Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 27, 2023 | Jun. 30, 2022 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
Entity File Number | 001-39812 | ||
Entity Registrant Name | MIDWEST HOLDING INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 20-0362426 | ||
Entity Address, Address Line One | 2900 S. 70th Street, Suite 400 | ||
Entity Address, City or Town | Lincoln | ||
Entity Address, State or Province | NE | ||
Entity Address, Postal Zip Code | 68506 | ||
City Area Code | 402 | ||
Local Phone Number | 817-5701 | ||
Title of 12(b) Security | Voting Common Stock, $0.001 par value | ||
Trading Symbol | MDWT | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 3,727,976 | ||
Entity Public Float | $ 44.4 | ||
Auditor Name | Mazars USA LLP | ||
Auditor Firm ID | 339 | ||
Auditor Location | Fort Washington, Pennsylvania | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Entity Central Index Key | 0000355379 | ||
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Assets | ||
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | $ 1,214,635 | $ 683,296 |
Mortgage loans on real estate, held for investment | 227,047 | 183,203 |
Derivative instruments (See Note 4) | 15,934 | 23,022 |
Equity securities, at fair value (cost: $5,592 in 2022 and $22,158 in 2021) | 5,111 | 21,869 |
Other invested assets | 112,431 | 35,293 |
Preferred stock | 31,415 | 18,686 |
Deposits and notes receivable | 8,359 | 10,071 |
Policy loans | 25 | 87 |
Total investments | 1,614,957 | 975,527 |
Cash and cash equivalents | 191,414 | 142,013 |
Deferred acquisition costs, net | 43,433 | 24,530 |
Premiums receivable | 362 | 354 |
Accrued investment income | 25,165 | 13,623 |
Reinsurance recoverables (See Note 8) | 20,190 | 38,579 |
Property and equipment, net | 1,897 | 386 |
Receivable for securities sold | 10,518 | 19,732 |
Other assets | 12,495 | 5,173 |
Total assets | 1,920,431 | 1,219,917 |
Liabilities: | ||
Benefit reserves | 12,945 | 12,941 |
Deposit-type contracts (See Note 6) | 1,743,348 | 1,075,439 |
Other policy-holder funds | 4,105 | 238 |
Notes payable (See Note 7) | 25,000 | |
Deferred gain on coinsurance transactions | 38,063 | 28,589 |
Payable for securities purchased | 8,872 | 5,546 |
Other liabilities | 53,721 | 11,408 |
Total liabilities | 1,886,054 | 1,134,161 |
Stockholders' Equity: | ||
Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and outstanding as of December 31, 2022 or December 31, 2021 | ||
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,727,976 shares issued and outstanding as of December 31, 2022 and 3,737,564 at December 31, 2021, respectively; non-voting common stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding December 31, 2022 and December 31, 2021, respectively | 4 | 4 |
Additional paid-in capital | 138,482 | 138,452 |
Treasury stock | (175) | (175) |
Accumulated deficit | (63,019) | (70,159) |
Accumulated other comprehensive (loss) income | (51,386) | 2,634 |
Total Midwest Holding Inc.'s stockholders' equity | 23,906 | 70,756 |
Noncontrolling interests | 10,471 | 15,000 |
Total stockholders' equity | 34,377 | 85,756 |
Total liabilities and stockholders' equity | $ 1,920,431 | $ 1,219,917 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Consolidated Balance Sheets | ||
Amortized Cost | $ 1,269,735 | $ 679,921 |
Equity Securities, Amortized Cost | $ 5,592 | $ 22,158 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 3,727,976 | 3,737,564 |
Common stock, shares outstanding | 3,727,976 | 3,737,564 |
Non Voting Common Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Non Voting Common Stock, Shares Authorized | 2,000,000 | 2,000,000 |
Non Voting Common Stock, Shares Issued | 0 | 0 |
Non Voting Common Stock, Shares Outstanding | 0 | 0 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenues | ||
Investment income, net of expenses | $ 35,115 | $ 15,737 |
Net realized (loss) gain on investments (See Note 3) | (14,878) | 7,752 |
Amortization of deferred gain on reinsurance transactions | 4,816 | 3,022 |
Policy administration fees | 2,130 | 842 |
Service fee revenue, net of expenses | 2,366 | 2,343 |
Other revenue | 500 | 367 |
Total revenue | 30,049 | 30,063 |
Expenses | ||
Interest credited | (10,193) | 7,012 |
Benefits | 3,206 | 6 |
Amortization of deferred acquisition costs | 4,788 | 2,886 |
Salaries and benefits | 16,196 | 16,926 |
Other operating expenses | 7,661 | 15,104 |
Total expenses | 21,658 | 41,934 |
Net income (loss) before income tax expense | 8,391 | (11,871) |
Income tax expense (See Note 9) | (7,600) | (4,766) |
Net income (loss) after income tax benefit (expense) | 791 | (16,637) |
Less: Income (loss) attributable to noncontrolling interest | (6,349) | |
Net income (loss) attributable to Midwest Holding Inc. | 7,140 | (16,637) |
Comprehensive income (loss): | ||
Unrealized (losses) on investments arising during the year ended December 31, 2022 and 2021, net of offsets, net of tax ($10.4 million and $0.2 million, respectively) | (54,975) | (1,422) |
Less: Reclassification adjustment for net realized losses on investments, net of offsets dur-ing the year ended December 31, 2022 and 2021 (net of tax ($24.9 million) and $0.4 million, respectively) | 955 | (2,375) |
Other comprehensive loss | (54,020) | (3,797) |
Comprehensive loss | (46,880) | $ (20,434) |
Total other-than-temporary impairment | 1,415 | |
Net other-than-temporary impairment loss recognized in net income | $ 1,415 | |
Income (Loss) per common share | ||
Basic (in dollars per share) | $ 1.91 | $ (4.45) |
Diluted (in dollars per share) | $ 1.88 | $ (4.45) |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Consolidated Statements of Comprehensive Loss | ||
Unrealized gains (losses) on investments arising during period, net of tax | $ 10.4 | $ 0.2 |
Reclassification adjustment for net realized losses on investments, net of tax | $ 24.9 | $ (0.4) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders Equity - USD ($) $ in Thousands | Treasury Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | AOCI | Noncontrolling Interest | Total |
Balance at Dec. 31, 2020 | $ (175) | $ 4 | $ 133,592 | $ (53,522) | $ 6,431 | $ 86,330 | |
Net income (loss) | (16,637) | (16,637) | |||||
Additional capital raise related expenses | (121) | (121) | |||||
Employee stock options | 4,981 | 4,981 | |||||
Unrealized (gains) losses on investments, net of taxes | (3,797) | (3,797) | |||||
Noncontrolling interest | $ 15,000 | 15,000 | |||||
Balance at Dec. 31, 2021 | (175) | 4 | 138,452 | (70,159) | 2,634 | 15,000 | 85,756 |
Net income (loss) | 7,140 | 7,140 | |||||
Employee stock options | 30 | 30 | |||||
Unrealized (gains) losses on investments, net of taxes | (54,020) | (54,020) | |||||
Noncontrolling interest | (4,529) | (4,529) | |||||
Balance at Dec. 31, 2022 | $ (175) | $ 4 | $ 138,482 | $ (63,019) | $ (51,386) | $ 10,471 | $ 34,377 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Cash Flows from Operating Activities: | ||
Income (loss) attributable to Midwest Holding Inc. | $ 7,140 | $ (16,637) |
Adjustments to arrive at cash provided by operating activities: | ||
Net premium and discount on investments | (11,548) | (1,244) |
Depreciation and amortization | 338 | 50 |
Stock options | 29 | 4,981 |
Amortization of deferred acquisition costs | 4,788 | 2,886 |
Deferred acquisition costs capitalized | (23,857) | (14,018) |
Net realized gain (loss) on investments | 14,878 | (7,752) |
Deferred gain on coinsurance transactions | 9,474 | 10,390 |
Changes in operating assets and liabilities: | ||
Reinsurance recoverable | 29,015 | (6,434) |
Interest and dividends due and accrued | (11,542) | (6,816) |
Premiums receivable | (8) | (40) |
Deposit-type liabilities | 3,431 | 24,371 |
Policy liabilities | 3,872 | 239 |
Receivable and payable for securities | 12,540 | (14,185) |
Other assets and liabilities | 34,612 | (1,129) |
Net cash provided by (used in) operating activities | 73,162 | (25,338) |
Fixed maturities available for sale: | ||
Purchases | (1,060,013) | (660,059) |
Proceeds from sale or maturity | 456,615 | 356,820 |
Mortgage loans on real estate, held for investment | ||
Purchases | (110,381) | (160,714) |
Proceeds from sale | 69,365 | 72,064 |
Derivatives | ||
Purchases | (24,112) | (23,944) |
Proceeds from sale | 3,232 | 14,578 |
Equity securities | ||
Purchases | (22,097) | |
Proceeds from sale | 16,986 | |
Other invested assets | ||
Purchases | (84,734) | (95,529) |
Proceeds from sale | 3,334 | 82,272 |
Purchase of restricted common stock | (806) | (500) |
Preferred stock | ||
Purchases | (14,926) | |
Proceeds from sale | 23,579 | |
Net change in policy loans | 62 | (41) |
Net purchases of property and equipment | (1,835) | (331) |
Net cash used in investing activities | (708,708) | (452,407) |
Cash Flows from Financing Activities: | ||
Net transfer to noncontrolling interest | (4,529) | 15,000 |
Proceeds from term debt | 25,000 | |
Capital contribution | (121) | |
Receipts on deposit-type contracts | 716,083 | 471,646 |
Withdrawals on deposit-type contracts | (51,607) | (18,446) |
Net cash provided by financing activities | 684,947 | 468,079 |
Net increase (decrease) in cash and cash equivalents | 49,401 | (9,666) |
Cash and cash equivalents: | ||
Beginning | 142,013 | 151,679 |
Ending | 191,414 | 142,013 |
Supplementary information | ||
Cash paid for taxes | $ 2,870 | $ 6,450 |
Nature of Operations and Summar
Nature of Operations and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Nature of Operations and Summary of Significant Accounting Policies. | |
Nature of Operations and Summary of Significant Accounting Policies | Note 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Midwest Holding Inc. (“Midwest,” “the Company,” “we,” “our,” or “us”) was incorporated in Nebraska on October 31, 2003 for the primary purpose of operating a financial services company. The Company redomesticated from the State of Nebraska to the State of Delaware on August 27, 2020. The Company is in the life and annuity insurance business and operates through its wholly owned subsidiaries, American Life & Security Corp. (“American Life”), and 1505 Capital LLC (“1505 Capital”) as well as through its sponsored captive reinsurance company, Seneca Reinsurance Company, LLC (“Seneca Re”). American Life is a Nebraska-domiciled life insurance company, that was licensed to sell, underwrite, and market life insurance and annuity products in 23 states and the District of Columbia as of December 31, 2022. American Life received authorization to do business in Georgia as of February 24, 2023, bringing our operating jurisdictions to 24 states and the District of Columbia. Effective March 12, 2020, Seneca Re, a Vermont limited liability company, was formed by Midwest to operate as a sponsored captive insurance company for the purpose of insuring and reinsuring various types of risks of its participants through one or more protected cells and to conduct any other business or activity that is permitted for sponsored captive insurance companies under Vermont insurance regulations. On March 30, 2020, Seneca Re received its Certification of Authority to transact the business of a captive insurance company. On May 12, 2020, Midwest contributed $0.3 million to Seneca Re for a 100% ownership interest. On April 15, 2020, Midwest entered into an operating agreement with Seneca Re and as of December 31, 2022, Seneca Re has two incorporated cells, Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Re Incorporated Cell 2021-03 (“SRC3”), which are consolidated in our financial statements. Midwest initially owned a 100% interest in SRC1 by contributing a total of $21.4 million. On December 30, 2021, Midwest closed the sale of approximately 70% of SRC1 to a subsidiary of ORIX Corporation USA (“ORIX USA”) for $15.0 million. Under the terms of the agreement, Midwest now holds a 30% ownership interest in SRC1. ORIX Advisers, LLC, another subsidiary of ORIX USA, is the manager of the assets underlying SRC1’s reinsurance obligations going forward, replacing Midwest’s asset management arm, 1505 Capital. On July 27, 2020, American Life entered into a reinsurance agreement (the “Reinsurance Agreement”) with a new protected cell formed by Seneca Re (Seneca Incorporated Cell, LLC 2020-02 (“SRC2”)). SRC2 was capitalized by Crestline Management, L.P. (“Crestline”), a significant shareholder of Midwest via a Crestline subsidiary, Crestline Re SPC1. The Reinsurance Agreement, which was effective as of April 24, 2020, was entered into pursuant to a Master Letter Agreement (the “Master Agreement”) dated and effective as of April 24, 2020, among American Life, Seneca Re and Crestline. The Reinsurance Agreement supports American Life’s new business production by providing reinsurance capacity for American Life to write certain kinds of fixed and multi-year guaranteed annuity products. Concurrently with the Reinsurance Agreement: ● American Life and SRC2 each entered into investment management agreements with Crestline, pursuant to which Crestline manages the assets that support the reinsured business; and ● American Life and SRC2 entered into a trust agreement whereby SRC2 maintains for American Life’s benefit a trust account that supports the reinsured business. Under the Master Agreement, Crestline agreed to provide reinsurance funding for a quota share percentage of 25% of the liabilities of American Life arising from its multi-year guaranteed annuities (“MYGA”) and a quota share percentage of 40% of the liabilities of American Life arising from its fixed indexed annuity (“FIA”) products. The Master Agreement expires on April 24, 2023. In addition, pursuant to the Master Agreement, the parties thereto have agreed to enter into one or more separate agreements whereby, among other things and subject to certain conditions, American Life will agree to reinsure additional new business production to one or more reinsurers formed and/or capitalized by Crestline, Midwest or an appropriate affiliate will be compensated for providing administrative services to certain advisory clients of Crestline, and American Life will consider investing in certain assets originated or sourced by Crestline. On June 26, 2021, the Nebraska Department of Insurance (‘NDOI”) issued its non-disapproval of the Modified Coinsurance Agreement (“Modco AEG Agreement”) of American Life with American Republic Insurance Company (“AEG”), an Iowa domiciled reinsurance company. The agreement closed on June 30, 2021. Under the Modco AEG Agreement, American Life cedes to AEG, on a modified coinsurance basis, 20% quota share of certain liabilities with respect to its MYGA-5 business and an initial 20% quota share of certain liabilities with respect to its FIA products. American Life has established a Modco Deposit Account to hold the assets for the Modco AEG Agreement. The initial settlement included net premium of $37.5 million and net reserves of $34.8 million for the modified coinsurance account. The amount paid to the Modified Deposit Account from AEG was $2.4 million. Effective February 28, 2023, AEG elected not to extend its commitment period for reinsuring liabilities under its Modco AEG Agreement. As a result, AEG’s current quota share with respect to MYGA and FIA policies is 0%. The AEG Coinsurance Agreement remains in place, and AEG remains responsible for previously ceded liabilities. On November 10, 2021, Midwest purchased 100% ownership of an intermediary holding company for $5.7 million, which company thereupon contributed capital of $5.5 million to purchase 100% of SRC3 Class A and B capital stock. Also, on November 10, 2021, American Life and SRC3 entered into a Funds Withheld and Modified Coinsurance Agreement, whereby, SRC3 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA products and quota share percentage of 45% of the liabilities of American Life arising from its FIA products. In the fourth quarter of 2022, the agreement with SRC3 was amended to provide a one time reinsurance funding for a quota share of $10.0 million of the liabilities of American Life arising from its FIA products. On September 30, 2022, American Life entered into a reinsurance agreement (the “Reinsurance Agreement”) with a new protected cell formed by Seneca Re (Seneca Incorporated Cell, LLC 2022-04 (“SRC4”)). SRC4 was capitalized by loans from Embrace Software, Inc (“Embrace”) and Tillman Networks LLC (“Tillman”). The Reinsurance Agreement was effective as of July 1, 2022, among American Life and Seneca Re. The Reinsurance Agreement supports American Life’s new business production by providing reinsurance capacity for American Life to write certain kinds of fixed indexed and multi-year guaranteed annuity products. Under the Reinsurance Agreement, SRC4 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA-5 products and a quota share percentage of 10% of the liabilities of American Life arising from its MYGA-3 products. American Life has established a Modco Deposit Account, a Funds Withheld custody account, and a Trust Account pursuant to the Reinsurance Agreement. The initial settlement included net premium of $21.4 million and net reserves of $21.5 million for the modified coinsurance account. Also on September 30, 2022, American Life entered into an Investment Management Agreement (“IMA”) with CoVenture Management, LLC (“CoVenture”) naming CoVenture as the manager of certain assets held by American Life on behalf of SRC4. Management evaluates the Company as one reporting segment in the life insurance industry. The Company is primarily engaged in the underwriting and marketing of annuity products through American Life, and then reinsuring such products with third-party reinsurers, and since May 13, 2020, with Seneca Re protected cells. American Life’s legacy product offerings consisted of a multi-benefit life insurance policy that combined cash value life insurance with a tax deferred annuity and a single premium term life product. American Life presently offers six annuity products: two MYGAs, two FIAs, and two bonus plans associated with the FIA product. It is not presently offering any traditional life insurance products. Basis of Presentation These consolidated financial statements for the year ended December 31, 2022 and 2021 have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The following is a summary of our significant accounting policies and estimates. These accounting policies inherently require significant judgment and assumptions, and actual operating results could differ significantly from management’s estimates determined using these policies. We believe the following accounting policies, judgments and estimates are the most critical to the understanding of our results of operations and financial position. All intercompany accounts and transactions have been eliminated in consolidation and certain immaterial reclassifications have been made to the prior period results to conform to the current period’s presentation with no impact on results of operations or total stockholders’ equity. Fixed Maturities All fixed maturities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Premiums and discounts on fixed maturity debt instruments are amortized using the scientific-yield method over the term of the instruments. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in accumulated other comprehensive (loss) income. Declines in the fair value of available-for-sale securities below their amortized cost are evaluated to assess whether any other-than-temporary impairment loss should be recorded. In determining if these losses are expected to be other-than-temporary, the Company considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, the financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost. Investment income consists of interest, dividends, gains and losses from investments, and real estate income, which are recognized on an accrual basis along with the amortization of premiums and discounts. Certain available-for-sale investments are maintained as collateral under Funds Withheld (“FW”) and Modified Coinsurance (“Modco”) agreements but the assets and total returns or losses on the asset portfolios belong to the third-party reinsurers. American Life has treaties with several third-party reinsurers that have FW and Modco provisions. In a Modco agreement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a FW agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurers to reduce the potential credit risk. The unrealized gains/losses on those investments are passed through to the third-party reinsurers as either a realized gain or loss on the Consolidated Statements of Comprehensive Loss. Mortgage Loans on Real Estate Mortgage loans on real estate, held for investment are carried at unpaid principal balances. Interest income 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 for impairments 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 and disposition of collateral. These evaluations are revised as conditions change and new information becomes available. As of December 31, 2022, the Company held one asset valued at $7.7 million with a total impairment of $1.4 million. No such impairments were recognized as of December 31, 2021. Derivative Instruments Derivatives are used to hedge the risks experienced in our ongoing operations, such as equity, interest rate and cash flow risks, or for other risk management purposes, which primarily involve managing liability risks associated with our indexed annuity products and reinsurance agreements. