, Fair Value | 3,197,545 | 3,197,545 | $ 2,772,809 | ||
Proceeds from Sale of Debt Securities, Available-for-sale | 82,222 | $ 2,977,954 | 2,488,387 | $ 9,313,456 | |
Debt Securities, Available-for-sale, Realized Gain | 0 | 3,062 | 9,006 | 27,972 | |
Debt Securities, Available-for-sale, Realized Loss | $ 9,512 | $ 91,567 | $ 22,660 | $ 318,351 |
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 ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 67,264,433 | $ 17,384,183 |
Mortgage loans on real estate, held for investment | 10,098,478 | |
Other invested assets | 2,976,375 | |
Preferred stock | 500,000 | |
Investments, Fair Value Disclosure | 80,839,286 | |
Transfers between levels | 0 | 0 |
Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 67,264,433 | 17,384,183 |
Investments, Fair Value Disclosure | 67,264,433 | 17,384,183 |
Total Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments, Fair Value Disclosure | 80,839,286 | |
U.S. government obligations | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,046,251 | 1,995,951 |
Investments, Fair Value Disclosure | 2,046,251 | 1,995,951 |
Mortgage-back securities | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 860,717 | 1,004,051 |
Investments, Fair Value Disclosure | 860,717 | 1,004,051 |
Asset-backed securities | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 46,253,623 | |
States and Political Subdivisions - general obligations | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 267,601 | 263,184 |
Investments, Fair Value Disclosure | 267,601 | 263,184 |
States and Political Subdivisions - special revenue | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 25,329 | 25,173 |
Investments, Fair Value Disclosure | 25,329 | 25,173 |
Corporate | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 17,810,912 | 14,095,824 |
Investments, Fair Value Disclosure | 17,810,912 | 14,095,824 |
Fair Value, Inputs, Level 2 | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 67,264,433 | 17,384,183 |
Fair Value, Inputs, Level 2 | Total Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments, Fair Value Disclosure | 67,264,433 | |
Fair Value, Inputs, Level 2 | U.S. government obligations | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,046,251 | 1,995,951 |
Fair Value, Inputs, Level 2 | Mortgage-back securities | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 860,717 | 1,004,051 |
Fair Value, Inputs, Level 2 | Asset-backed securities | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 46,253,623 | |
Fair Value, Inputs, Level 2 | States and Political Subdivisions - general obligations | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 267,601 | 263,184 |
Fair Value, Inputs, Level 2 | States and Political Subdivisions - special revenue | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 25,329 | 25,173 |
Fair Value, Inputs, Level 2 | Corporate | Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 17,810,912 | $ 14,095,824 |
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 | 10,098,478 | |
Other invested assets | 2,976,375 | |
Preferred stock | 500,000 | |
Fair Value, Inputs, Level 3 | Total Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments, Fair Value Disclosure | $ 13,574,853 |
Fair Values of Financial Inst_4
Fair Values of Financial Instruments (Schedule of Financial Assets and Liabilities at Fair Value) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Assets: | ||
Cash | $ 24,369,609 | $ 2,832,567 |
Fair Value, Inputs, Level 1 | ||
Assets: | ||
Cash | 24,369,609 | 2,832,567 |
Fair Value, Inputs, Level 3 | ||
Assets: | ||