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or other underlying notional amounts. Derivative assets and liabilities are carried at fair value on the consolidated balance sheets. To qualify for hedge accounting, at the inception of the hedging relationship, the Company must formally document our designation of the hedge as a cash flow or fair value hedge and our risk management objective and strategy for undertaking the hedging transaction. In this documentation, we would identify how the hedging instrument is expected to hedge the designated risks related to the hedged item, the method that would be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method which would be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness would be formally assessed at inception and periodically throughout the life of the designated hedging relationship. During the last quarter of 2020, the Company began investing in futures to hedge the fluctuations in various aspects of our business. The formal documentation and hedge effectiveness was not completed at the date we entered into those futures contracts; therefore, they do not qualify for hedge accounting. The futures change in fair market values were recorded on our Consolidated Statements of Comprehensive Loss as realized gains or (losses). Additionally, reinsurance agreements written on a FW or Modco basis contain embedded derivatives on our annuity products. Gains or (losses) associated with the performance of assets maintained in the modified coinsurance deposit and funds withheld accounts are reflected as realized gains or (losses) in the Consolidated Statements of Comprehensive Loss. Equity Securities Equity securities at December 31, 2022, consisted of exchange traded funds (“ETFs”). The ETFs are carried at fair value with the change in fair value recorded through realized gains and losses in the Consolidated Statements of Comprehensive Loss. As of December 31, 2022, we held $5.1 million of ETFs and $21.9 million of ETFs as of December 31, 2021. Preferred Stock The company held a perpetual preferred stock investment of $10.0 million as of December 31, 2022. This investment is carried at fair market value. The change in fair market value is recorded in net investment income on the Statement of Comprehensive Loss. In 2020 American Life entered into a series of transactions with an unaffiliated entity, Ascona Group Holdings Ltd (“AGH”). Through these transactions American Life acquired preferred equity in AGH in British Pound Sterling (“GBP”) 3.6 million along with warrants bearing no initial assigned value. American Life subsequently created a special purpose vehicle, Ascona Asset Holding LLC (“AAH”), to hold the Preferred Equity and Warrants, and later created Ascona Collinwood HoldCo LLC (“ACH”) to be the sole member of AAH. American Life and Crestline Re SP1 own 74% and 26%, respectively, of ACH. American Life is carrying the preferred equity and warrants at a market value in USD of $2.2 million as of December 31, 2022 and $3.9 million of December 31, 2021. The change in market value for the preferred stock and warrants of $9.0 million was recorded in net investment income on the Consolidated Statements of Comprehensive Loss. Of the $9.0 million of investment income, $2.4 million was attributed to the noncontrolling interest held by Crestline Re SP1. Other Invested Assets Other invested assets consists of approximately $112.4 million of various investments. Of this total, approximately $98.4 million are primarily collateral loans, and $13.0 million of private credit and equipment leases. Also, we had an initial investment of $19.0 million investment in a private fund between American Life and an unaffiliated entity, PF Collinwood Holdings, LLC (“PFC”), with American Life owning 100% of the entity effective January 2021. The fair value of the PFC investment as of December 31, 2022, was $13.7 million and as of December 31, 2021, $14.5 million, respectively, with the change in fair market value recorded in unrealized gains and losses in equity on the balance sheet. On February 2, 2022, we established a special purpose vehicle, Python Asset Holding LLC, with American Life owning 100% of the entity with an initial investment of $7.4 million. As of September 30, 2022, our investment in Python was carried at the net asset value (“NAV”) plus approximately $0.4 million of investment income. Deposits and notes receivable Investment escrow The Company held in escrow $0.8 million and $3.6 million as of December 31, 2022 and 2021, respectively. The cash held at year end was used to purchased mortgages in January 2023 and 2022, respectively. Federal Home Loan Bank stock American Life initially purchased Federal Home Loan Bank of Topeka (“FHLB”) common stock on May 5, 2021. This investment was to solidify our membership with FHLB Topeka. The carrying value of FHLB stock approximates fair value since the Company can redeem the stock with FHLB at cost. As a member of the FHLB, the Company is required to purchase this stock, which is carried at cost and classified as restricted equity securities. Membership allows access to various funding arrangements to provide a source of additional liquidity. As of December 31, 2022, the Company had pledged assets with a market value of $121.1 million to FHLB to allow a borrowing capacity of $109.8 million and none pledged as of December 31, 2021. As of December 31, 2022, we had $29.0 million of outstanding funding arrangements. As of December 31, 2021, there were no outstanding funding arrangements. Notes Receivable The Company held notes receivable carried at fair value of $6.3 million and $6.0 million as of December 31, 2022 and 2021, respectively, between American Life and a related party. The note receivable has an annual interest rate of 5% which is paid in kind (“PIK”) interest per annum that increases the outstanding note balance. This note was rated BBB+ by a nationally recognized statistical rating organization. This note matures on June 18, 2050. See Note 15 – Related Party – Chelsea for details regarding this note. Policy Loans Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value. Cash and Cash Equivalents The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of December 31, 2022 and 2021, the Company held less than GBP 0.1 and approximately GBP 2.2 million in custody accounts, respectively. The USD equivalent held was less than $0.1 and $3.0 million, respectively. As of December 31, 2022 and 2021, the Company held approximately less than Euro 0.1 and 9.3 million, respectively. The USD equivalent held was approximately less than $0.1 and $10.6 million, respectively. As of December 31, 2022 and 2021, we had realized gains of approximately $3.7 million and approximately $2.0 million, respectively, related to the change in the foreign currency exchange rate of the GBP and Euro that were recorded in realized (losses) gains on investments in the Consolidated Statements of Comprehensive Loss. The Company had no money market investments as of December 31, 2022 and 2021, respectively. Deferred Acquisition Costs Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to third-party reinsurers, that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. These costs are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. The Company evaluates the types of acquisition costs it capitalizes. The Company capitalizes agent compensation and benefits and other expenses that are directly related to the successful acquisition of contracts. The Company also capitalizes expenses directly related to activities performed by the Company, such as underwriting, policy issuance, and processing fees incurred in connection with successful contract acquisitions. The following table represents a roll forward of DAC, net of reinsurance: (In thousands) December 31, 2022 December 31, 2021 Beginning balance $ 24,530 $ 13,456 Additions 23,857 13,402 Amortization (3,905) (2,886) Interest (883) 632 Impact of unrealized investment losses (166) (74) Ending Balance $ 43,433 $ 24,530 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 in management’s judgment require an immediate review. The Company performed a recoverability analysis during the fourth quarter of 2022 and determined that all DAC balances were recoverable as of December 31, 2022. Premiums Receivable Premiums receivable consists of premiums earned on our legacy insurance business which have been earned, but have not yet been collected. Amounts are receivable from our legacy business partners and were consistent at $0.4 million in both 2022 and 2021. 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 three During the first quarter of 2021, the Company began the implementation of a new cloud-based enterprise resource planning and enterprise performance management system. The Company expects to capitalize related consultation and support expenses relating to this system and will begin amortizing these fees over a period of five years from the date of implementation. The useful life of the system has been estimated at five years in accordance with guidance in ASC 350, Intangibles – Goodwill and Other 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. The Company determined that no such events occurred in the periods covered by the Consolidated Financial Statements that would indicate the carrying amounts may not be recoverable. Reinsurance We seek to reinsure a significant portion of our new annuity policies with a variety of reinsurers in exchange for upfront ceding commissions, expense reimbursements and administrative fees. Under these reinsurance agreements, we expect there will be a monthly or quarterly settlement of premiums, claims, surrenders, collateral, and other administration fees. We believe this will help preserve American Life’s capital while supporting its growth because American Life will have lower capital requirements when its business is reinsured due to lower overall financial exposure versus retaining the insurance policy business itself. See Note 8 below for further discussion of our reinsurance activities. There are two main categories of reinsurance transactions: 1) “indemnity,” where we cede a portion of our risk but retain the legal responsibility to our policyholders should our reinsurers not meet their financial obligations; and 2) “assumption,” where we transfer the risk and legal responsibilities to the reinsurers. The reinsurers are required to acquire the appropriate regulatory and policyholder approvals to convert indemnity policies to assumption policies. Our reinsurers may be domestic or foreign capital markets investors or traditional reinsurance companies seeking to assume U.S. insurance business. We plan to mitigate the credit risk relating to reinsurers generally by requiring other financial commitments from the reinsurers to secure the reinsured risks (such as posting substantial collateral). It should be noted that under indemnity reinsurance agreements American Life remains exposed to the credit risk of its reinsurers. If one or more reinsurers become insolvent or are otherwise unable or unwilling to pay claims under the terms of the applicable reinsurance agreement, American Life retains legal responsibility to pay policyholder claims, which in such event would likely materially and adversely affect the capital and surplus of American Life. Midwest formed Seneca Re in early 2020, followed by Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Incorporated Cell, LLC 2021-03 (“SRC3”) which are consolidated in these financial statements. Midwest sold 70% ownership of SRC1 to an ORIX Corporation USA subsidiary on December 30, 2021, and retained 30% ownership. Midwest maintains control over SRC1 and we continue to consolidate SRC1 in these financial statements and eliminate the noncontrolling interest. Additionally, Seneca Re has established Seneca Incorporated Cell, LLC 2022-04; however, management has determined that Midwest does not control the entity and thus it is not consolidated into these financial statements. American Life entered into a novation agreement with SRC2 and Crestline Re SPC, for and on behalf of Crestline Re SP1, under which the above-described reinsurance, trust and related asset management agreements were novated and replaced with substantially similar agreements entered into by American Life and Crestline Re SP1. Some reinsurers are not and may not be “accredited” or qualified as reinsurers under Nebraska law and regulations. In order to enter into reinsurance agreements with such reinsurers and to reduce potential credit risk, American Life holds a deposit or withholds funds from the reinsurer or requires the reinsurer to maintain a trust that holds assets backing up the reinsurer’s obligation to pay claims on the business it assumes. The reinsurer may also appoint an investment manager for such funds, which in some cases may be our investment adviser subsidiary, 1505 Capital, to manage these assets pursuant to guidelines adopted by us that are consistent with Nebraska investment statutes and reinsurance regulations. American Life currently has treaties with several third-party reinsurers and one related party reinsurer. In a Modco agreement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a FW agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurers, to reduce the potential credit risk. Under those provisions with third-party reinsurers, the assets backing the treaties are maintained by American Life as investments but the assets and total returns or losses on the investments are owned by the reinsurers. Under GAAP, this arrangement is considered an embedded derivative as discussed in Comprehensive Loss and Note 4 below. Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained cumulative unrealized losses of approximately $10.5 million and gains of $0.2 million as of December 31, 2022 and 2021, respectively. The terms of the contracts with the third-party reinsurers provide that changes in the unrealized gains and losses on the portfolios accrue to the third-party reinsurers. To recognize changes in the third-party unrealized gain (loss), American Life records the year -to-date change in the Consolidated Statements of Comprehensive Loss and in amounts recoverable from third-party reinsurers on the Consolidated Balance Sheets. As of December 31, 2022, and 2021, American Life recognized a current year gain in the embedded derivative of $10.6 million and losses of $2.8 million respectively. For further discussion see Note 4 below. 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. Deposit-type contracts also include balances outstanding under funding agreements with the Federal Home Loan Bank of Topeka (“FHLB”). The funding agreements are carried at cost. Amounts received and repaid under FHLB funding agreements are classified as financing activities in the Company's Consolidated Statements of Cash Flows. In 2021, the Company became a member of FHLB, which provides access to collateralized borrowings and other FHLB products. Any borrowing from FHLB requires the purchase of FHLB activity-based common stock in an amount equal to 4.5% of the borrowing. In 2022, the Board authorized a maximum amount equal to 5% of net aggregate admitted retained assets of American Life for FHLB advances and funding agreements combined. In 2022, American Life received advances of $29.0 million from FHLB under funding agreements and made no repayments on FHLB funding agreements. Outstanding advances under FHLB funding agreements are reported as part of deposit-type contracts in the Consolidated Balance Sheets and totaled $29.0 million as of December 31, 2022. Interest on the funding agreements accrues at their effective interest rates. As of December 31, 2022, scheduled maturity dates for outstanding FHLB funding agreements were as follows: |
Non-controlling Interest
Non-controlling Interest | 12 Months Ended |
Dec. 31, 2022 | |
Non-controlling Interest | |
Non-controlling Interest | Note 2. Non-controlling Interest Disposal On December 30, 2021, Midwest closed the sale of approximately 70% of SRC1 to a subsidiary of ORIX Corporation USA for $15.0 million. Under the terms of the agreement, Midwest holds a 30% ownership interest in SRC1. ORIX Advisers, LLC, another subsidiary of ORIX USA, is the manager of the assets underlying SRC1’s reinsurance obligations, replacing Midwest’s asset management arm, 1505 Capital LLC. As of December 31, 2022, Midwest recognized the original purchase of $15.0 million less $7.3 million of losses as noncontrolling interest in the equity section of the Consolidated Balance Sheets. Purchase In 2020 American Life entered into a series of transactions with an unaffiliated entity, Ascona Group Holdings Ltd (“AGH”). Through these transactions American Life acquired preferred equity in AGH in British Pound Sterling (“GBP”) of 3.6 million along with warrants bearing no initial assigned value. American Life subsequently created a special purpose vehicle, Ascona Asset Holding LLC (“AAH”), to hold the Preferred Equity and Warrants, and later created Ascona Collinwood HoldCo LLC (“ACH”) to be the sole member of AAH. American Life and Crestline Re SP1 own 74% and 26%, respectively, of ACH. American Life is carrying the preferred equity at a market USD value of $2.2 million as of December 31, 2022, and $3.9 million as of December 31, 2021. The change in market value for the year ended December 31, 2022, of $9.0 million for the preferred stock and warrants was recorded in net investment income on the Consolidated Statements of Comprehensive Loss. Of the $9.0 million of investment income, $2.4 million was attributable to noncontrolling interest. |
Investments
Investments | 12 Months Ended |
Dec. 31, 2022 | |
Investments. | |
Investments | Note 3. Investments The amortized cost and estimated fair value of investments classified as available-for-sale as of December 31, 2022 and 2021 are as follows: Gross Gross Amortized Unrealized Unrealized Estimated (In thousands) Cost Gains Losses Fair Value December 31, 2022: Fixed maturities: Bonds: U.S. government obligations $ 1,343 $ — $ 81 $ 1,262 Mortgage-backed securities 316,105 469 22,508 294,066 Asset-backed securities 34,728 17 3,989 30,756 Collateralized loan obligations 308,871 726 21,924 287,673 States and political subdivisions-general obligations 104 — 3 101 States and political subdivisions-special revenue 228 — 23 205 Corporate 46,700 415 5,515 41,600 Term loans 561,656 1,923 4,607 558,972 Total fixed maturities $ 1,269,735 $ 3,550 $ 58,650 $ 1,214,635 Mortgage loans on real estate, held for investment 227,047 — — 227,047 Derivatives 30,239 2,694 16,999 15,934 Equity securities 5,592 — 481 5,111 Other invested assets 108,979 3,667 215 112,431 Preferred stock 35,644 1,757 5,986 31,415 Deposits and notes receivable 8,359 — — 8,359 Policy loans 25 — — 25 Total investments $ 1,685,620 $ 11,668 $ 82,331 $ 1,614,957 December 31, 2021: Fixed maturities: Bonds: U.S. government obligations $ 1,855 $ 32 $ 5 $ 1,882 Mortgage-backed securities 55,667 368 755 55,280 Asset-backed securities 24,675 443 167 24,951 Collateralized loan obligations 272,446 2,928 851 274,523 States and political subdivisions-general obligations 105 9 — 114 States and political subdivisions-special revenue 4,487 1,129 4 5,612 Corporate 35,392 1,846 99 37,139 Term loans 268,794 441 1,767 267,468 Trust preferred 2,218 19 — 2,237 Redeemable preferred stock 14,282 53 245 14,090 Total fixed maturities $ 679,921 $ 7,268 $ 3,893 $ 683,296 Mortgage loans on real estate, held for investment 183,203 — — 183,203 Derivatives 18,654 6,391 2,023 23,022 Equity securities 22,158 — 289 21,869 Other invested assets 34,491 813 11 35,293 Preferred stock 14,885 3,801 — 18,686 Deposits and notes receivable 10,071 — — 10,071 Policy loans 87 — — 87 Total investments $ 963,470 $ 18,273 $ 6,216 $ 975,527 The following table shows the distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of December 31, 2022 and 2021. December 31, 2022 December 31, 2021 Carrying Carrying (In thousands) Value Percent Value Percent AAA and U.S. Government $ 124,183 10.2 % $ 2,674 0.4 % AA 815 0.1 482 0.1 A 371,371 30.6 168,141 24.6 BBB 619,516 51.0 462,699 67.7 Total investment grade 1,115,885 91.9 633,996 92.8 BB and below 98,750 8.1 49,300 7.2 Total $ 1,214,635 100.0 % $ 683,296 100.0 % Reflecting the quality of securities maintained by us, as of December 31, 2022 and 2021, 91.9% and 92.8%, respectively, of all fixed maturity securities were investment grade. The BB and below also includes maturities that have no rating. The following table summarizes, for all fixed maturity securities in an unrealized loss position as of December 31, 2022 and 2021 and the estimated fair value, pre-tax gross unrealized loss, and number of securities by consecutive months they have been in an unrealized loss position. December 31, 2022 December 31, 2021 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of (In thousands) Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 1,135 $ 70 13 $ 104 $ 2 1 Mortgage-backed securities 233,624 18,464 89 35,403 755 35 Asset-backed securities 24,552 3,278 23 12,355 167 13 Collateralized loan obligations 203,549 16,730 252 90,731 851 115 States and political subdivisions-general obligations 101 3 1 — — — States and political subdivisions-special revenue 47 2 3 217 4 0 Term loans 558,337 4,607 36 105,677 1,767 47 Redeemable preferred stock — — — 10,837 245 6 Corporate 37,286 5,426 64 2,367 73 9 Greater than 12 months: U.S. government obligations 126 11 5 66 3 3 Asset-backed securities 5,321 711 7 — — — Collateralized loan obligations 37,814 5,194 47 — — — States and political subdivisions-special revenue 158 21 7 — — — Mortgage-backed securities 17,985 4,044 14 — — — Corporate 376 89 7 324 26 2 Total fixed maturities $ 1,120,411 $ 58,650 568 $ 258,081 $ 3,893 231 (1) Our securities positions resulted in a gross unrealized loss position as of December 31, 2022 that was greater than the gross unrealized loss position at December 31, 2021 due to increases in the Federal Reserve interest rates. We performed an analysis and determined that there were no additional indicators other than the increase in the interest rates that would indicate a cash flow testing analysis should be performed. No impairment was required as of December 31, 2022 or December 31, 2021. See the discussion above under “Comprehensive Loss” in Note 1 regarding unrealized gains/losses on investments that are owned by our reinsurers and the corresponding offset carried as a gain in the associated embedded derivatives. The Company purchases and sells equipment leases in its investment portfolio. As of December 31, 2022, the Company owned several leases, all of which were performing. No impairment was required as of December 31, 2022. The amortized cost and estimated fair value of fixed maturities as of December 31, 2022, 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 (In thousands) Cost Fair Value Due in one year or less $ 67,088 $ 65,223 Due after one year through five years 631,956 618,744 Due after five years through ten years 481,819 452,108 Due after ten years through twenty years 57,113 53,238 Due after twenty years 31,759 25,322 $ 1,269,735 $ 1,214,635 The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At December 31, 2022 and 2021, these required deposits had a total amortized cost of $1.2 million and $3.0 million, respectively, and fair values of $1.0 million and $3.0 million, respectively. Mortgage loans consist of the following: (In thousands) December 31, 2022 December 31, 2021 1-4 Family $ 59,579 $ 72,324 Hospitality 12,902 12,822 Land 62,119 15,904 Multifamily (5+) 34,072 31,583 Retail 22,119 17,655 Other 36,256 32,915 Total mortgage loans $ 227,047 $ 183,203 Geographic Location: As of December 31, 2022, the commercial mortgages loans were secured by properties geographically dispersed (with the largest concentrations in loans secured by properties in New York (24%), Florida (15%), Delaware (10%), California (6%), and Arizona (5%)). As of December 31, 2021, the commercial mortgages loans were secured by properties geographically dispersed (with the largest concentrations in New York (32%), Arizona (4%), California (4%) and non-US (9%)). The loan-to-value ratio is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A loan-to-value ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The following represents the loan-to-value ratio of the commercial mortgage loan portfolio, excluding those under development, net of valuation allowances. As of December 31, 2022, the Company held one asset valued at $7.7 million with an impairment of $1.4 million. No such valuations were established as of December 31, 2021. Commercial Mortgage Loans (In thousands) December 31, 2022 December 31, 2021 Loan-to-Value Ratio: 0%-59.99% $ 108,281 $ 91,104 60%-69.99% 79,968 42,819 70%-79.99% 33,268 44,106 80% or greater 5,530 5,174 Total mortgage loans $ 227,047 $ 183,203 The components of net investment income for the years ended December 31, 2022 and 2021 are as follows: Year ended December 31, (In thousands) 2022 2021 Fixed maturities $ 38,299 $ 16,443 Mortgage loans 2,456 185 Other invested assets 1,854 665 Other interest income (1,517) 298 Gross investment income 41,092 17,591 Less: investment expenses (5,977) (1,854) Investment income, net of expenses $ 35,115 $ 15,737 Proceeds for the years ended December 31, 2022 and 2021 from sales of investments classified as available-for-sale were $456.6 million, and $356.8 million, respectively. Gross gains of $1.7 million and $6.0 million and gross losses of $39.0 million and $1.4 million were realized on sales and the realized losses on sales during the years ended December 31, 2022 and 2021, respectively. The proceeds included those assets associated with the third-party reinsurers. The gains and losses relate only to the assets retained by American Life. Unrealized gain/loss included as part of net investment income were $69.2 million loss and $12.1 million gain for the year ended December 31, 2022 and 2021. |
Derivative Instruments
Derivative Instruments | 12 Months Ended |
Dec. 31, 2022 | |
Derivative Instruments | |
Derivative Instruments | Note 4. Derivative Instruments The Company enters into derivative instruments to manage risk, primarily equity, interest rate, credit, foreign currency and market volatility. Some of these derivative instruments are to hedge fixed indexed annuity products that guarantee the return of principal to the policyholders and credit interest based on a percentage of the gain in a specified market index. To hedge against adverse changes in equity indices, the Company entered into contracts to buy equity indexed options. The following is a summary of the asset derivatives not designated as hedges embedded derivatives in our FIA product as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 (In thousands, except number of contracts) Location in the Derivatives Not Designated Consolidated Notional Number of Estimated Notional Number of Estimated as Hedging Instruments Balance Sheets Amount Contracts Fair Value Amount Contracts Fair Value Equity-indexed options Derivatives $ 831,657 595 $ 15,592 $ 526,096 482 $ 23,766 Equity-indexed embedded derivatives Deposit-type 782,997 6,131 111,618 525,548 4,205 123,692 At December 31, 2022, the value of the embedded derivative considers all amounts projected to be paid in excess of the minimum guarantee (the amounts payable without any indexation increases) over future periods. The host contract reflects the minimum guaranteed values. Due to price changes in the capital markets, our securities positions resulted in decreased unrealized gains at December 31, 2022, compared to 2021, reported in accumulated other comprehensive income on the balance sheet. The embedded derivative related to the asset portfolio belonging to the third-party reinsurers offset these unrealized gains. The unrealized losses as of December 31, 2022 were $10.6 million compared to unrealized gains of $2.8 million as of December 31, 2021. The following table summarizes the impact of those embedded derivatives related to the funds withheld provision where the total return on the asset portfolio is passed through to the third-party reinsurers: December 31, 2022 December 31, 2021 (In thousands) Book Value Market Value Total Return Book Value Market Value Total Return Portfolio Assets Assets Swap Value Assets Assets Swap Value American Republic Insurance Company $ 150,413 $ 143,952 $ 6,461 $ 74,983 $ 74,670 $ 313 Crestline Re SP1 354,806 356,374 (1,568) 228,560 228,450 110 Ironbound 159,644 154,477 5,167 154,867 155,755 (888) Ascendent Re 56,064 54,790 1,274 56,246 56,078 168 SRC4 61,646 62,516 (870) - - - US Alliance - - - 46,221 46,085 136 Total $ 782,573 $ 772,109 $ 10,464 $ 560,877 $ 561,038 $ (161) Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained cumulative unrealized losses of approximately $10.5 million as of December 31, 2022, and cumulative unrealized gains of $0.2 million as of December 31, 2021, respectively. The terms of the contracts with the third-party reinsurers provide that the changes in unrealized gains on the portfolios accrue to the third-party reinsurers. Accordingly, the change in unrealized losses on the assets held by American Life were offset by gains in the embedded derivative of $10.6 million and a gain in the embedded derivative of $2.8 million as of December 31, 2022 and 2021, respectively. We account for this unrealized (loss) pass-through by recording an equivalent realized gain on our Consolidated Statements of Comprehensive Loss and in amounts payable to our third-party reinsurers on the Consolidated Balance Sheets. |
Fair Values of Financial Instru
Fair Values of Financial Instruments | 12 Months Ended |
Dec. 31, 2022 | |
Fair Values of Financial Instruments | |
Fair Values of Financial Instruments | Note 5. Fair Values of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: ● Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. ● Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. ● Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the period in which the reclassifications occur. A description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Level 1 measurements Cash equivalents: Level 2 measurements Fixed maturity securities: Derivatives: Equity securities Preferred stock Deposits and notes receivable Level 3 measurements Term Loans Mortgage Loans Other Invested Assets Deposits and notes receivable: Preferred Stock Policy loans: Deposit-type contracts: Embedded derivative for equity-indexed contracts The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of December 31, 2022 and 2021. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Net Asset Fair (In thousands) (Level 1) (Level 2) (Level 3) Value Value December 31, 2022 Financial assets Fixed maturity securities: Bonds U.S. government obligations $ — $ 1,262 $ — $ — $ 1,262 Mortgage-backed securities — 294,066 — — 294,066 Asset-backed securities — 30,756 — — 30,756 Collateralized loan obligations — 287,673 — — 287,673 States and political subdivisions-general obligations — 101 — — 101 States and political subdivisions-special revenue — 205 — — 205 Corporate — 41,600 — — 41,600 Term loans — — 558,972 — 558,972 Total fixed maturity securities — 655,663 558,972 — 1,214,635 Mortgage loans on real estate, held for investment — — 227,047 — 227,047 Derivatives — 15,934 — — 15,934 Equity securities — 5,111 — — 5,111 Other invested assets — — 99,997 12,434 112,431 Preferred stock — 9,544 21,871 — 31,415 Deposits and notes receivable — 7,053 1,306 — 8,359 Policy loans — — 25 — 25 Total Investments $ — $ 693,305 $ 909,218 12,434 $ 1,614,957 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 111,618 $ — 111,618 December 31, 2021 Financial assets Fixed maturity securities: Bonds U.S. government obligations $ — $ 1,882 $ — $ — $ 1,882 Mortgage-backed securities — 55,280 — — 55,280 Asset-backed securities — 24,951 — — 24,951 Collateralized loan obligations — 274,523 — — 274,523 States and political subdivisions-general obligations — 114 — — 114 States and political subdivisions-special revenue — 5,612 — — 5,612 Corporate — 37,139 — — 37,139 Term loans — — 267,468 — 267,468 Trust preferred — 2,237 — — 2,237 Redeemable preferred stock — 14,090 — — 14,090 Total fixed maturity securities — 415,828 267,468 — 683,296 Mortgage loans on real estate, held for investment — — 183,203 — 183,203 Derivatives — 23,022 — — 23,022 Equity securities — 21,869 — 21,869 Other invested assets — — 35,293 — 35,293 Preferred stock — — 18,686 — 18,686 Deposits and notes receivable — 9,571 500 — 10,071 Policy loans — — 87 — 87 Total Investments $ — $ 470,290 $ 505,237 — $ 975,527 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 123,692 $ — $ 123,692 There were no transfers of financial instruments between any levels during the years ended December 31, 2022 and 2021. 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. As of December 31, 2022 or 2021, 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 December 31, 2022 and 2021, respectively: December 31, 2022 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair (In thousands) Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 25 $ — $ — $ 25 $ 25 Cash equivalents 191,414 — 191,414 — 191,414 Liabilities: Policyholder deposits (deposit-type contracts) 1,743,348 — — 1,743,348 1,743,348 December 31, 2021 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair (In thousands) Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 87 $ — $ — $ 87 $ 87 Cash equivalents 142,013 — 142,013 — 142,013 Liabilities: Policyholder deposits (deposit-type contracts) 1,075,439 — — 1,075,439 1,075,439 The following table presents a reconciliation of the beginning balance for all assets and liabilities measured at fair value on a recurring basis using level three inputs during the year ended December 31, 2022: December 31, 2022 Total realized and unrealized gains (losses) Beginning Balance Included in Income Included in OCI Net Purchases, Issuances, Sales, and Settlements Ending Balance (In thousands) Assets Term loans $ 267,468 $ — $ (2,683) $ 294,187 558,972 Mortgage loans on real estate, held for investment 183,203 — — 43,844 227,047 Deposits and notes receivable 500 — — 806 1,306 Other invested assets 35,293 — 3,452 61,252 99,997 Preferred stock 18,686 — (4,229) 7,414 21,871 Policy loans 87 — — (62) 25 Total level 3 assets $ 505,237 $ — $ (3,460) $ 407,441 $ 909,218 Liabilities Embedded derivative for equity-indexed contracts (123,692) (10,193) — 22,267 (111,618) Total level 3 liabilities $ (123,692) $ (10,193) $ — $ 22,267 $ (111,618) The following tables present a reconciliation of the beginning balance for all investments measured at fair value on a recurring basis using level three inputs during the year ended December 31, 2021: December 31, 2021 Total realized and unrealized gains (losses) (In thousands) Beginning Balance Included in Income Included in OCI Net Purchases, Issuances, Sales, and Settlements Ending Balance Assets Term loans $ 107,254 $ (1,326) $ 225 $ 161,315 $ 267,468 Mortgage loans on real estate, held for investment 94,990 — — 88,213 183,203 Deposits and notes receivable — — — 500 500 Other invested assets 21,897 810 (671) 13,257 35,293 Preferred stock 3,898 — 157 14,631 18,686 Policy loans 46 — — 31 87 Total level 3 assets $ 228,085 $ (516) $ (289) $ 277,947 $ 505,237 Liabilities Embedded derivative for equity-indexed contracts (84,501) (4,169) — (35,022) (123,692) Total level 3 liabilities $ (84,501) $ (4,169) $ — $ (35,022) $ (123,692) Significant Unobservable Inputs —Significant unobservable inputs occur when we could not obtain or corroborate the quantitative detail of the inputs. This applies to fixed maturity securities, preferred stock, mortgage loans and certain derivatives, as well as embedded derivatives in liabilities. Additional significant unobservable inputs are described below. Interest sensitive contract liabilities – embedded derivative – Significant unobservable inputs we use in the fixed indexed annuities embedded derivative of the interest sensitive contract liabilities valuation include: ● Nonperformance risk – For contracts we issue, we use the credit spread, relative to the US Department of the Treasury (Treasury) curve based on our public credit rating as of the valuation date. This represents our credit risk for use in the estimate of the fair value of embedded derivatives. ● Option budget – We assume future hedge costs in the derivative’s fair value estimate. The level of option budgets determines the future costs of the options and impacts future policyholder account value growth. ● Policyholder behavior – We regularly review the lapse and withdrawal assumptions (surrender rate). These are based on our initial pricing assumptions updated for actual experience. Actual experience may be limited for recently issued products. Preferred equity and warrants – Significant unobservable inputs we use include surrender rate, discount rates, and EBITDA Multiples. ● EBITDA Multiple -The warrants valued using a market approach guideline public company method ("GCPM") using a multiplier of EBITDA. ● Discount Rates - For the preferred equity, discounted cash flow models are used to assist with the calculation the fair value. Other Invested Assets ● EBITDA Multiple -The other invested assets valued using a market approach guideline public company method ("GCPM") using a multiplier of EBITDA. ● Discount Rates - For the other invested assets, discounted cash flow models are used to assist with the calculation the fair value. Term Loans Preferred Stock Mortgage Loans The following summarizes the unobservable inputs for available for sale and trading securities and the embedded derivatives of fixed indexed annuities and preferred stock (with associated detachable warrants): December 31, 2022 (In millions, except for percentages and multiples) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Term loans $559.0 Yield Analysis Discount rates 4.6% 17.3% 12.4% Decrease Mortgage loans on real estate $227.0 Yield Analysis Principal funded NA NA NA Decrease Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $111.6 Option Budget Method Nonperformance risk 0.6% 1.5% 1.1% Decrease Option budget 1.1% 5.7% 2.7% Increase Surrender rate 0.5% 15% (base) 10.5% Decrease Other invested assets $100.0 Market Approach EBITDA Multiples 2.6% 3.1% 2.8% NA Discount rates 8.0% 25.5% 14.5% NA Preferred equity $6.1 Yield Analysis Discount rates 24.0% 28.0% 26.0% Increase Detachable warrants $2.2 Market Approach GPCM EBITDA Multiples 10.0x% 11.5x 100.0% Decrease Preferred stock $31.4 Market Approach EBITDA Multiples NA NA NA Decrease * Weighted by account value December 31, 2021 (In millions, except for percentages and multiples) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $123.7 Option Budget Method Nonperformance risk 0.3% 1.1% 0.6% Decrease Option budget 1.1% 3.4% 2.4% Increase Surrender rate 0.5% 15% (base) 7.7% Decrease Preferred equity $4.9 Yield analysis Discount rates 17.5% 19.5% 18.5% Increase Detachable warrants $3.8 Market Approach - GPCM EBITDA Multiples 9.0x 10.0x 100.0% Increase * Weighted by account value |
Deposit-Type Contracts
Deposit-Type Contracts | 12 Months Ended |
Dec. 31, 2022 | |
Deposit-Type Contracts | |
Deposit-Type Contracts | Note 6. 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 years ended December 31, 2022 and 2021: (In thousands) December 31, 2022 December 31, 2021 Beginning balance $ 1,075,439 $ 597,868 US Alliance (2,176) 1,873 Unified Life Insurance Company (10) 468 Ironbound Reinsurance Company Limited 5,959 6,579 Ascendant Re (3,185) 2,880 Crestline SP1 (11,623) 4,834 American Republic Insurance Company (4,080) 1,567 SRC4 613 — Deposits received 745,083 471,646 Investment earnings (includes embedded derivative) (10,193) 7,012 Withdrawals (51,659) (18,446) Policy charges (820) (842) Ending balance $ 1,743,348 $ 1,075,439 In addition, membership in FHLB provides the Company with access to additional short-term liquidity based on the level of investment in FHLB stock and pledged collateral. At December 31, 2022, a funding agreement of $29.0 million was outstanding. There were no borrowings outstanding with the FHLB at December 31, 2021. |
Debt
Debt | 12 Months Ended |
Dec. 31, 2022 | |
Debt | |
Debt | Note 7. Debt On November 22, 2022, the Company entered into a three-year senior secured revolving credit agreement (“Credit Agreement”) with Royal Bank of Canada and other lenders with a capacity of $30 million (the “Revolving Credit Facility”). The maturity date of the Credit Agreement is November 22, 2025. The obligations under the Credit Agreement are secured by a first priority lien on a variety of the Company’s assets. The balance of the revolving credit was $25.0 million at December 31, 2022, with $5.0 million unutilized credit. Under the terms of the Credit Agreement, the Company has the option of selecting an applicable variable interest rate of (a) an adjusted term standard overnight financing rate (“SOFR”), plus an applicable margin or (b) a base rate, plus an applicable margin. Depending on our debt to capitalization ratio, the applicable margin can range from 2.50% to 3.25% for the base rate and from 3.50% to 4.25% for an adjusted term SOFR loan. The terms of the Credit Agreement require the Company to maintain, among other things, certain financial measures including: ● Consolidated debt to capitalization must not be greater than 35% on the last day of any fiscal quarter; ● Risk-based capital of American Life & Security Corp. must not be less than 300% on the last day of any fiscal quarter; ● Consolidated liquidity must not be less than $3.0 million at any time; and ● The strength rating of American Life & Security Corp. from A.M. Best must not fall below “B++”. |