Policy loans | 42,902 | 43,843 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 87,901,054 | 7,234,927 |
Notes payable | 18,938,705 | |
Carrying Amount | ||
Assets: | ||
Policy loans | 42,902 | 43,843 |
Cash | 24,369,609 | 2,832,567 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 87,901,054 | 7,234,927 |
Notes payable | 18,938,705 | |
Fair Value | ||
Assets: | ||
Policy loans | 42,902 | 43,843 |
Cash | 24,369,609 | 2,832,567 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | $ 87,901,054 | 7,234,927 |
Notes payable | $ 18,938,705 |
Income Tax Matters (Schedule of
Income Tax Matters (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Loss carryforwards | $ 1,062,759 | $ 1,429,458 |
Capitalized costs | 233,806 | 269,472 |
Unrealized losses on investments | 390,349 | |
Policy acquisition costs | 661,065 | |
Charitable contribution carryforward | 2,394 | |
Property and equipment | 15,508 | |
Benefit reserves | 565,405 | 192,858 |
Total deferred tax assets | 2,540,937 | 2,282,137 |
Less valuation allowance | (2,210,492) | (1,928,454) |
Total deferred tax assets, net of valuation allowance | 330,445 | 353,683 |
Deferred tax liabilities: | ||
Policy acquisition costs | 74,080 | |
Due premiums | 83,754 | 117,144 |
Intangible assets | 147,000 | 147,000 |
Policy loans | 25,611 | 86,245 |
Property and equipment | 3,294 | |
Total deferred tax liabilities | $ 330,445 | $ 353,683 |
Income Tax Matters (Schedule _2
Income Tax Matters (Schedule of Effective Tax Rate Reconciliation) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Computed expected income tax benefit | $ (325,116) | $ (477,395) | $ (813,759) | $ (764,779) |
Increase (reduction) in income taxes resulting from: | ||||
Meals, entertainment and political contributions | (1,778) | 1,628 | 3,858 | 5,832 |
Change in loss carryforward due to 382 limitation | 202,994 | 5,735,023 | ||
COD Interest | 177,563 | |||
Other | (38,325) | (54,442) | 512 | (89,110) |
Total deductions | (40,103) | 150,180 | 181,933 | 5,651,745 |
Tax benefit before valuation allowance | (365,219) | (327,215) | (631,826) | 4,886,966 |
Change in valuation allowance | 479,861 | $ 327,215 | 746,468 | $ (4,886,966) |
Net income tax expenses | $ 114,642 | $ 114,642 |
Income Tax Matters (Narrative)
Income Tax Matters (Narrative) (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Jun. 28, 2018 | Sep. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Deferred Tax Assets, Valuation Allowance | $ 2,210,492 | $ 2,210,492 | $ 1,928,454 | |
Operating Loss Carryforwards, Expiration Dates | Dec. 31, 2032 | |||
U.S. federal income tax rate | 21.00% | |||
Net operating loss ("NOL") carryforwards | $ 890,636 | 5,060,759 | $ 5,060,759 | |
Percentage of carry forward year limited taxable income | 80.00% | |||
NOLs Carryforwards, Valuation Allowance | 11,062,759 | $ 11,062,759 | ||
Income tax expense | $ 114,642 | $ 114,642 |
Reinsurance (Summary of Signifi
Reinsurance (Summary of Significant Reinsurance Amounts) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Balance sheets: | |||||
Benefit and claim reserves ceded | $ 24,103,438 | $ 24,103,438 | $ 23,100,644 | ||
Statements of comprehensive income: | |||||
Premiums assumed | $ 1,922 | $ 10,268 | |||
Premiums ceded | 180,149 | 231,012 | 702,450 | 871,677 | |
Benefits assumed | 357 | 92,792 | |||
Benefits ceded | 51,866 | 46,390 | 167,895 | 149,452 | |
Commissions assumed | 4 | 18 | |||
Commissions ceded | $ 1,566 | $ 1,644 | $ 8,146 | $ 5,864 |
Reinsurance (Schedule of Signif
Reinsurance (Schedule of Significant Reinsurance Balances) (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Recoverable on Unpaid Losses | $ 139,727 | |