Reinsurance
Reinsurance | 12 Months Ended |
Dec. 31, 2022 | |
Reinsurance | |
Reinsurance | Note 8. Reinsurance A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of December 31, 2022 and 2021 is as follows: (In thousands) December 31, 2022 December 31, 2021 Assets: Reinsurance recoverables $ 20,190 $ 38,579 Liabilities: Deposit-type contracts Direct $ 1,743,348 1,075,439 Reinsurance ceded (912,982) (647,632) Retained deposit-type contracts $ 830,366 $ 427,807 Year ended December 31, 2022 2021 (In thousands) Premiums Direct $ 238 $ 258 Reinsurance ceded (238) (258) Total Premiums $ — $ — Future policy and other policy benefits Direct $ 7 $ 159 Reinsurance ceded (7) (159) Total future policy and other policy benefits $ — $ — The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third-party reinsurers as of December 31, 2022: Recoverable/ Total Amount Recoverable Recoverable (Payable) on Benefit Ceded Recoverable/ (In thousands) AM Best on Paid on Unpaid Reserves/Deposit- Due (Payable) to/from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ (344) $ — $ (344) Optimum Re Insurance Company A — — 601 — 601 Sagicor Life Insurance Company A- — 154 10,744 (303) 10,595 Ascendant Re NR — — (2,130) — (2,130) Crestline SP1 NR — — (3,357) — (3,357) American Republic Insurance Company A — — 5,879 — 5,879 SRC4 NR — — (44,442) — (44,442) Unified Life Insurance Company NR — 41 986 (17) 1,010 US Alliance Life and Security Company NR — — 52,400 (22) 52,378 $ — $ 195 $ 20,337 $ (342) $ 20,190 The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third-party reinsurers as of December 31, 2021: Recoverable on Total Amount Recoverable Recoverable Benefit Ceded Recoverable (In thousands) AM Best on Paid on Unpaid Reserves/Deposit- Due from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ (3,561) $ — $ (3,561) Optimum Re Insurance Company A — — 561 — 561 Sagicor Life Insurance Company A- — 157 10,901 (303) 10,755 Ascendant Re NR — — 1,550 — 1,550 Crestline SP1 NR — — 18,288 — 18,288 American Republic Insurance Company A — — 4,885 — 4,885 Unified Life Insurance Company NR — 45 1,013 (21) 1,037 US Alliance Life and Security Company NR — — 5,090 (26) 5,064 $ — $ 202 $ 38,727 $ (350) $ 38,579 Our securities positions resulted in changes in the unrealized gains position as of December 31, 2022, compared to December 31, 2021, that is reported in accumulated other comprehensive (loss) income on the Consolidated Balance Sheets. As discussed in Note 1, American Life has treaties with several third-party reinsurers that have FW and Modco provisions. Under those provisions, the assets backing the treaties are maintained by American Life as collateral but the assets and total returns or losses on the asset portfolios belong to the third-party reinsurers. Under GAAP this arrangement is considered an embedded derivative as discussed in Note 4. Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained cumulative unrealized losses of approximately $10.5 million as of December 31, 2022, and cumulative unrealized gains of $0.2 million at December 31, 2021. The terms of the contracts with the third-party reinsurers provide that the changes in unrealized gains and losses on the portfolios accrue to the third-party reinsurers. To recognize changes in the third-party unrealized gain (loss), American Life records the year-to-date change in the Consolidated Statements of Comprehensive Loss and in amounts recoverable from third-party reinsurers on the Consolidated Balance Sheets. As of December 31, 2022, American Life recognized a current year gain in the embedded derivative of $10.6 million and a loss in the embedded derivative of $2.8 million for the comparable period in 2021. On June 26, 2021, the NDOI issued its non-disapproval of the Modified Coinsurance Agreement (“Modco AEG Agreement”) with American Republic Insurance Company (“AEG”), an Iowa domiciled reinsurance company. The agreement closed on June 30, 2021. Under the Modco AEG Agreement, American Life cedes to AEG, on a modified coinsurance basis, a 20% quota share of certain liabilities with respect to its MYGA-5 business and an initial 20% quota share of certain liabilities with respect to its FIA business. American Life has established a Modco Deposit Account to hold the assets for the Modco AEG Agreement. The initial settlement included net premium income of $37.5 million and net statutory reserves of $34.8 million for the ModCo Deposit Account. The amount paid to the Modco Deposit Account from AEG was $2.4 million. Effective February 28, 2023, AEG elected not to extend its commitment period for reinsuring liabilities under its Modco AEG Agreement. As a result, AEG’s current quota share with respect to MYGA and FIA policies is 0%. The AEG Coinsurance Agreement remains in place, and AEG remains responsible for previously ceded liabilities. On November 10, 2021, the NDOI issued its non-disapproval of the Funds Withheld and Modified Coinsurance Agreement with SRC3, whereby, SRC3 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA products and a quota share percentage of 45% of the liabilities of American Life arising from its FIA products. In the fourth quarter of 2022, the agreement with SRC3 was amended to provide a one time reinsurance funding for $10.0 million of the liabilities of American Life arising from its FIA products. American Life has established a FW and Modco Deposit Account to hold the assets for the FW and Modco Agreement. The initial settlement included net premium income of $37.5 million and net statutory reserves of $43.6 million. On September 21, 2022, the NDOI issued its non-disapproval of the conversion of American Life’s agreement with US Alliance to convert its block of business from a Funds Withheld agreement to a Funds Paid Coinsurance agreement. The conversion was effective as of October 1, 2022, and was triggered by US Alliance becoming a Qualified Institutional Buyer as specified in the original agreement. Upon conversion, American Life began transferring assets held on behalf of US Alliance to the reinsurer, with a corresponding entry made to Amounts Recoverable. The approximate value of assets transferred was $37.9 million. On September 30, 2022, American Life entered into a reinsurance agreement (the “Reinsurance Agreement”) with a new protected cell formed by Seneca Re (Seneca Incorporated Cell, LLC 2022-04 (“SRC4”)). SRC4 was capitalized by loans from Embrace Software, Inc (“Embrace”) and Tillman Networks LLC (“Tillman”). The Reinsurance Agreement was effective as of July 1, 2022, among American Life and Seneca Re. The Reinsurance Agreement supports American Life’s new business production by providing reinsurance capacity for American Life to write certain kinds of fixed indexed and multi-year guaranteed annuity products. Under the Reinsurance Agreement, SRC4 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA-5 products and a quota share percentage of 10% of the liabilities of American Life arising from its MYGA-3 products. American Life has established a Modco Deposit Account, a Funds Withheld custody account, and a Trust Account pursuant to the Reinsurance Agreement. The initial settlement included net premium of $21.4 million and net reserves of $21.5 million for the modified coinsurance account. Also on September 30, 2022, American Life entered into an Investment Management Agreement (“IMA”) with CoVenture Management, LLC (“CoVenture”) naming CoVenture as the manager of certain assets held by American Life on behalf of SRC4. The tables below shows the ceding commissions from the reinsurers excluding SRC1 and what was earned on a GAAP basis for the years ended December 31, 2022 and 2021: Year ended December 31, (In thousands) 2022 2021 Reinsurer Gross Ceding Commission Expense Allowance (1) Interest on Ceding Commission Earned Ceding Commission Gross Ceding Commission Expense Allowance Interest on Ceding Commission Earned Ceding Commission Unified Life Insurance Company $ — $ — $ — $ 25 $ — $ — $ — $ 35 Ironbound Reinsurance Company Limited — — 193 513 — (461) 211 684 Ascendant Re — — 93 332 498 904 93 367 US Alliance Life and Security Company — — 54 348 2 (75) 60 401 Crestline SP1 5,875 8,754 391 2,569 6,699 12,321 255 1,185 American Republic Insurance Company 3,851 6,189 136 863 3,971 7,039 26 350 SRC4 1,770 1,581 21 166 — — — — $ 11,496 $ 16,524 $ 888 $ 4,816 $ 11,170 $ 19,728 $ 645 $ 3,022 (1) Includes: acquisition and administrative expenses, commission expense allowance and product development fees. The table below shows the ceding commissions deferred on each reinsurance transaction on a GAAP basis: (In thousands) December 31, 2022 December 31, 2021 Reinsurer Deferred Gain on Reinsurance Transactions Deferred Gain on Reinsurance Transactions US Alliance Life and Security Company (1) $ 152 $ 162 Unified Life Insurance Company (1) 217 242 Ironbound Reinsurance Company Limited (2) 4,876 5,137 Ascendant Re 2,947 3,101 US Alliance Life and Security Company (2) 2,069 2,286 American Republic Insurance Company (2) 7,502 4,146 Crestline SP1 (2) 18,475 13,515 SRC4 (2) 1,825 — $ 38,063 $ 28,589 1) These reinsurance transactions on our legacy life insurance business received gross ceding commissions on the effective dates of the transaction. The difference between the statutory net adjusted reserves and the GAAP adjusted reserves plus the elimination of DAC and value of business acquired related to these businesses reduces the gross ceding commission with the remaining deferred and amortized over the lifetime of the blocks of business. 2) These reinsurance transactions include the ceding commissions and expense allowances which are accounted for as described in (1). The use of reinsurance does not relieve American Life of its primary liability to pay the full amount of the insurance benefit in the event of the failure of a reinsurer to honor its contractual obligation for all blocks of business except what is included in the Unified transaction. The reinsurance agreement with Unified discharges American Life’s responsibilities once all the policies have changed from indemnity to assumptive reinsurance. No reinsurer of business ceded by American Life has failed to pay policy claims (individually or in the aggregate) with respect to our ceded business. American Life monitors several factors that it considers relevant to satisfy itself as to the ongoing ability of a reinsurer to meet all obligations of the reinsurance agreements. These factors include the credit rating of the reinsurer, the financial strength of the reinsurer, significant changes or events of the reinsurer, and any other relevant factors. If American Life believes that any reinsurer would not be able to satisfy its obligations with American Life, separate contingency reserves may be established. As of December 31, 2022 and 2021, no contingency reserves were established. American Life expects to reinsure a significant portion of its new insurance policies with a variety of reinsurers in exchange for upfront ceding commissions, expense reimbursements and administrative fees. American Life may retain some business with the intent to reinsure some or all at a future date. Retained and Reinsured Balance Sheets The tables below shows the retained and reinsurance consolidated balance sheets: December 31, 2022 December 31, 2021 (In thousands) Retained Reinsured Consolidated Retained Reinsured Consolidated Assets Total investments $ 812,177 $ 802,780 $ 1,614,957 $ 414,418 $ 561,109 $ 975,527 Cash and cash equivalents 127,291 64,123 191,414 95,406 46,607 142,013 Accrued investment income 11,307 13,858 25,165 3,853 9,770 13,623 Deferred acquisition costs, net 43,433 — 43,433 24,530 — 24,530 Reinsurance recoverables (6,853) 27,405 20,552 — 38,579 38,579 Other assets 16,189 8,721 24,910 27,834 (2,189) 25,645 Total assets $ 1,003,544 $ 916,887 $ 1,920,431 $ 566,041 $ 653,876 $ 1,219,917 Liabilities and Stockholders’ Equity Liabilities: Policyholder liabilities $ 847,417 $ 912,981 $ 1,760,398 $ 427,807 $ 660,811 $ 1,088,618 Note payable 25,000 — 25,000 — — — Deferred gain on coinsurance transactions 38,063 — 38,063 28,589 — 28,589 Payable for securities purchased 8,872 — 8,872 5,546 — 5,546 Other liabilities 49,815 3,906 53,721 18,343 (6,935) 11,408 Total liabilities $ 969,167 $ 916,887 $ 1,886,054 $ 480,285 $ 653,876 $ 1,134,161 Stockholders’ Equity: Voting common stock 4 — 4 4 — 4 Additional paid-in capital 138,307 — 138,307 138,277 — 138,277 Accumulated deficit (63,019) — (63,019) (70,159) — (70,159) Accumulated other comprehensive income (loss) (51,386) — (51,386) 2,634 — 2,634 Total Midwest Holding Inc.'s stockholders' equity $ 23,906 $ — $ 23,906 $ 70,756 $ — $ 70,756 Noncontrolling interest 10,471 — 10,471 15,000 — 15,000 Total stockholders' equity 34,377 — 34,377 85,756 — 85,756 Total liabilities and stockholders' equity $ 1,003,544 $ 916,887 $ 1,920,431 $ 566,041 $ 653,876 $ 1,219,917 |
Income Tax Matters
Income Tax Matters | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Matters | |
Income Tax Matters | Note 9. Income Tax Matters Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows: (In thousands) December 31, 2022 December 31, 2021 Deferred tax assets: Loss carryforwards $ 2,672 $ 2,244 Capitalized costs 79 127 Stock option granted 1,066 1,060 Policy acquisition costs 6,489 3,640 General business credits 6 6 Derivative option allowance — 510 Sec 163(j) limitation 171 171 Benefit reserves 12,010 5,186 Property and equipment — 33 Impairments 403 — Unrealized losses on investments 13,624 1,534 Other 1,928 1,464 Total deferred tax assets 38,448 15,975 Less valuation allowance (35,305) (14,431) Total deferred tax assets, net of valuation allowance 3,143 1,544 Deferred tax liabilities: Unrealized losses on investments — 1,084 Intangible assets 147 147 Derivative option allowance 2,150 — Bond Discount 936 313 Property and equipment (90) — Total deferred tax liabilities 3,143 1,544 Net deferred tax assets $ — $ — At December 31, 2022 and 2021, the Company recorded a valuation allowance of $35.3 million and $14.4 million, 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 carry forwards are expected to be available to reduce taxable income. There was income tax expense of $7.6 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively . This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Year ended December 31, (In thousands) 2022 2021 Computed expected income tax benefit (expense) $ (1,762) $ 2,815 Reduction (increase) in income taxes resulting from: Interest maintenance reserve and reinsurance 212 (157) Nondeductible expenses (16) (9) Gain on sale of SRC1 — (368) Change in valuation allowance (6,061) (7,429) Amended Return - 2019/2020 — (339) Adjustment to payable — 110 Deferred tax adjustment 14 382 Prior year true-up 13 229 Subtotal of increases (5,838) (7,581) Tax benefit (expense) $ (7,600) $ (4,766) Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss (“NOL”) carryforwards following a change of control, which occurred on June 28, 2018. As of December 31, 2022, the deferred tax assets included the expected tax benefit attributable to federal NOLs of $8.6 million. The federal NOLs generated by Midwest Holding and American Life prior to June 28, 2018 which are subject to the Section 382 limitation can be carried forward. If not utilized, the NOLs of $1.0 million prior to 2017 will expire through the year of 2032. The NOLs generated by SRC1 prior to December 30, 2021 of $3.9 million are subject to Section 382 limitations due to the change in control. However, under the Tax Cuts and Jobs Act of 2017, they will not expire and can be carried forward indefinitely. The NOLs not subject to Section 382 which were generated from June 28, 2018 to December 31, 2022 do not expire and will carry forward indefinitely, however 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 $1.8 million on the deferred tax assets related to these federal NOL carryforwards. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Leases | Note 10. Leases Our operating lease activities consist of leases for office space and equipment and do not include variable lease payments. Supplemental balance sheet information for our leases for the years ended December 31, 2022 and 2021, is as follows: (In thousands) Classification December 31, 2022 December 31, 2021 Assets Operating Operating lease right-of-use assets $ 2,119 $ 2,360 Liabilities Operating lease Operating lease liabilities $ 2,135 $ 2,364 Our operating lease expense for the years ended December 31, 2022 and 2021, is as follows: Year ended December 31, (In thousands) Classification 2022 2021 Operating General and administrative expense $ 10 $ 8 Minimum contractual obligations for our leases as of December 31, 2022 are as follows: (In thousands) Operating Leases 2023 $ 342 2024 342 2025 342 2026 345 2027 353 2028 and after 1,404 Total remaining lease payments $ 3,128 The cash flows related to operating leases was approximately $0.1 million and less than $0.1 million as of December 31, 2022 and 2021, respectively. The weighted average remaining lease terms of our operating leases were approximately eight and one half years |
Equity
Equity | 12 Months Ended |
Dec. 31, 2022 | |
Equity | |
Equity | Note 11. Equity Preferred stock As of December 31, 2022 and 2021, the Company had two million shares of preferred stock authorized with none issued or outstanding. Common Stock Our voting common stock is traded on The Nasdaq Capital Market under the symbol “MDWT.” Midwest has authorized 20 million shares of voting common stock and two million shares of non-voting common stock. As of December 31, 2022 and 2021, Midwest had 3,727,976 and 3,737,564 shares of voting common stock issued and outstanding, Midwest holds approximately 4,500 shares of voting common stock in its treasury due to a reverse stock split. Additional paid-in capital Additional paid-in capital is primarily comprised of the cumulative cash that exceeds the par value received by the Company in conjunction with past issuances of its shares. It also is increased by the amortization expense of the consideration calculated at inception of the stock option grants as discussed in Note 12 – Long-Term Incentive Plans below. Accumulated Other Comprehensive Income (AOCI) AOCI represents the cumulative other comprehensive income (loss) items that are reported separate from net loss and detailed on the Consolidated Statements of Comprehensive Loss. AOCI includes the unrealized gains and losses on investments and DAC, net of offsets and taxes as follows: (In thousands) Unrealized investment gains (losses) on fixed maturities, net of offsets Balance at December 31, 2020 $ 6,431 Other comprehensive (loss) before reclassifications, net of tax (1,422) Less: Reclassification adjustments for losses realized in net income (2,375) Balance, December 31, 2021 2,634 Other comprehensive (loss) before reclassifications, net of tax (54,975) Less: Reclassification adjustments for losses realized in net income, net of tax 955 Balance, December 31, 2022 $ (51,386) |
Long-Term Incentive Plans
Long-Term Incentive Plans | 12 Months Ended |
Dec. 31, 2022 | |
Long-Term Incentive Plans | |