Recoverable on Benefit Reserves/Deposit-type Contracts | 24,298,516 | |
Ceded Due Premiums | 334,805 | |
Total Amount Recoverable from Reinsurer | $ 24,103,438 | $ 23,100,644 |
Optimum Reinsurance Company [Member] | ||
AM Best Rating | A- | |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 489,737 | |
Total Amount Recoverable from Reinsurer | $ 489,737 | |
Sagicor Life Insurance Company [Member] | ||
AM Best Rating | A- | |
Recoverable on Unpaid Losses | $ 116,727 | |
Recoverable on Benefit Reserves/Deposit-type Contracts | 11,389,369 | |
Ceded Due Premiums | 270,196 | |
Total Amount Recoverable from Reinsurer | $ 11,235,900 | $ 11,494,161 |
Ironbound Reinsurance Company Limited | ||
AM Best Rating | NR | |
Recoverable on Benefit Reserves/Deposit-type Contracts | $ 474,577 | |
Total Amount Recoverable from Reinsurer | $ 474,577 | |
US Alliance Life and Security Company [Member] | ||
AM Best Rating | NR | |
Recoverable on Unpaid Losses | $ 23,000 | |
Recoverable on Benefit Reserves/Deposit-type Contracts | 11,944,833 | |
Ceded Due Premiums | 64,609 | |
Total Amount Recoverable from Reinsurer | $ 11,903,224 |
Reinsurance (Narrative) (Detail
Reinsurance (Narrative) (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Jul. 25, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Percentage of quota share of liabilities | 95.00% | |||||
Net premium income | $ 2,327 | $ 3,589 | $ (152) | $ 16,296 | ||
Gross Commission paid | $ 1,562,786 | |||||
Amount owned | 19,100,000 | 19,100,000 | ||||
Reinsurance recoverables (Note 9) | 24,103,438 | 24,103,438 | $ 23,100,644 | |||
Net of ceding allowance | 2,821,255 | $ (36,282) | ||||
Remaining deferred gain | 3,069,690 | |||||
American Life [Member] | ||||||
Coinsurance ceding commission deferred | 779,046 | $ 779,046 | ||||
Percentage of coinsured block of business discharging | 73.00% | |||||
American Life amortized amount | $ 82,611 | |||||
Unified Life Insurance Company [Member] | ||||||
Transferred risk insurance company | 100.00% | |||||
Amount transferred for reinsurance | $ 19,311,616 | |||||
Adjusted reserves cash | 14,320,817 | |||||
Net of ceding allowance | $ 3,500,000 | |||||
Percentage of indemnity coinsurance | 73.00% | |||||
Additional amount release into income | $ 2,131,291 | |||||
Remaining DAC | 1,890,013 | |||||
Remaining deferred gain | 26,896 | |||||
Value of business acquired | 338,536 | |||||
US Alliance Life and Security Company [Member] | ||||||
Reinsurance recoverables (Note 9) | 11,903,224 | 11,903,224 | ||||
Amount to cede | 11,903,224 | 11,903,224 | 11,149,888 | |||
Sagicor Life Insurance Company [Member] | ||||||
Reinsurance recoverables (Note 9) | 11,235,900 | 11,235,900 | $ 11,494,161 | |||
American Life and Security National Life Insurance [Member] | ||||||
Deferred loss | 154,780 | |||||
Amount to cede | 2,543,898 | 2,543,898 | ||||
FW, Modco Agreement | ||||||
Net premium income | 45,005,536 | |||||
Gross premiums income | 46,568,321 | |||||
Net statutory reserves | 47,271,267 | |||||
Coinsurance ceding commission and commission allowance | 5,215,477 | 5,215,477 | ||||
Coinsurance ceding commission deferred | $ 5,071,440 | $ 5,071,440 | ||||
Funds Withheld Account [Member] | FW, Modco Agreement | ||||||
Net statutory reserves | 26,944,622 | |||||
Initial settlement | 24,928,934 | |||||
Amount owned | 2,015,688 | |||||
Modco Deposit Account [Member] | FW, Modco Agreement | ||||||
Net statutory reserves | 17,963,081 | |||||
Initial settlement | 16,619,289 | |||||
Amount owned | $ 1,343,792 |
Notes Payable (Narrative) (Deta