Long-Term Incentive Plans | Note 12. Long-Term Incentive Plans In 2019, the Board approved the Midwest Holding Inc. (“MHI”) Long-Term Incentive Plan (the “2019 Plan”) that reserves up to 102,000 shares of MHI voting common stock for award issuances. It provides for the grant of options, restricted stock awards, restricted stock units, stock appreciation rights, performance units, performance bonuses, stock awards, and other incentive awards to eligible employees, consultants and eligible directors, subject to the conditions set forth in the 2019 Plan. In 2019, the shareholders of MHI approved the 2019 Plan. All awards are required to be established, approved, and/or granted by the Compensation Committee of the Board. In 2020, the Board adopted a new equity incentive plan titled the 2020 Long-Term Incentive Plan (the “2020 Plan”) that reserves up to 350,000 shares of MHI voting common stock for award issuances. The terms of the 2020 Plan are essentially the same as the 2019 Plan. In 2021, the shareholders of MHI approved the 2020 Plan. During 2022, the Board approved the addition of 150,000 shares of voting common stock to be added to the 2020 Plan for future awards and these shares were approved by the shareholders of MHI. Stock Options In accordance with the stockholder-approved equity incentive plans above, the Company grants stock options to employees and directors for the purchase of common stock at exercise prices established at the date of the grants. Fair value and compensation at grant date are calculated using the Black Scholes Model. Compensation expense for option shares is expensed on a straight-line basis over the requisite service periods, accounting for forfeitures as they occur. Stock options become exercisable under various vesting schedules (typically two Changes in outstanding options were as follows: Weighted Average Exercise Price Per Share Range of Option Exercise Prices per Share Total Outstanding Outstanding, Non-vested Vested and Exercisable December 31, 2021 $ 40.74 $16.37 - $55.02 399,053 298,180 100,873 Granted 14.92 $11.20 - $21.16 117,367 117,367 - Vested 36.53 $16.37 - $41.25 - (45,777) 45,777 Exercised - - - - - Forfeited 37.44 $15.57 - $55.02 (110,653) (98,253) (12,400) Expired 40.38 $25.00 - $41.25 (86,646) - (86,646) December 31, 2022 $ 36.53 $11.20 - $55.02 319,121 271,517 47,604 Option information segregated by ranges of exercise prices were as follows: December 31, 2022 Total Outstanding Options Vested and Exercisable Range of Option Exercise Prices per Share Options Weighted Average Exercise Price per Share Weighted Average Remaining Term Options Weighted Average Exercise Price per Share Weighted Average Remaining Term > $50.00 52,603 $ 55.02 8.2 - $ - - $40.00 - $49.99 127,751 41.25 8.2 36,042 41.25 7.6 $30.00 - $39.99 - - - - - - $20.00 - $29.99 29,767 23.27 8.1 7,277 25.00 7.6 $10.00 - $19.99 109,000 13.28 9.5 4,285 16.37 9.0 < $10.00 - $ - - - $ - - The weighted average exercise prices of vested and exercisable options as of December 31, 2022 were $36.53. As of December 31, 2022, based on a closing stock price of $12.74 per share, the aggregate intrinsic (in-the-money) values of vested options and all options outstanding were $0.0 million and $0.3 million, respectively. Restricted Stock and Restricted Stock Units In 2020, the Company awarded 18,597 shares of restricted stock, and in 2021 it awarded 5,089 restricted stock units (“RSUs”). The restricted stock award shares had a grant date fair value of $41.25 per share and were subject to time-based vesting requirements of one-fourth The 5,089 RSUs were granted to our non-employee directors and had a grant date fair value of $24.34 per share and vested on June 14, 2022, the date of the Company’s 2022 annual meeting of stockholders. The compensation expense relating to these awards was calculated using the grant date fair value and is amortizing on a straight-line basis over the requisite service periods. On June 14, 2022, the Company granted 18,718 RSUs to our non-employee directors with a grant date fair value of $11.22 per share. The RSUs will vest at the earlier of the date of our 2023 annual meeting of stockholders or June 14, 2023. The compensation expense relating to these awards was calculated using the grant date fair value and is amortized on a straight-line basis over the requisite service periods. Total Outstanding Units Vested Units Units Weighted Average Grand Date Fair Value Units Weighted Average Grant Date Fair Value December 31, 2021 19,037 $ 47.62 - $ - Granted 18,718 11.22 - - Vested (1,163) 50.00 1,163 50.00 Forfeited (10,810) 40.41 - - Released (9,738) 45.35 - - December 31, 2022 17,207 $ 13.84 1,163 $ 50.00 The table below identifies the assumptions used in the Black Scholes Model to calculate the compensation expense: December 31, December 31, 2022 2021 Volatility 4.16% - 4.26% 4.4% - 66.3% Weighted-average volatility 3.7% 38.9% Expected term (in years) 2 - 7 2 - 7 Risk-free rate 0.02% - 2.15% .8% - 1.5% For the years ended December 31, 2022 and 2021, we amortized the compensation expense related to the 2019 and 2020 Plans, from the stock grants above, over vesting tranches which resulted in expense and an increase in additional paid in capital of less than $0.1 million and $5.0 million respectively. The tables below shows the remaining non-vested shares under the 2019 and 2020 Plans as of December 31, 2022 and 2021, respectively: December 31, 2022 Awards Outstanding Weighted Average Grant-Date Fair Value Weighted Average Exercise Price Nonvested stock options and restricted stock unit awards at December 31, 2021 317,217 $ 25.80 $ 40.13 Options granted 117,367 9.57 14.92 Restricted stock units granted 18,718 — — Vested (56,678) 21.12 36.53 Forfeited (109,063) 23.82 38.87 Ending Balance at December 31, 2022 287,561 $ 16.96 $ 32.29 December 31, 2021 Stock Options Outstanding Weighted Average Grant-Date Fair Value Weighted Average Exercise Price Nonvested stock options and restricted stock unit awards at December 31, 2020 100,972 $ 22.91 $ 34.70 Options granted 333,880 19.25 42.84 Restricted stock units granted 5,089 — — Vested (85,957) 17.32 30.20 Forfeited (36,767) 23.91 40.42 Ending Balance at December 31, 2021 317,217 $ 25.80 $ 40.13 |
Statutory Net Income and Surplu
Statutory Net Income and Surplus | 12 Months Ended |
Dec. 31, 2022 | |
Statutory Net Income and Surplus | |
Statutory Net Income and Surplus | Note 13. Statutory Net Income and Surplus American Life and Seneca Re are required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Nebraska Department of Insurance and the Vermont 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. The following table represents the net gains or (losses) as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3: Year ended December 31, (In thousands) 2022 2021 American Life $ 2,330 $ (6,355) SRC1 $ 1,199 $ (1,004) SRC3 $ 1,291 $ (6,851) The following table represents the Capital and Surplus as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3: (In thousands) December 31, 2022 December 31, 2021 American Life $ 69,936 $ 74,011 SRC1 $ 9,615 $ 8,415 SRC3 $ 6,088 $ 3,150 The following table represents the premiums sales as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3: Year ended December 31, (In thousands) 2022 2021 American Life $ 369,241 $ 107,767 SRC1 $ - $ 37,764 SRC3 $ 35,586 $ 88,704 State insurance laws require American Life to maintain certain minimum capital and surplus amounts on a statutory basis. American Life is subject to regulations that restrict the payment of dividends from statutory surplus and may require prior approval from its domiciliary insurance regulatory authorities. American Life is also subject to risk-based capital (“RBC”) requirements that may further affect its ability to pay dividends. American Life’s statutory capital and surplus as of December 31, 2022 and 2021, exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements as of those dates. As of December 31, 2020, American Life had an invested asset that was impaired as a result of the fair market of the underlying collateral being valued less that the book value. This was a non-admitted asset for statutory accounting purposes. This asset was held in our modified coinsurance account for Ironbound Reinsurance Company Limited so it was passed through to the third-party reinsurer through as a reduction of the investment income earned by the third-party reinsurer. As of March 31, 2021, this invested asset was sold for a loss of $2.4 million that was passed through to the third-party reinsurer as a reduction of its investment income earned. As of December 31, 2022 and 2021, American Life did not hold any participating policyholder contracts where dividends were required to be paid. |
Third-party Administration
Third-party Administration | 12 Months Ended |
Dec. 31, 2022 | |
Third-party Administration | |
Third-party Administration | Note 14. 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 customer, generate fee income for the Company. Services provided vary based on each customer’s needs and can include some or all aspects of back-office accounting and policy administration. TPA fee income earned for TPA services for the year ended December 31, 2022 and 2021 were $2.4 million and $2.3 million, respectively. Furthermore, as of December 31, 2022, 1505 Capital had $501.9 million of third-party assets under management. |
Related Party
Related Party | 12 Months Ended |
Dec. 31, 2022 | |
Third-party Administration | |
Related Party | Note 15. Related Party Crestline On April 24, 2020, we entered into a Securities Purchase Agreement with Crestline Assurance Holdings LLC (“Crestline”) an institutional alternative investment management firm under which we issued 444,444 shares of our voting common stock to Crestline. We contributed $5.0 million of the net proceeds to American Life and used $3.3 million of the proceeds to capitalize Seneca Re and its first protected cell. We also entered into a Stockholders Agreement along with Xenith and Vespoint that grants Crestline certain rights. Also, Douglas K. Bratton, a principal of Crestline, was appointed as a director of both our Board and the American Life Board of Directors. In addition, on April 24, 2020, American Life entered into a three-year master letter agreement and related reinsurance, trust and asset management agreement with Seneca Re and a Crestline affiliate regarding the flow of annuity reinsurance and related asset management, whereby Crestline agreed to provide reinsurance funding for a quota share percentage of 25% of the liabilities of American Life arising from its MYGA and quota share percentage of 40% the liabilities of American Life arising from its FIA products. Through December 31, 2022, American Life had ceded $5.9 million face amount of annuities to Crestline SP1. American Life received total ceding commissions of $2.6 million and expense reimbursements of $8.8 million in connection with these transactions for the year ended December 31, 2022. The Reinsurance Agreement also contains the following agreements: ● American Life and Crestline SP1 each entered into investment management agreements with Crestline, pursuant to which Crestline manages the assets that support the reinsured business; and ● American Life and Crestline SP1 entered into a trust agreement whereby Crestline maintains for American Life’s benefit a trust account that supports the reinsured business. On September 16, 2022, Midwest Holding and Crestline executed a Letter of Understanding relating to the Stockholders Agreement. The Company and Crestline agreed that Crestline’s representative on would resign from the Boards of Directors of the Company and American Life. Notwithstanding the foregoing, the parties agreed that the resignation and Crestline’s decision to no longer appoint a director does not constitute a permanent waiver of Crestline’s rights under the Stockholders Agreement to appoint a Crestline Designated Director. The Company and Crestline agreed that the foregoing described agreement will remain in place until the earlier to occur of the date (i) the parties reach written agreement otherwise, (ii) that Crestline is no longer an affiliate of a life insurance entity it recently acquired and (iii) on which Crestline no longer has the right to elect or appoint a Designated Director and Observer to the Board. Currently, Crestline has approximately $423.6 million of the Company’s assets under management and is a subadvisor on approximately $134.3 million of additional investments. Chelsea On June 29, 2020, Midwest’s subsidiary, American Life, purchased a 17% interest in Financial Guaranty UK Limited through an economic interest in Chelsea Holdings Midwest LLC. American Life has a note receivable from Chelsea Holdings Midwest LLC with an interest rate of 5% per annum that was rated BBB+ by a nationally recognized statistical rating organization (“NRSRO”) and Class B preferred shares in Chelsea Holdings Midwest LLC. This note is being carried at cost plus PIK of $6.3 million, and the preferred shares are carried at a fair market value of $2.3 million, based upon valuations received from an independent their-party, as of December 31, 2022. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies. | |
Commitments and Contingencies | Note 16. Commitments and Contingencies Contingent Commitments: (In thousands) December 31, 2022 December 31, 2021 Due in one year or less $ 52,951 $ 19,245 Due in two years 43,604 26,753 Due in three years 7,731 4,705 Due in four years 13,277 8,741 Due in five years and after 61,432 86,497 $ 178,995 $ 145,941 Legal Proceedings: Regulatory Matters: |
Schedule I Summary of Investmen
Schedule I Summary of Investments - Other Than Investments in Related Parties | 12 Months Ended |
Dec. 31, 2022 | |
Condensed Financial Information Disclosure [Abstract] | |
Summary of Investments - Other Than Investments in Related Parties | Midwest Holding Inc. and Subsidiaries Summary of Investments — Other Than Investments in Related Parties December 31, 2022 Amount Recognized in Amortized Consolidated (In thousands) Cost Fair Value Balance Sheets Type of Investment Fixed maturities: U.S. government obligations $ 1,343 $ 1,262 $ 1,262 Foreign governments — — — Mortgage-backed securities 316,105 294,066 294,066 Asset-backed securities 34,728 30,756 30,756 Collateralized loan obligations 308,871 287,673 287,673 States and political subdivisions-general obligations 104 101 101 States and political subdivisions-special revenue 228 205 205 Corporate 46,700 41,600 41,600 Term loans 561,656 558,972 558,972 Trust preferred — — — Redeemable preferred stock — — — Total fixed maturity securities $ 1,269,735 $ 1,214,635 $ 1,214,635 Mortgage loans on real estate, held for investment 227,047 227,047 227,047 Derivatives 30,239 15,934 15,934 Equity securities 5,592 5,111 5,111 Other invested assets 108,979 112,431 112,431 Preferred stock 35,644 31,415 31,415 Deposits and notes payable 8,359 8,359 8,359 Policy loans 25 25 25 Total Investments $ 1,685,620 1,614,957 $ 1,614,957 |
Schedule II Condensed Financial
Schedule II Condensed Financial Information of Registrant Balance Sheets | 12 Months Ended |
Dec. 31, 2022 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Financial Information of Registrant Balance Sheets | Midwest Holding Inc. (Parent Company) Condensed Financial Information of Parent Balance Sheets As of December 31, (In thousands) 2022 2021 Assets: Investment in subsidiaries (1) $ 56,054 $ 79,532 Preferred stock 1 — Cash and cash equivalents 115 7,540 Notes receivable 34 31 Property and equipment, net 1,878 334 Right of use assets 2,118 2,360 Other assets 5,750 3,257 Total assets $ 65,950 $ 93,054 Liabilities and Stockholders’ Equity Liabilities: Notes payable 25,000 500 Lease liability 2,135 2,364 Accounts payable and accrued expenses 4,438 4,434 Total liabilities $ 31,573 $ 7,298 Stockholders’ Equity: Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and outstanding as of December 31, 2022 or December 31, 2021 — — Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,727,976 shares issued and outstanding December 31, 2022 4 4 Additional paid-in capital 138,482 138,452 Treasury stock (175) (175) Accumulated deficit (63,019) (70,159) Accumulated other comprehensive (loss) income (51,386) 2,634 Total Midwest Holding Inc.'s stockholders' equity $ 23,906 $ 70,756 Noncontrolling interest 10,471 15,000 Total stockholders' equity $ 34,377 $ 85,756 Total liabilities and stockholders' equity $ 65,950 $ 93,054 (1) eliminated in consolidation. |
Schedule II Condensed Financi_2
Schedule II Condensed Financial Information of Registrant Statements of Comprehensive Loss | 12 Months Ended |
Dec. 31, 2022 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Financial Information of Registrant Statements of Comprehensive Loss | Midwest Holding Inc. (Parent Company) Condensed Financial Information of Parent Statements of Comprehensive Loss As of December 31, (In thousands) 2022 2021 Income: Investment loss, net of expenses $ — $ — Miscellaneous income 61 23 61 23 Expenses: General 1,494 7,193 Loss from continuing operations before taxes (1,433) (7,170) Income tax expense (See Note 9) — (4,766) Loss before equity in loss of consolidated subsidiaries (1,433) (11,936) Equity in loss of consolidated subsidiaries 2,224 (4,701) Net gain (loss) 791 (16,637) Less: gain (loss) attributable to noncontrolling interest 6,349 — Net loss 7,140 (16,637) Comprehensive income: Unrealized gains on investments arising during period, net of tax (54,975) (1,422) Unrealized gains on foreign currency, net of tax — — Less: reclassification adjustment for net realized gains on investments 955 (2,375) Other comprehensive income, net of tax (54,020) (3,797) Comprehensive loss $ (46,880) $ (20,434) |
Schedule II Condensed Financi_3
Schedule II Condensed Financial Information of Registrant Statements of Cash Flows | 12 Months Ended |
Dec. 31, 2022 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Financial Information of Registrant Statements of Cash Flows | Midwest Holding Inc. (Parent Company) Condensed Financial Information of Parent Statements of Cash Flows Year Ended December 31, (In thousands) 2022 2021 Cash Flows from Operating Activities: Net income (loss) $ 7,140 $ (16,637) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Equity in net loss of consolidated subsidiaries 2,224 9,506 Depreciation (297) (295) Stock options 30 4,982 Net transfers to noncontrolling interest — — Other assets and liabilities (9,246) 1,525 Net cash used by operating activities (149) (919) Cash Flows from Investing Activities: Purchase of preferred stock (1) — Net (purchases) disposals of property and equipment (1,246) — Net cash used by investing activities (1,247) — Cash Flows from Financing Activities: Capital contributions to consolidated subsidiaries (26,000) (14,102) Notes payable 24,500 — Net transfers to noncontrolling interest (4,529) 15,000 Net cash (used in) provided by financing activities (6,029) 777 Net decrease in cash and cash equivalents (7,425) (142) Cash and cash equivalents: Beginning 7,540 7,682 Ending $ 115 $ 7,540 Supplementary information Cash paid for taxes $ — $ — |
Schedule III Supplementary Insu
Schedule III Supplementary Insurance Information | 12 Months Ended |
Dec. 31, 2022 | |
SEC Schedule, 12-16, Insurance Companies, Supplementary Insurance Information [Abstract] | |
Supplementary Insurance Information | Midwest Holding Inc. and Subsidiaries Supplementary Insurance Information (In thousands) As of December 31, 2022 For the Year Ended December 31, 2022 Future Policy Death and Benefits, Deferred Other Benefits Claims and Gain on Net and Increase Other Deposit-type Advance Coinsurance Premium Investment in Benefit Operating Contracts Premiums Transaction Revenue Income Reserves Expenses Life Insurance $ 1,760,398 $ — $ 38,063 $ — $ 35,115 $ (2,199) $ 23,857 (In thousands) As of December 31, 2021 For the Year Ended December 31, 2021 Future Policy Death and Benefits, Deferred Other Benefits Claims and Gain on Net and Increase Other Deposit-type Advance Coinsurance Premium Investment in Benefit Operating Contracts Premiums Transaction Revenue Income Reserves Expenses Life Insurance $ 1,088,617 $ 1 $ 28,589 $ — $ 15,737 $ 9,904 $ 32,030 |
Schedule IV Reinsurance Informa
Schedule IV Reinsurance Information | 12 Months Ended |
Dec. 31, 2022 | |
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Abstract] | |
Reinsurance Information | Midwest Holding Inc. and Subsidiaries Reinsurance Information Ceded to Other (In thousands) Gross Amount Companies Net Amount Year ended December 31, 2022 Life insurance in force $ 44,236 $ 42,398 $ 1,838 Life insurance premiums $ 1,056 $ 1,056 $ — Year ended December 31, 2021 Life insurance in force $ 45,930 $ 44,090 $ 1,840 Life insurance premiums $ 1,055 1,055 $ — |
Valuation and Qualifying Accoun
Valuation and Qualifying Accounts | 12 Months Ended |
Dec. 31, 2022 | |
SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | |
Valuation and Qualifying Accounts | Midwest Holding Inc. and Subsidiaries Valuation and Qualifying Accounts Year Ended December 31, (In thousands) 2022 2021 Accumulated Depreciation: Beginning of the year 1,072 1,023 Depreciation expense 327 49 Disposals (17) — End of the year $ 1,382 $ 1,072 |
Nature of Operations and Summ_2
Nature of Operations and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Nature of Operations and Summary of Significant Accounting Policies. | |
Nature of Operations | Nature of Operations Midwest Holding Inc. (“Midwest,” “the Company,” “we,” “our,” or “us”) was incorporated in Nebraska on October 31, 2003 for the primary purpose of operating a financial services company. The Company redomesticated from the State of Nebraska to the State of Delaware on August 27, 2020. The Company is in the life and annuity insurance business and operates through its wholly owned subsidiaries, American Life & Security Corp. (“American Life”), and 1505 Capital LLC (“1505 Capital”) as well as through its sponsored captive reinsurance company, Seneca Reinsurance Company, LLC (“Seneca Re”). American Life is a Nebraska-domiciled life insurance company, that was licensed to sell, underwrite, and market life insurance and annuity products in 23 states and the District of Columbia as of December 31, 2022. American Life received authorization to do business in Georgia as of February 24, 2023, bringing our operating jurisdictions to 24 states and the District of Columbia. Effective March 12, 2020, Seneca Re, a Vermont limited liability company, was formed by Midwest to operate as a sponsored captive insurance company for the purpose of insuring and reinsuring various types of risks of its participants through one or more protected cells and to conduct any other business or activity that is permitted for sponsored captive insurance companies under Vermont insurance regulations. On March 30, 2020, Seneca Re received its Certification of Authority to transact the business of a captive insurance company. On May 12, 2020, Midwest contributed $0.3 million to Seneca Re for a 100% ownership interest. On April 15, 2020, Midwest entered into an operating agreement with Seneca Re and as of December 31, 2022, Seneca Re has two incorporated cells, Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Re Incorporated Cell 2021-03 (“SRC3”), which are consolidated in our financial statements. Midwest initially owned a 100% interest in SRC1 by contributing a total of $21.4 million. On December 30, 2021, Midwest closed the sale of approximately 70% of SRC1 to a subsidiary of ORIX Corporation USA (“ORIX USA”) for $15.0 million. Under the terms of the agreement, Midwest now holds a 30% ownership interest in SRC1. ORIX Advisers, LLC, another subsidiary of ORIX USA, is the manager of the assets underlying SRC1’s reinsurance obligations going forward, replacing Midwest’s asset management arm, 1505 Capital. On July 27, 2020, American Life entered into a reinsurance agreement (the “Reinsurance Agreement”) with a new protected cell formed by Seneca Re (Seneca Incorporated Cell, LLC 2020-02 (“SRC2”)). SRC2 was capitalized by Crestline Management, L.P. (“Crestline”), a significant shareholder of Midwest via a Crestline subsidiary, Crestline Re SPC1. The Reinsurance Agreement, which was effective as of April 24, 2020, was entered into pursuant to a Master Letter Agreement (the “Master Agreement”) dated and effective as of April 24, 2020, among American Life, Seneca Re and Crestline. The Reinsurance Agreement supports American Life’s new business production by providing reinsurance capacity for American Life to write certain kinds of fixed and multi-year guaranteed annuity products. Concurrently with the Reinsurance Agreement: ● American Life and SRC2 each entered into investment management agreements with Crestline, pursuant to which Crestline manages the assets that support the reinsured business; and ● American Life and SRC2 entered into a trust agreement whereby SRC2 maintains for American Life’s benefit a trust account that supports the reinsured business. Under the Master Agreement, Crestline agreed to provide reinsurance funding for a quota share percentage of 25% of the liabilities of American Life arising from its multi-year guaranteed annuities (“MYGA”) and a quota share percentage of 40% of the liabilities of American Life arising from its fixed indexed annuity (“FIA”) products. The Master Agreement expires on April 24, 2023. In addition, pursuant to the Master Agreement, the parties thereto have agreed to enter into one or more separate agreements whereby, among other things and subject to certain conditions, American Life will agree to reinsure additional new business production to one or more reinsurers formed and/or capitalized by Crestline, Midwest or an appropriate affiliate will be compensated for providing administrative services to certain advisory clients of Crestline, and American Life will consider investing in certain assets originated or sourced by Crestline. On June 26, 2021, the Nebraska Department of Insurance (‘NDOI”) issued its non-disapproval of the Modified Coinsurance Agreement (“Modco AEG Agreement”) of American Life with American Republic Insurance Company (“AEG”), an Iowa domiciled reinsurance company. The agreement closed on June 30, 2021. Under the Modco AEG Agreement, American Life cedes to AEG, on a modified coinsurance basis, 20% quota share of certain liabilities with respect to its MYGA-5 business and an initial 20% quota share of certain liabilities with respect to its FIA products. American Life has established a Modco Deposit Account to hold the assets for the Modco AEG Agreement. The initial settlement included net premium of $37.5 million and net reserves of $34.8 million for the modified coinsurance account. The amount paid to the Modified Deposit Account from AEG was $2.4 million. Effective February 28, 2023, AEG elected not to extend its commitment period for reinsuring liabilities under its Modco AEG Agreement. As a result, AEG’s current quota share with respect to MYGA and FIA policies is 0%. The AEG Coinsurance Agreement remains in place, and AEG remains responsible for previously ceded liabilities. On November 10, 2021, Midwest purchased 100% ownership of an intermediary holding company for $5.7 million, which company thereupon contributed capital of $5.5 million to purchase 100% of SRC3 Class A and B capital stock. Also, on November 10, 2021, American Life and SRC3 entered into a Funds Withheld and Modified Coinsurance Agreement, whereby, SRC3 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA products and quota share percentage of 45% of the liabilities of American Life arising from its FIA products. In the fourth quarter of 2022, the agreement with SRC3 was amended to provide a one time reinsurance funding for a quota share of $10.0 million of the liabilities of American Life arising from its FIA products. On September 30, 2022, American Life entered into a reinsurance agreement (the “Reinsurance Agreement”) with a new protected cell formed by Seneca Re (Seneca Incorporated Cell, LLC 2022-04 (“SRC4”)). SRC4 was capitalized by loans from Embrace Software, Inc (“Embrace”) and Tillman Networks LLC (“Tillman”). The Reinsurance Agreement was effective as of July 1, 2022, among American Life and Seneca Re. The Reinsurance Agreement supports American Life’s new business production by providing reinsurance capacity for American Life to write certain kinds of fixed indexed and multi-year guaranteed annuity products. Under the Reinsurance Agreement, SRC4 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA-5 products and a quota share percentage of 10% of the liabilities of American Life arising from its MYGA-3 products. American Life has established a Modco Deposit Account, a Funds Withheld custody account, and a Trust Account pursuant to the Reinsurance Agreement. The initial settlement included net premium of $21.4 million and net reserves of $21.5 million for the modified coinsurance account. Also on September 30, 2022, American Life entered into an Investment Management Agreement (“IMA”) with CoVenture Management, LLC (“CoVenture”) naming CoVenture as the manager of certain assets held by American Life on behalf of SRC4. Management evaluates the Company as one reporting segment in the life insurance industry. The Company is primarily engaged in the underwriting and marketing of annuity products through American Life, and then reinsuring such products with third-party reinsurers, and since May 13, 2020, with Seneca Re protected cells. American Life’s legacy product offerings consisted of a multi-benefit life insurance policy that combined cash value life insurance with a tax deferred annuity and a single premium term life product. American Life presently offers six annuity products: two MYGAs, two FIAs, and two bonus plans associated with the FIA product. It is not presently offering any traditional life insurance products. |
Basis of Presentation | Basis of Presentation These consolidated financial statements for the year ended December 31, 2022 and 2021 have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The following is a summary of our significant accounting policies and estimates. These accounting policies inherently require significant judgment and assumptions, and actual operating results could differ significantly from management’s estimates determined using these policies. We believe the following accounting policies, judgments and estimates are the most critical to the understanding of our results of operations and financial position. All intercompany accounts and transactions have been eliminated in consolidation and certain immaterial reclassifications have been made to the prior period results to conform to the current period’s presentation with no impact on results of operations or total stockholders’ equity. |
Fixed Maturities | Fixed Maturities All fixed maturities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Premiums and discounts on fixed maturity debt instruments are amortized using the scientific-yield method over the term of the instruments. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in accumulated other comprehensive (loss) income. Declines in the fair value of available-for-sale securities below their amortized cost are evaluated to assess whether any other-than-temporary impairment loss should be recorded. In determining if these losses are expected to be other-than-temporary, the Company considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, the financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost. Investment income consists of interest, dividends, gains and losses from investments, and real estate income, which are recognized on an accrual basis along with the amortization of premiums and discounts. Certain available-for-sale investments are maintained as collateral under Funds Withheld (“FW”) and Modified Coinsurance (“Modco”) agreements but the assets and total returns or losses on the asset portfolios belong to the third-party reinsurers. American Life has treaties with several third-party reinsurers that have FW and Modco provisions. In a Modco agreement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a FW agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurers to reduce the potential credit risk. The unrealized gains/losses on those investments are passed through to the third-party reinsurers as either a realized gain or loss on the Consolidated Statements of Comprehensive Loss. |
Mortgage Loans on Real Estate | Mortgage Loans on Real Estate Mortgage loans on real estate, held for investment are carried at unpaid principal balances. Interest income 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 for impairments 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 and disposition of collateral. These evaluations are revised as conditions change and new information becomes available. As of December 31, 2022, the Company held one asset valued at $7.7 million with a total impairment of $1.4 million. No such impairments were recognized as of December 31, 2021. |
Derivative Instruments | Derivative Instruments Derivatives are used to hedge the risks experienced in our ongoing operations, such as equity, interest rate and cash flow risks, or for other risk management purposes, which primarily involve managing liability risks associated with our indexed annuity products and reinsurance agreements. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or other underlying notional amounts. Derivative assets and liabilities are carried at fair value on the consolidated balance sheets. To qualify for hedge accounting, at the inception of the hedging relationship, the Company must formally document our designation of the hedge as a cash flow or fair value hedge and our risk management objective and strategy for undertaking the hedging transaction. In this documentation, we would identify how the hedging instrument is expected to hedge the designated risks related to the hedged item, the method that would be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method which would be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness would be formally assessed at inception and periodically throughout the life of the designated hedging relationship. During the last quarter of 2020, the Company began investing in futures to hedge the fluctuations in various aspects of our business. The formal documentation and hedge effectiveness was not completed at the date we entered into those futures contracts; therefore, they do not qualify for hedge accounting. The futures change in fair market values were recorded on our Consolidated Statements of Comprehensive Loss as realized gains or (losses). Additionally, reinsurance agreements written on a FW or Modco basis contain embedded derivatives on our annuity products. Gains or (losses) associated with the performance of assets maintained in the modified coinsurance deposit and funds withheld accounts are reflected as realized gains or (losses) in the Consolidated Statements of Comprehensive Loss. |
Equity Securities | Equity Securities Equity securities at December 31, 2022, consisted of exchange traded funds (“ETFs”). The ETFs are carried at fair value with the change in fair value recorded through realized gains and losses in the Consolidated Statements of Comprehensive Loss. As of December 31, 2022, we held $5.1 million of ETFs and $21.9 million of ETFs as of December 31, 2021. |
Preferred Stock | Preferred Stock The company held a perpetual preferred stock investment of $10.0 million as of December 31, 2022. This investment is carried at fair market value. The change in fair market value is recorded in net investment income on the Statement of Comprehensive Loss. In 2020 American Life entered into a series of transactions with an unaffiliated entity, Ascona Group Holdings Ltd (“AGH”). Through these transactions American Life acquired preferred equity in AGH in British Pound Sterling (“GBP”) 3.6 million along with warrants bearing no initial assigned value. American Life subsequently created a special purpose vehicle, Ascona Asset Holding LLC (“AAH”), to hold the Preferred Equity and Warrants, and later created Ascona Collinwood HoldCo LLC (“ACH”) to be the sole member of AAH. American Life and Crestline Re SP1 own 74% and 26%, respectively, of ACH. American Life is carrying the preferred equity and warrants at a market value in USD of $2.2 million as of December 31, 2022 and $3.9 million of December 31, 2021. The change in market value for the preferred stock and warrants of $9.0 million was recorded in net investment income on the Consolidated Statements of Comprehensive Loss. Of the $9.0 million of investment income, $2.4 million was attributed to the noncontrolling interest held by Crestline Re SP1. |
Other Invested Assets | Other Invested Assets Other invested assets consists of approximately $112.4 million of various investments. Of this total, approximately $98.4 million are primarily collateral loans, and $13.0 million of private credit and equipment leases. Also, we had an initial investment of $19.0 million investment in a private fund between American Life and an unaffiliated entity, PF Collinwood Holdings, LLC (“PFC”), with American Life owning 100% of the entity effective January 2021. The fair value of the PFC investment as of December 31, 2022, was $13.7 million and as of December 31, 2021, $14.5 million, respectively, with the change in fair market value recorded in unrealized gains and losses in equity on the balance sheet. On February 2, 2022, we established a special purpose vehicle, Python Asset Holding LLC, with American Life owning 100% of the entity with an initial investment of $7.4 million. As of September 30, 2022, our investment in Python was carried at the net asset value (“NAV”) plus approximately $0.4 million of investment income. |
Deposits and notes receivable | Deposits and notes receivable Investment escrow The Company held in escrow $0.8 million and $3.6 million as of December 31, 2022 and 2021, respectively. The cash held at year end was used to purchased mortgages in January 2023 and 2022, respectively. Federal Home Loan Bank stock American Life initially purchased Federal Home Loan Bank of Topeka (“FHLB”) common stock on May 5, 2021. This investment was to solidify our membership with FHLB Topeka. The carrying value of FHLB stock approximates fair value since the Company can redeem the stock with FHLB at cost. As a member of the FHLB, the Company is required to purchase this stock, which is carried at cost and classified as restricted equity securities. Membership allows access to various funding arrangements to provide a source of additional liquidity. As of December 31, 2022, the Company had pledged assets with a market value of $121.1 million to FHLB to allow a borrowing capacity of $109.8 million and none pledged as of December 31, 2021. As of December 31, 2022, we had $29.0 million of outstanding funding arrangements. As of December 31, 2021, there were no outstanding funding arrangements. Notes Receivable The Company held notes receivable carried at fair value of $6.3 million and $6.0 million as of December 31, 2022 and 2021, respectively, between American Life and a related party. The note receivable has an annual interest rate of 5% which is paid in kind (“PIK”) interest per annum that increases the outstanding note balance. This note was rated BBB+ by a nationally recognized statistical rating organization. This note matures on June 18, 2050. See Note 15 – Related Party – Chelsea for details regarding this note. |
Policy Loans | Policy Loans Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of December 31, 2022 and 2021, the Company held less than GBP 0.1 and approximately GBP 2.2 million in custody accounts, respectively. The USD equivalent held was less than $0.1 and $3.0 million, respectively. As of December 31, 2022 and 2021, the Company held approximately less than Euro 0.1 and 9.3 million, respectively. The USD equivalent held was approximately less than $0.1 and $10.6 million, respectively. As of December 31, 2022 and 2021, we had realized gains of approximately $3.7 million and approximately $2.0 million, respectively, related to the change in the foreign currency exchange rate of the GBP and Euro that were recorded in realized (losses) gains on investments in the Consolidated Statements of Comprehensive Loss. The Company had no money market investments as of December 31, 2022 and 2021, respectively. |
Deferred Acquisition Costs | Deferred Acquisition Costs Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to third-party reinsurers, that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. These costs are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. The Company evaluates the types of acquisition costs it capitalizes. The Company capitalizes agent compensation and benefits and other expenses that are directly related to the successful acquisition of contracts. The Company also capitalizes expenses directly related to activities performed by the Company, such as underwriting, policy issuance, and processing fees incurred in connection with successful contract acquisitions. The following table represents a roll forward of DAC, net of reinsurance: (In thousands) December 31, 2022 December 31, 2021 Beginning balance $ 24,530 $ 13,456 Additions 23,857 13,402 Amortization (3,905) (2,886) Interest (883) 632 Impact of unrealized investment losses (166) (74) Ending Balance $ 43,433 $ 24,530 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 in management’s judgment require an immediate review. The Company performed a recoverability analysis during the fourth quarter of 2022 and determined that all DAC balances were recoverable as of December 31, 2022. |
Premiums Receivable | Premiums Receivable Premiums receivable consists of premiums earned on our legacy insurance business which have been earned, but have not yet been collected. Amounts are receivable from our legacy business partners and were consistent at $0.4 million in both 2022 and 2021. |
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 three During the first quarter of 2021, the Company began the implementation of a new cloud-based enterprise resource planning and enterprise performance management system. The Company expects to capitalize related consultation and support expenses relating to this system and will begin amortizing these fees over a period of five years from the date of implementation. The useful life of the system has been estimated at five years in accordance with guidance in ASC 350, Intangibles – Goodwill and Other 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. The Company determined that no such events occurred in the periods covered by the Consolidated Financial Statements that would indicate the carrying amounts may not be recoverable. |