Notes Payable (Narrative) (Details) - USD ($) | May 09, 2018 | Dec. 31, 2018 | Sep. 30, 2019 | Jun. 18, 2019 | Jun. 18, 2018 |
Shares of Common Stock into which Loan May be Converted | 927,680,315 | ||||
Common stock, shares authorized | 1,970,000,000 | 1,970,000,000 | 1,970,000,000 | ||
Maximum | |||||
Common stock, shares authorized | 1,970,000,000 | ||||
Xenith [Member] | |||||
Proceeds From Issuance of Debt | $ 600,000 | $ 600,000 | |||
Debt term | 10 years | 10 years | |||
Interest rate | 8.00% | ||||
Accrued interest | $ 845,536 | ||||
Proceeds from issuance of additional loan of converted | $ 23,500,000 | ||||
Xenith [Member] | Note One [Member] | |||||
Proceeds From Issuance of Debt | 500,000 | ||||
Xenith [Member] | Note Two [Member] | |||||
Proceeds From Issuance of Debt | $ 100,000 | ||||
Xenith [Member] | Additional Loan [Member] | |||||
Proceeds From Issuance of Debt | $ 18,500,000 | ||||
Conversion price | $ 0.02 | ||||
Xenith [Member] | June 28, 2018 through December 31, 2018 [Member] | |||||
Accrued interest | $ 131,711 | ||||
Xenith [Member] | January 1, 2019 through June 18, 2019 [Member] | |||||
Accrued interest | $ 713,825 |
Notes Payable (Summary of Infor
Notes Payable (Summary of Information Regarding Loans) (Details) | 9 Months Ended |
Sep. 30, 2019USD ($)shares | |
Loan Principal Amount | $ | $ 19,100,000 |
Shares of Common Stock into which Loan May be Converted | shares | 927,680,315 |
June 28, 2018 [Member] | |
Loan Principal Amount | $ | $ 500,000 |
Shares of Common Stock into which Loan May be Converted | shares | 24,284,825 |
June 28, 2018 [Member] | |
Loan Principal Amount | $ | $ 100,000 |
Shares of Common Stock into which Loan May be Converted | shares | 4,856,965 |
October 10, 2018 [Member] | |
Loan Principal Amount | $ | $ 1,000,000 |
Shares of Common Stock into which Loan May be Converted | shares | 48,569,650 |
December 7, 2018 [Member] | |
Loan Principal Amount | $ | $ 17,500,000 |
Shares of Common Stock into which Loan May be Converted | shares | 849,968,875 |
Deposit-Type Contracts (Details
Deposit-Type Contracts (Details) - USD ($) | Jul. 31, 2018 | Jan. 01, 2018 | Sep. 30, 2019 | Dec. 31, 2018 |
Deposit Type Contracts [Abstract] | ||||
Beginning balance | $ 8,314,297 | $ 7,234,927 | $ 8,314,297 | |
US Alliance | 442,370 | 804,187 | ||
Ironbound Reinsurance Company Limited | 76,216,386 | |||
Deposits received | 4,088,640 | (1,881,411) | ||
Investment earnings | 42,895 | 650 | ||
Withdrawals | (126,852) | 47,936 | ||
Contract charges | 2,688 | (50,732) | ||
Ending balance | $ 87,901,054 | $ 7,234,927 | ||
Percentage of sales retained | 5.00% | 5.00% | 5.00% |
Leases (Narrative) (Details)
Leases (Narrative) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Adjustment finance lease | $ 5,266 | |
Adjustment operating lease | $ 54,454 | |
Weighted Average Remaining Term - Finance lease | 6 months | 15 months |
Weighted Average Remaining Term - Operating lease | 3 years | 3 years 6 months |
Weighted Average Discount Rate - Finance lease | 6.00% | |
Weighted Average Discount Rate - Operating lease | 8.00% |
Leases (Schedule of Supplementa
Leases (Schedule of Supplemental Balance Sheet Information Related to Leases) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Noncurrent: | ||
Finance lease (Office and other equipment, net of accumulated depreciation and amortization) | $ 5,826 | $ 14,564 |
Operating lease right-of-use assets | 500,615 | 592,065 |
Total leased assets | 506,441 | 606,629 |
Current: | ||
Finance lease | 3,720 | 9,299 |
Noncurrent: | ||
Operating lease | 554,921 | 646,519 |
Total leased liabilities | $ 558,641 | $ 655,818 |
Leases (Schedule of Components