Reinsurance | Reinsurance We seek to reinsure a significant portion of our new annuity policies with a variety of reinsurers in exchange for upfront ceding commissions, expense reimbursements and administrative fees. Under these reinsurance agreements, we expect there will be a monthly or quarterly settlement of premiums, claims, surrenders, collateral, and other administration fees. We believe this will help preserve American Life’s capital while supporting its growth because American Life will have lower capital requirements when its business is reinsured due to lower overall financial exposure versus retaining the insurance policy business itself. See Note 8 below for further discussion of our reinsurance activities. There are two main categories of reinsurance transactions: 1) “indemnity,” where we cede a portion of our risk but retain the legal responsibility to our policyholders should our reinsurers not meet their financial obligations; and 2) “assumption,” where we transfer the risk and legal responsibilities to the reinsurers. The reinsurers are required to acquire the appropriate regulatory and policyholder approvals to convert indemnity policies to assumption policies. Our reinsurers may be domestic or foreign capital markets investors or traditional reinsurance companies seeking to assume U.S. insurance business. We plan to mitigate the credit risk relating to reinsurers generally by requiring other financial commitments from the reinsurers to secure the reinsured risks (such as posting substantial collateral). It should be noted that under indemnity reinsurance agreements American Life remains exposed to the credit risk of its reinsurers. If one or more reinsurers become insolvent or are otherwise unable or unwilling to pay claims under the terms of the applicable reinsurance agreement, American Life retains legal responsibility to pay policyholder claims, which in such event would likely materially and adversely affect the capital and surplus of American Life. Midwest formed Seneca Re in early 2020, followed by Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Incorporated Cell, LLC 2021-03 (“SRC3”) which are consolidated in these financial statements. Midwest sold 70% ownership of SRC1 to an ORIX Corporation USA subsidiary on December 30, 2021, and retained 30% ownership. Midwest maintains control over SRC1 and we continue to consolidate SRC1 in these financial statements and eliminate the noncontrolling interest. Additionally, Seneca Re has established Seneca Incorporated Cell, LLC 2022-04; however, management has determined that Midwest does not control the entity and thus it is not consolidated into these financial statements. American Life entered into a novation agreement with SRC2 and Crestline Re SPC, for and on behalf of Crestline Re SP1, under which the above-described reinsurance, trust and related asset management agreements were novated and replaced with substantially similar agreements entered into by American Life and Crestline Re SP1. Some reinsurers are not and may not be “accredited” or qualified as reinsurers under Nebraska law and regulations. In order to enter into reinsurance agreements with such reinsurers and to reduce potential credit risk, American Life holds a deposit or withholds funds from the reinsurer or requires the reinsurer to maintain a trust that holds assets backing up the reinsurer’s obligation to pay claims on the business it assumes. The reinsurer may also appoint an investment manager for such funds, which in some cases may be our investment adviser subsidiary, 1505 Capital, to manage these assets pursuant to guidelines adopted by us that are consistent with Nebraska investment statutes and reinsurance regulations. American Life currently has treaties with several third-party reinsurers and one related party reinsurer. In a Modco agreement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a FW agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurers, to reduce the potential credit risk. Under those provisions with third-party reinsurers, the assets backing the treaties are maintained by American Life as investments but the assets and total returns or losses on the investments are owned by the reinsurers. Under GAAP, this arrangement is considered an embedded derivative as discussed in Comprehensive Loss and Note 4 below. Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained cumulative unrealized losses of approximately $10.5 million and gains of $0.2 million as of December 31, 2022 and 2021, respectively. The terms of the contracts with the third-party reinsurers provide that changes in the unrealized gains and losses on the portfolios accrue to the third-party reinsurers. To recognize changes in the third-party unrealized gain (loss), American Life records the year -to-date change in the Consolidated Statements of Comprehensive Loss and in amounts recoverable from third-party reinsurers on the Consolidated Balance Sheets. As of December 31, 2022, and 2021, American Life recognized a current year gain in the embedded derivative of $10.6 million and losses of $2.8 million respectively. For further discussion see Note 4 below. |
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. Deposit-type contracts also include balances outstanding under funding agreements with the Federal Home Loan Bank of Topeka (“FHLB”). The funding agreements are carried at cost. Amounts received and repaid under FHLB funding agreements are classified as financing activities in the Company's Consolidated Statements of Cash Flows. In 2021, the Company became a member of FHLB, which provides access to collateralized borrowings and other FHLB products. Any borrowing from FHLB requires the purchase of FHLB activity-based common stock in an amount equal to 4.5% of the borrowing. In 2022, the Board authorized a maximum amount equal to 5% of net aggregate admitted retained assets of American Life for FHLB advances and funding agreements combined. In 2022, American Life received advances of $29.0 million from FHLB under funding agreements and made no repayments on FHLB funding agreements. Outstanding advances under FHLB funding agreements are reported as part of deposit-type contracts in the Consolidated Balance Sheets and totaled $29.0 million as of December 31, 2022. Interest on the funding agreements accrues at their effective interest rates. As of December 31, 2022, scheduled maturity dates for outstanding FHLB funding agreements were as follows: (Dollar amounts in thousands) Interest Maturity Date Rate Amount January 22, 2025 4.69% $ 13,000 August 16, 2025 4.96% 8,000 September 15, 2027 4.97% 8,000 $ 29,000 |
Notes Payable | Note Payable On November 22, 2022, the Company entered into a three-year senior secured revolving credit agreement (“Credit Agreement”) with Royal Bank of Canada and other lenders with a capacity of $30.0 million (the “Revolving Credit Facility”). The maturity date of the Credit Agreement is November 22, 2025. The obligations under the Credit Agreement are secured by a first priority lien on a variety of our assets. The balance of the revolving credit was $25.0 million at December 31, 2022, with $5.0 million unutilized credit. |
Deferred Gain on Coinsurance Transactions | Deferred Gain on Coinsurance Transactions American Life has entered into several reinsurance contracts where it has earned or is earning ceding commissions. These ceding commissions are recorded as a deferred liability and amortized over the life of the business ceded. American Life receives commission and administrative expenses from reinsurance transactions that represent recovery of acquisition costs. These remittances first reduce the DAC associated with the reinsured blocks of business with the remainder being included in the deferred gain on coinsurance transactions that is also being amortized. |
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 are included in deposit-type liabilities. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services and cost of insurance, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the Consolidated Statements of Cash Flows. Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due. Liabilities for future policy benefits 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. Service fee revenue is comprised of third-party administration (“TPA”) fees and investment management fees: ● The TPA fees are related to accounting services performed based on service agreements with varying lengths. Revenue associated with TPA fees are only recognized when the services are performed, which is typically on a monthly or quarterly basis. ● Fees for investment management fees are based on the total assets managed for each client at a contracted rate. The length of term on the contracts varies by client. The Company accrues investment advisory fees and recognizes revenue based on the market value of the client’s assets at the end of the applicable period, at the client’s contracted rate. |
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 2019. The Company is not currently under examination for any open years for income taxes. 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 DAC. 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 |
Comprehensive Loss | Comprehensive Loss Comprehensive Loss is comprised of net income (loss) and other comprehensive loss. Other comprehensive loss includes unrealized gains and losses from fixed maturities classified as available for sale and unrealized gains and losses from foreign currency transactions, net of applicable taxes. American Life has treaties with several third-party reinsurers that have FW and Modco provisions. Under those provisions, the assets backing the treaties are maintained by American Life as collateral but are owned by the third-party reinsurers, thus, the total return on the asset portfolio belongs to the third-party reinsurers. Under GAAP this is considered an embedded derivative as discussed above under “Reinsurance” and in Note 8 below. Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained cumulative unrealized losses of approximately $10.5 million as of December 31, 2022 and cumulative unrealized gains of $0.2 million as of December 31, 2021, respectively. The terms of the contracts with the third-party reinsurers provide that the changes in unrealized gains and losses on the portfolios accrue to the third-party reinsurers. To recognize changes in the third-party unrealized gain (loss), American Life records the year-to-date change in the Consolidated Statements of Comprehensive Loss and in amounts recoverable from third-party reinsurers on the Consolidated Balance Sheet. As of December 31, 2022, American Life recognized a current year gain in the embedded derivative of $10.6 million and a gain in the embedded derivative of $2.8 million for the comparable period in 2021. For further discussion see Note 4 below. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic income (loss) per share for the year ended December 31, 2022 and 2021 was income of $1.91 and loss of $4.45, respectively, which included the aforementioned gain of $10.6 million and loss of $2.8 million, respectively. The Company has 20.0 million voting common shares authorized, two million non-voting common shares authorized, and two million preferred shares authorized. There were 3,727,976 voting common shares issued December 31, 2021 Year ended December 31, 2022 2021 (In thousands, except per share amounts) Numerator: Net income (loss) attributable to Midwest Holding Inc. $ 7,140 $ (16,637) Denominator: Weighted average common shares outstanding 3,736,283 3,737,564 Effect of dilutive securities: Stock options and deferred compensation agreements 68,000 — Denominator for earnings (loss) per common share 3,804,283 3,737,564 Income (loss) per common share $ 1.91 $ (4.45) Income (loss) per common share, diluted $ 1.88 $ (4.45) |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In January 2020, the FASB issued ASU No. 2020-1, Equity Securities Investments-Equity Method and Joint Ventures and Derivatives and Hedging -Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. 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 In December 2022, the FASB issued ASU no. 2022-06, Reference Rate Reform (Topic 846): Deferral of the Sunset Date of Topic 848. In 2020, the Board issued Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The objective of the guidance in Topic 848 is to provide temporary relief during the transition period. The FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published. At the time that Update 2020-04 was issued, the UK Financial Conduct Authority (FCA) had established its intent that it would no longer be necessary to persuade, or compel, banks to submit to LIBOR after December 31, 2021. As a result, the sunset provision was set for December 31, 2022—12 months after the expected cessation date of all currencies and tenors of LIBOR. In March 2021, the FCA announced that the intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848. Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, the amendments in ASU 2022-06 defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. Future Adoption of New Accounting Standards In August 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as amended by ASU 2019-09, Financial Services —Insurance (Topic 944). The new guidance (i) prescribes the discount rate to be used in measuring the liability for future policy benefits for traditional and limited payment long-duration contracts, and requires assumptions for those liability valuations to be updated after contract inception, (ii) requires more market-based product guarantees on certain separate account and other account balance long-duration contracts to be accounted for at fair value, (iii) simplifies the amortization of DAC for virtually all long duration contracts, and (iv) introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures. The new standard becomes effective for reporting periods after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2024 for companies eligible as smaller reporting companies. Early application of the amendments in Update 2018-12 is permitted. 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. The Company is evaluating the impact this guidance will have on its results of operations and financial position. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments in this update include items brought to the FASB’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, the incurred loss impairment methodology in current GAAP is replaced with a methodology that reflects expected credit losses that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to maturity debt securities. It also applies to off-balance sheet credit exposures, not accounted for as insurance (loan commitments, standby letters of credit financial guarantees, and other instruments). In addition, ASU 2016-13 made changes to the accounting for available for sale debt securities. One such change is to require credit losses to be presented as an allowance rather than a write-down on available for sale debt securities management does not intend to sell or believes that it is not more likely than not they will be required to sell. The new standard becomes effective for reporting periods beginning after December 15, 2022, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained earnings. The segment of the Company’s investment portfolio that is not marked to market was approximately $1.0 million at December 31, 2022, and the Company does not have total impact amount at this time. The Company’s implementation activities continue to be performed to evaluate The Company intends to utilize the modified retrospective method and the prospective transition approach for fixed maturities for which other-than-temporary impairment has been recognized prior to January 1, 2023. As of December 31, 2022, $1.4 million of other-than-temporary impairment has been recognized, compared to $0 in the prior year. |
Nature of Operations and Summ_3
Nature of Operations and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Nature of Operations and Summary of Significant Accounting Policies. | |
Schedule of deferred acquisition costs | (In thousands) December 31, 2022 December 31, 2021 Beginning balance $ 24,530 $ 13,456 Additions 23,857 13,402 Amortization (3,905) (2,886) Interest (883) 632 Impact of unrealized investment losses (166) (74) Ending Balance $ 43,433 $ 24,530 |
Summary of scheduled maturity dates for outstanding FHLB funding agreements | (Dollar amounts in thousands) Interest Maturity Date Rate Amount January 22, 2025 4.69% $ 13,000 August 16, 2025 4.96% 8,000 September 15, 2027 4.97% 8,000 $ 29,000 |
Schedule of earnings (loss) per share | Year ended December 31, 2022 2021 (In thousands, except per share amounts) Numerator: Net income (loss) attributable to Midwest Holding Inc. $ 7,140 $ (16,637) Denominator: Weighted average common shares outstanding 3,736,283 3,737,564 Effect of dilutive securities: Stock options and deferred compensation agreements 68,000 — Denominator for earnings (loss) per common share 3,804,283 3,737,564 Income (loss) per common share $ 1.91 $ (4.45) Income (loss) per common share, diluted $ 1.88 $ (4.45) |
Investments (Tables)
Investments (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Investments | |
Schedule of Available for Sale Investments | Gross Gross Amortized Unrealized Unrealized Estimated (In thousands) Cost Gains Losses Fair Value December 31, 2022: Fixed maturities: Bonds: U.S. government obligations $ 1,343 $ — $ 81 $ 1,262 Mortgage-backed securities 316,105 469 22,508 294,066 Asset-backed securities 34,728 17 3,989 30,756 Collateralized loan obligations 308,871 726 21,924 287,673 States and political subdivisions-general obligations 104 — 3 101 States and political subdivisions-special revenue 228 — 23 205 Corporate 46,700 415 5,515 41,600 Term loans 561,656 1,923 4,607 558,972 Total fixed maturities $ 1,269,735 $ 3,550 $ 58,650 $ 1,214,635 Mortgage loans on real estate, held for investment 227,047 — — 227,047 Derivatives 30,239 2,694 16,999 15,934 Equity securities 5,592 — 481 5,111 Other invested assets 108,979 3,667 215 112,431 Preferred stock 35,644 1,757 5,986 31,415 Deposits and notes receivable 8,359 — — 8,359 Policy loans 25 — — 25 Total investments $ 1,685,620 $ 11,668 $ 82,331 $ 1,614,957 December 31, 2021: Fixed maturities: Bonds: U.S. government obligations $ 1,855 $ 32 $ 5 $ 1,882 Mortgage-backed securities 55,667 368 755 55,280 Asset-backed securities 24,675 443 167 24,951 Collateralized loan obligations 272,446 2,928 851 274,523 States and political subdivisions-general obligations 105 9 — 114 States and political subdivisions-special revenue 4,487 1,129 4 5,612 Corporate 35,392 1,846 99 37,139 Term loans 268,794 441 1,767 267,468 Trust preferred 2,218 19 — 2,237 Redeemable preferred stock 14,282 53 245 14,090 Total fixed maturities $ 679,921 $ 7,268 $ 3,893 $ 683,296 Mortgage loans on real estate, held for investment 183,203 — — 183,203 Derivatives 18,654 6,391 2,023 23,022 Equity securities 22,158 — 289 21,869 Other invested assets 34,491 813 11 35,293 Preferred stock 14,885 3,801 — 18,686 Deposits and notes receivable 10,071 — — 10,071 Policy loans 87 — — 87 Total investments $ 963,470 $ 18,273 $ 6,216 $ 975,527 |
Schedule of credit ratings of fixed maturity securities | December 31, 2022 December 31, 2021 Carrying Carrying (In thousands) Value Percent Value Percent AAA and U.S. Government $ 124,183 10.2 % $ 2,674 0.4 % AA 815 0.1 482 0.1 A 371,371 30.6 168,141 24.6 BBB 619,516 51.0 462,699 67.7 Total investment grade 1,115,885 91.9 633,996 92.8 BB and below 98,750 8.1 49,300 7.2 Total $ 1,214,635 100.0 % $ 683,296 100.0 % |
Schedule of Unrealized Loss of Securities | December 31, 2022 December 31, 2021 Gross Number Gross Number Estimated Unrealized of Estimated Unrealized of (In thousands) Fair Value Loss Securities (1) Fair Value Loss Securities (1) Fixed Maturities: Less than 12 months: U.S. government obligations $ 1,135 $ 70 13 $ 104 $ 2 1 Mortgage-backed securities 233,624 18,464 89 35,403 755 35 Asset-backed securities 24,552 3,278 23 12,355 167 13 Collateralized loan obligations 203,549 16,730 252 90,731 851 115 States and political subdivisions-general obligations 101 3 1 — — — States and political subdivisions-special revenue 47 2 3 217 4 0 Term loans 558,337 4,607 36 105,677 1,767 47 Redeemable preferred stock — — — 10,837 245 6 Corporate 37,286 5,426 64 2,367 73 9 Greater than 12 months: U.S. government obligations 126 11 5 66 3 3 Asset-backed securities 5,321 711 7 — — — Collateralized loan obligations 37,814 5,194 47 — — — States and political subdivisions-special revenue 158 21 7 — — — Mortgage-backed securities 17,985 4,044 14 — — — Corporate 376 89 7 324 26 2 Total fixed maturities $ 1,120,411 $ 58,650 568 $ 258,081 $ 3,893 231 (1) |
Schedule of Fixed Maturities | Amortized Estimated (In thousands) Cost Fair Value Due in one year or less $ 67,088 $ 65,223 Due after one year through five years 631,956 618,744 Due after five years through ten years 481,819 452,108 Due after ten years through twenty years 57,113 53,238 Due after twenty years 31,759 25,322 $ 1,269,735 $ 1,214,635 |
Schedule of investment in mortgage loans | (In thousands) December 31, 2022 December 31, 2021 Loan-to-Value Ratio: 0%-59.99% $ 108,281 $ 91,104 60%-69.99% 79,968 42,819 70%-79.99% 33,268 44,106 80% or greater 5,530 5,174 Total mortgage loans $ 227,047 $ 183,203 |