Leases (Schedule of Components of Leases Expenses) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Leases [Abstract] | ||||
Operating lease cost (General and administrative expense) | $ 3,344 | $ 4,609 | $ 10,453 | $ 13,829 |
Finance lease cost: | ||||
Amortization of right of use assets | 2,914 | 1,120 | 8,739 | 3,360 |
Interest on lease liabilities | $ 111 | $ 111 | $ 333 | $ 333 |
Leases (Schedule of Finance and
Leases (Schedule of Finance and Operating Leases Mature) (Details) | Sep. 30, 2019USD ($) |
Operating Leases | |
2019 (excluding six months ended June 30, 2019) | $ 39,079 |
2020 | 160,958 |
2021 | 164,081 |
2022 | 156,608 |
2023 | 161,674 |
2024 | 13,508 |
Total remaining lease payments | 695,908 |
Finance Lease | |
2019 (excluding six months ended June 30, 2019) | 2,133 |
2020 | 2,133 |
Total remaining lease payments | $ 4,266 |
Leases (Schedule of Supplemen_2
Leases (Schedule of Supplemental Cash Flow Information Related to Leases) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Cash payments | ||||
Operating cash flows from operating leases | $ (190) | $ 1,076 | $ (148) | $ 3,228 |
Operating cash flows from finance leases | 1,164 | (628) | 2,328 | (1,258) |
Financing cash flows from finance leases | $ (111) | $ (111) | $ (333) | $ (333) |
Statutory Net Income and Surp_2
Statutory Net Income and Surplus (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Ironbound Reinsurance Company Limited | FW, Modco Agreement | |||
Ceded percentage | 95.00% | ||
Ceded Premiums Written | $ 70,035,588 | ||
Reserve requirement ceded | 75,741,809 | ||
Nebraska Department of Insurance | American Life and Security Corporation | |||
Statutory Net Loss | (149,247) | $ (3,107,135) | |
Capital and Surplus | 18,035,576 | $ 20,979,285 | |
Multi-year guaranteed annuity sales | 79,500,172 | ||
Annuity sales pending | $ 6,902,677 |
Surplus Notes (Narrative) (Deta
Surplus Notes (Narrative) (Details) | Dec. 31, 2018USD ($)item | Dec. 30, 2018USD ($) | Dec. 31, 2018USD ($) |
Face Amount | $ 876,400 | $ 876,400 | |
Number of condominiums transferred to retire surplus notes | item | 10 | ||
Book value of condominiums | $ 493,648 | 493,648 | |
Gain on settlement of transaction | $ 382,752 | ||
Surplus Notes One [Member] | |||
Maturity Date | Aug. 1, 2016 | ||
Face Amount | $ 300,000 | ||
Surplus Notes Two [Member] | |||
Maturity Date | Sep. 1, 2016 | ||
Face Amount | $ 250,000 |
Third Party Administration (Det
Third Party Administration (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
TPA [Member] | ||||
Related Party Transaction [Line Items] | ||||
Amount of transaction | $ 11,880 | $ 24,600 | $ 40,140 | $ 71,940 |
Long Term Incentive Plan (Detai
Long Term Incentive Plan (Details) - 2019 LTIP - Stock Options - $ / shares | Jul. 19, 2019 | Jun. 11, 2019 |
Granted (in shares) | 8,950,000 | |
Grants, weighted average exercise price (in dollars per share) | $ 0.05 | |
Grant date fair value (in dollars per share) | $ 0.05 | |
Maximum | ||
Shares authorized | 51,000,000 | |
Exercisable after July 21, 2021 | ||
Vesting percentage | 33.30% | |
Exercisable after July 17, 2023 | ||
Vesting percentage | 66.70% |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event | Nov. 05, 2019item |
Subsequent Event [Line Items] | |
Number of accounts established to hold assets | 2 |
SDA | MYGA | |
Subsequent Event [Line Items] | |
Ceded percentage of certain liabilities | 5.00% |
SDA | FIA | |
Subsequent Event [Line Items] | |
Ceded percentage of certain liabilities through current fiscal year | 95.00% |
Ceded percentage of certain liabilities after current fiscal year | 30.00% |