Components of net investment income | Year ended December 31, (In thousands) 2022 2021 Fixed maturities $ 38,299 $ 16,443 Mortgage loans 2,456 185 Other invested assets 1,854 665 Other interest income (1,517) 298 Gross investment income 41,092 17,591 Less: investment expenses (5,977) (1,854) Investment income, net of expenses $ 35,115 $ 15,737 |
Mortgage-back securities | |
Investments | |
Schedule of Mortgage Loan Activity | (In thousands) December 31, 2022 December 31, 2021 1-4 Family $ 59,579 $ 72,324 Hospitality 12,902 12,822 Land 62,119 15,904 Multifamily (5+) 34,072 31,583 Retail 22,119 17,655 Other 36,256 32,915 Total mortgage loans $ 227,047 $ 183,203 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Derivative Instruments | |
Summary of the derivatives not designated as hedges | The following is a summary of the asset derivatives not designated as hedges embedded derivatives in our FIA product as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 (In thousands, except number of contracts) Location in the Derivatives Not Designated Consolidated Notional Number of Estimated Notional Number of Estimated as Hedging Instruments Balance Sheets Amount Contracts Fair Value Amount Contracts Fair Value Equity-indexed options Derivatives $ 831,657 595 $ 15,592 $ 526,096 482 $ 23,766 Equity-indexed embedded derivatives Deposit-type 782,997 6,131 111,618 525,548 4,205 123,692 |
Summary of embedded derivatives related to the funds withheld provision | The following table summarizes the impact of those embedded derivatives related to the funds withheld provision where the total return on the asset portfolio is passed through to the third-party reinsurers: December 31, 2022 December 31, 2021 (In thousands) Book Value Market Value Total Return Book Value Market Value Total Return Portfolio Assets Assets Swap Value Assets Assets Swap Value American Republic Insurance Company $ 150,413 $ 143,952 $ 6,461 $ 74,983 $ 74,670 $ 313 Crestline Re SP1 354,806 356,374 (1,568) 228,560 228,450 110 Ironbound 159,644 154,477 5,167 154,867 155,755 (888) Ascendent Re 56,064 54,790 1,274 56,246 56,078 168 SRC4 61,646 62,516 (870) - - - US Alliance - - - 46,221 46,085 136 Total $ 782,573 $ 772,109 $ 10,464 $ 560,877 $ 561,038 $ (161) |
Fair Values of Financial Inst_2
Fair Values of Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Fair Values of Financial Instruments | |
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 December 31, 2022 and 2021. Significant Quoted Other Significant In Active Observable Unobservable Estimated Markets Inputs Inputs Net Asset Fair (In thousands) (Level 1) (Level 2) (Level 3) Value Value December 31, 2022 Financial assets Fixed maturity securities: Bonds U.S. government obligations $ — $ 1,262 $ — $ — $ 1,262 Mortgage-backed securities — 294,066 — — 294,066 Asset-backed securities — 30,756 — — 30,756 Collateralized loan obligations — 287,673 — — 287,673 States and political subdivisions-general obligations — 101 — — 101 States and political subdivisions-special revenue — 205 — — 205 Corporate — 41,600 — — 41,600 Term loans — — 558,972 — 558,972 Total fixed maturity securities — 655,663 558,972 — 1,214,635 Mortgage loans on real estate, held for investment — — 227,047 — 227,047 Derivatives — 15,934 — — 15,934 Equity securities — 5,111 — — 5,111 Other invested assets — — 99,997 12,434 112,431 Preferred stock — 9,544 21,871 — 31,415 Deposits and notes receivable — 7,053 1,306 — 8,359 Policy loans — — 25 — 25 Total Investments $ — $ 693,305 $ 909,218 12,434 $ 1,614,957 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 111,618 $ — 111,618 December 31, 2021 Financial assets Fixed maturity securities: Bonds U.S. government obligations $ — $ 1,882 $ — $ — $ 1,882 Mortgage-backed securities — 55,280 — — 55,280 Asset-backed securities — 24,951 — — 24,951 Collateralized loan obligations — 274,523 — — 274,523 States and political subdivisions-general obligations — 114 — — 114 States and political subdivisions-special revenue — 5,612 — — 5,612 Corporate — 37,139 — — 37,139 Term loans — — 267,468 — 267,468 Trust preferred — 2,237 — — 2,237 Redeemable preferred stock — 14,090 — — 14,090 Total fixed maturity securities — 415,828 267,468 — 683,296 Mortgage loans on real estate, held for investment — — 183,203 — 183,203 Derivatives — 23,022 — — 23,022 Equity securities — 21,869 — 21,869 Other invested assets — — 35,293 — 35,293 Preferred stock — — 18,686 — 18,686 Deposits and notes receivable — 9,571 500 — 10,071 Policy loans — — 87 — 87 Total Investments $ — $ 470,290 $ 505,237 — $ 975,527 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 123,692 $ — $ 123,692 |
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 December 31, 2022 and 2021, respectively: December 31, 2022 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair (In thousands) Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 25 $ — $ — $ 25 $ 25 Cash equivalents 191,414 — 191,414 — 191,414 Liabilities: Policyholder deposits (deposit-type contracts) 1,743,348 — — 1,743,348 1,743,348 December 31, 2021 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant for Identical Assets Observable Unobservable Carrying and Liabilities Inputs Inputs Fair (In thousands) Amount (Level 1) (Level 2) (Level 3) Value Assets: Policy loans $ 87 $ — $ — $ 87 $ 87 Cash equivalents 142,013 — 142,013 — 142,013 Liabilities: Policyholder deposits (deposit-type contracts) 1,075,439 — — 1,075,439 1,075,439 |
Schedule of Recurring Basis Using Level Three Inputs | December 31, 2022 Total realized and unrealized gains (losses) Beginning Balance Included in Income Included in OCI Net Purchases, Issuances, Sales, and Settlements Ending Balance (In thousands) Assets Term loans $ 267,468 $ — $ (2,683) $ 294,187 558,972 Mortgage loans on real estate, held for investment 183,203 — — 43,844 227,047 Deposits and notes receivable 500 — — 806 1,306 Other invested assets 35,293 — 3,452 61,252 99,997 Preferred stock 18,686 — (4,229) 7,414 21,871 Policy loans 87 — — (62) 25 Total level 3 assets $ 505,237 $ — $ (3,460) $ 407,441 $ 909,218 Liabilities Embedded derivative for equity-indexed contracts (123,692) (10,193) — 22,267 (111,618) Total level 3 liabilities $ (123,692) $ (10,193) $ — $ 22,267 $ (111,618) December 31, 2021 Total realized and unrealized gains (losses) (In thousands) Beginning Balance Included in Income Included in OCI Net Purchases, Issuances, Sales, and Settlements Ending Balance Assets Term loans $ 107,254 $ (1,326) $ 225 $ 161,315 $ 267,468 Mortgage loans on real estate, held for investment 94,990 — — 88,213 183,203 Deposits and notes receivable — — — 500 500 Other invested assets 21,897 810 (671) 13,257 35,293 Preferred stock 3,898 — 157 14,631 18,686 Policy loans 46 — — 31 87 Total level 3 assets $ 228,085 $ (516) $ (289) $ 277,947 $ 505,237 Liabilities Embedded derivative for equity-indexed contracts (84,501) (4,169) — (35,022) (123,692) Total level 3 liabilities $ (84,501) $ (4,169) $ — $ (35,022) $ (123,692) |
Summary of unobservable inputs for AFS and trading securities | December 31, 2022 (In millions, except for percentages and multiples) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Term loans $559.0 Yield Analysis Discount rates 4.6% 17.3% 12.4% Decrease Mortgage loans on real estate $227.0 Yield Analysis Principal funded NA NA NA Decrease Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $111.6 Option Budget Method Nonperformance risk 0.6% 1.5% 1.1% Decrease Option budget 1.1% 5.7% 2.7% Increase Surrender rate 0.5% 15% (base) 10.5% Decrease Other invested assets $100.0 Market Approach EBITDA Multiples 2.6% 3.1% 2.8% NA Discount rates 8.0% 25.5% 14.5% NA Preferred equity $6.1 Yield Analysis Discount rates 24.0% 28.0% 26.0% Increase Detachable warrants $2.2 Market Approach GPCM EBITDA Multiples 10.0x% 11.5x 100.0% Decrease Preferred stock $31.4 Market Approach EBITDA Multiples NA NA NA Decrease * Weighted by account value December 31, 2021 (In millions, except for percentages and multiples) Fair value Valuation technique Unobservable inputs Minimum Maximum Weighted average* Impact of an increase in the input on fair value Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $123.7 Option Budget Method Nonperformance risk 0.3% 1.1% 0.6% Decrease Option budget 1.1% 3.4% 2.4% Increase Surrender rate 0.5% 15% (base) 7.7% Decrease Preferred equity $4.9 Yield analysis Discount rates 17.5% 19.5% 18.5% Increase Detachable warrants $3.8 Market Approach - GPCM EBITDA Multiples 9.0x 10.0x 100.0% Increase * Weighted by account value |
Deposit-Type Contracts (Tables)
Deposit-Type Contracts (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Deposit Type Contracts [Abstract] | |
Schedule of deposit-type contracts | (In thousands) December 31, 2022 December 31, 2021 Beginning balance $ 1,075,439 $ 597,868 US Alliance (2,176) 1,873 Unified Life Insurance Company (10) 468 Ironbound Reinsurance Company Limited 5,959 6,579 Ascendant Re (3,185) 2,880 Crestline SP1 (11,623) 4,834 American Republic Insurance Company (4,080) 1,567 SRC4 613 — Deposits received 745,083 471,646 Investment earnings (includes embedded derivative) (10,193) 7,012 Withdrawals (51,659) (18,446) Policy charges (820) (842) Ending balance $ 1,743,348 $ 1,075,439 |
Reinsurance (Tables)
Reinsurance (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Reinsurance | |
Summary of significant reinsurance amounts | A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of December 31, 2022 and 2021 is as follows: (In thousands) December 31, 2022 December 31, 2021 Assets: Reinsurance recoverables $ 20,190 $ 38,579 Liabilities: Deposit-type contracts Direct $ 1,743,348 1,075,439 Reinsurance ceded (912,982) (647,632) Retained deposit-type contracts $ 830,366 $ 427,807 Year ended December 31, 2022 2021 (In thousands) Premiums Direct $ 238 $ 258 Reinsurance ceded (238) (258) Total Premiums $ — $ — Future policy and other policy benefits Direct $ 7 $ 159 Reinsurance ceded (7) (159) Total future policy and other policy benefits $ — $ — |
Schedule of significant reinsurance balances | The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third-party reinsurers as of December 31, 2022: Recoverable/ Total Amount Recoverable Recoverable (Payable) on Benefit Ceded Recoverable/ (In thousands) AM Best on Paid on Unpaid Reserves/Deposit- Due (Payable) to/from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ (344) $ — $ (344) Optimum Re Insurance Company A — — 601 — 601 Sagicor Life Insurance Company A- — 154 10,744 (303) 10,595 Ascendant Re NR — — (2,130) — (2,130) Crestline SP1 NR — — (3,357) — (3,357) American Republic Insurance Company A — — 5,879 — 5,879 SRC4 NR — — (44,442) — (44,442) Unified Life Insurance Company NR — 41 986 (17) 1,010 US Alliance Life and Security Company NR — — 52,400 (22) 52,378 $ — $ 195 $ 20,337 $ (342) $ 20,190 The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third-party reinsurers as of December 31, 2021: Recoverable on Total Amount Recoverable Recoverable Benefit Ceded Recoverable (In thousands) AM Best on Paid on Unpaid Reserves/Deposit- Due from Reinsurer Rating Losses Losses type Contracts Premiums Reinsurer Ironbound Reinsurance Company Limited NR $ — $ — $ (3,561) $ — $ (3,561) Optimum Re Insurance Company A — — 561 — 561 Sagicor Life Insurance Company A- — 157 10,901 (303) 10,755 Ascendant Re NR — — 1,550 — 1,550 Crestline SP1 NR — — 18,288 — 18,288 American Republic Insurance Company A — — 4,885 — 4,885 Unified Life Insurance Company NR — 45 1,013 (21) 1,037 US Alliance Life and Security Company NR — — 5,090 (26) 5,064 $ — $ 202 $ 38,727 $ (350) $ 38,579 |
Schedule of ceding commissions from the reinsurers | Year ended December 31, (In thousands) 2022 2021 Reinsurer Gross Ceding Commission Expense Allowance (1) Interest on Ceding Commission Earned Ceding Commission Gross Ceding Commission Expense Allowance Interest on Ceding Commission Earned Ceding Commission Unified Life Insurance Company $ — $ — $ — $ 25 $ — $ — $ — $ 35 Ironbound Reinsurance Company Limited — — 193 513 — (461) 211 684 Ascendant Re — — 93 332 498 904 93 367 US Alliance Life and Security Company — — 54 348 2 (75) 60 401 Crestline SP1 5,875 8,754 391 2,569 6,699 12,321 255 1,185 American Republic Insurance Company 3,851 6,189 136 863 3,971 7,039 26 350 SRC4 1,770 1,581 21 166 — — — — $ 11,496 $ 16,524 $ 888 $ 4,816 $ 11,170 $ 19,728 $ 645 $ 3,022 (1) Includes: acquisition and administrative expenses, commission expense allowance and product development fees. |
Schedule of ceding commissions deferred on each reinsurance transaction | (In thousands) December 31, 2022 December 31, 2021 Reinsurer Deferred Gain on Reinsurance Transactions Deferred Gain on Reinsurance Transactions US Alliance Life and Security Company (1) $ 152 $ 162 Unified Life Insurance Company (1) 217 242 Ironbound Reinsurance Company Limited (2) 4,876 5,137 Ascendant Re 2,947 3,101 US Alliance Life and Security Company (2) 2,069 2,286 American Republic Insurance Company (2) 7,502 4,146 Crestline SP1 (2) 18,475 13,515 SRC4 (2) 1,825 — $ 38,063 $ 28,589 1) These reinsurance transactions on our legacy life insurance business received gross ceding commissions on the effective dates of the transaction. The difference between the statutory net adjusted reserves and the GAAP adjusted reserves plus the elimination of DAC and value of business acquired related to these businesses reduces the gross ceding commission with the remaining deferred and amortized over the lifetime of the blocks of business. 2) These reinsurance transactions include the ceding commissions and expense allowances which are accounted for as described in (1). |
Schedule of retained and reinsurance balance sheets | The tables below shows the retained and reinsurance consolidated balance sheets: December 31, 2022 December 31, 2021 (In thousands) Retained Reinsured Consolidated Retained Reinsured Consolidated Assets Total investments $ 812,177 $ 802,780 $ 1,614,957 $ 414,418 $ 561,109 $ 975,527 Cash and cash equivalents 127,291 64,123 191,414 95,406 46,607 142,013 Accrued investment income 11,307 13,858 25,165 3,853 9,770 13,623 Deferred acquisition costs, net 43,433 — 43,433 24,530 — 24,530 Reinsurance recoverables (6,853) 27,405 20,552 — 38,579 38,579 Other assets 16,189 8,721 24,910 27,834 (2,189) 25,645 Total assets $ 1,003,544 $ 916,887 $ 1,920,431 $ 566,041 $ 653,876 $ 1,219,917 Liabilities and Stockholders’ Equity Liabilities: Policyholder liabilities $ 847,417 $ 912,981 $ 1,760,398 $ 427,807 $ 660,811 $ 1,088,618 Note payable 25,000 — 25,000 — — — Deferred gain on coinsurance transactions 38,063 — 38,063 28,589 — 28,589 Payable for securities purchased 8,872 — 8,872 5,546 — 5,546 Other liabilities 49,815 3,906 53,721 18,343 (6,935) 11,408 Total liabilities $ 969,167 $ 916,887 $ 1,886,054 $ 480,285 $ 653,876 $ 1,134,161 Stockholders’ Equity: Voting common stock 4 — 4 4 — 4 Additional paid-in capital 138,307 — 138,307 138,277 — 138,277 Accumulated deficit (63,019) — (63,019) (70,159) — (70,159) Accumulated other comprehensive income (loss) (51,386) — (51,386) 2,634 — 2,634 Total Midwest Holding Inc.'s stockholders' equity $ 23,906 $ — $ 23,906 $ 70,756 $ — $ 70,756 Noncontrolling interest 10,471 — 10,471 15,000 — 15,000 Total stockholders' equity 34,377 — 34,377 85,756 — 85,756 Total liabilities and stockholders' equity $ 1,003,544 $ 916,887 $ 1,920,431 $ 566,041 $ 653,876 $ 1,219,917 |
Income Tax Matters (Tables)
Income Tax Matters (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Matters | |
Schedule of deferred tax assets and liabilities | Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows: (In thousands) December 31, 2022 December 31, 2021 Deferred tax assets: Loss carryforwards $ 2,672 $ 2,244 Capitalized costs 79 127 Stock option granted 1,066 1,060 Policy acquisition costs 6,489 3,640 General business credits 6 6 Derivative option allowance — 510 Sec 163(j) limitation 171 171 Benefit reserves 12,010 5,186 Property and equipment — 33 Impairments 403 — Unrealized losses on investments 13,624 1,534 Other 1,928 1,464 Total deferred tax assets 38,448 15,975 Less valuation allowance (35,305) (14,431) Total deferred tax assets, net of valuation allowance 3,143 1,544 Deferred tax liabilities: Unrealized losses on investments — 1,084 Intangible assets 147 147 Derivative option allowance 2,150 — Bond Discount 936 313 Property and equipment (90) — Total deferred tax liabilities 3,143 1,544 Net deferred tax assets $ — $ — |
Schedule of effective tax rate reconciliation | There was income tax expense of $7.6 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively . This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Year ended December 31, (In thousands) 2022 2021 Computed expected income tax benefit (expense) $ (1,762) $ 2,815 Reduction (increase) in income taxes resulting from: Interest maintenance reserve and reinsurance 212 (157) Nondeductible expenses (16) (9) Gain on sale of SRC1 — (368) Change in valuation allowance (6,061) (7,429) Amended Return - 2019/2020 — (339) Adjustment to payable — 110 Deferred tax adjustment 14 382 Prior year true-up 13 229 Subtotal of increases (5,838) (7,581) Tax benefit (expense) $ (7,600) $ (4,766) |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information for our leases for the years ended December 31, 2022 and 2021, is as follows: (In thousands) Classification December 31, 2022 December 31, 2021 Assets Operating Operating lease right-of-use assets $ 2,119 $ 2,360 Liabilities Operating lease Operating lease liabilities $ 2,135 $ 2,364 |
Schedule of Components of Lease Expenses | Our operating lease expense for the years ended December 31, 2022 and 2021, is as follows: Year ended December 31, (In thousands) Classification 2022 2021 Operating General and administrative expense $ 10 $ 8 |
Schedule of Finance and Operating Leases Minimum | Minimum contractual obligations for our leases as of December 31, 2022 are as follows: (In thousands) Operating Leases 2023 $ 342 2024 342 2025 342 2026 345 2027 353 2028 and after 1,404 Total remaining lease payments $ 3,128 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Equity | |
Summary of Balance of and Changes in Each Component of AOCI | (In thousands) Unrealized investment gains (losses) on fixed maturities, net of offsets Balance at December 31, 2020 $ 6,431 Other comprehensive (loss) before reclassifications, net of tax (1,422) Less: Reclassification adjustments for losses realized in net income (2,375) Balance, December 31, 2021 2,634 Other comprehensive (loss) before reclassifications, net of tax (54,975) Less: Reclassification adjustments for losses realized in net income, net of tax 955 Balance, December 31, 2022 $ (51,386) |
Long-Term Incentive Plans (Tabl
Long-Term Incentive Plans (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Long-Term Incentive Plans | |
Schedule of Changes in outstanding options activities | Weighted Average Exercise Price Per Share Range of Option Exercise Prices per Share Total Outstanding Outstanding, Non-vested Vested and Exercisable December 31, 2021 $ 40.74 $16.37 - $55.02 399,053 298,180 100,873 Granted 14.92 $11.20 - $21.16 117,367 117,367 - Vested 36.53 $16.37 - $41.25 - (45,777) 45,777 Exercised - - - - - Forfeited 37.44 $15.57 - $55.02 (110,653) (98,253) (12,400) Expired 40.38 $25.00 - $41.25 (86,646) - (86,646) December 31, 2022 $ 36.53 $11.20 - $55.02 319,121 271,517 47,604 |
Schedule of Option information segregated by ranges of exercise prices | December 31, 2022 Total Outstanding Options Vested and Exercisable Range of Option Exercise Prices per Share Options Weighted Average Exercise Price per Share Weighted Average Remaining Term Options Weighted Average Exercise Price per Share Weighted Average Remaining Term > $50.00 52,603 $ 55.02 8.2 - $ - - $40.00 - $49.99 127,751 41.25 8.2 36,042 41.25 7.6 $30.00 - $39.99 - - - - - - $20.00 - $29.99 29,767 23.27 8.1 7,277 25.00 7.6 $10.00 - $19.99 109,000 13.28 9.5 4,285 16.37 9.0 < $10.00 - $ - - - $ - - |
Schedule of outstanding restricted stock and restricted stock units | Total Outstanding Units Vested Units Units Weighted Average Grand Date Fair Value Units Weighted Average Grant Date Fair Value December 31, 2021 19,037 $ 47.62 - $ - Granted 18,718 11.22 - - Vested (1,163) 50.00 1,163 50.00 Forfeited (10,810) 40.41 - - Released (9,738) 45.35 - - December 31, 2022 17,207 $ 13.84 1,163 $ 50.00 |
Schedule of assumptions used to calculate compensation expense | December 31, December 31, 2022 2021 Volatility 4.16% - 4.26% 4.4% - 66.3% Weighted-average volatility 3.7% 38.9% Expected term (in years) 2 - 7 2 - 7 Risk-free rate 0.02% - 2.15% .8% - 1.5% |
Schedule of outstanding remaining non-vested shares | December 31, 2022 Awards Outstanding Weighted Average Grant-Date Fair Value Weighted Average Exercise Price Nonvested stock options and restricted stock unit awards at December 31, 2021 317,217 $ 25.80 $ 40.13 Options granted 117,367 9.57 14.92 Restricted stock units granted 18,718 — — Vested (56,678) 21.12 36.53 Forfeited (109,063) 23.82 38.87 Ending Balance at December 31, 2022 287,561 $ 16.96 $ 32.29 December 31, 2021 Stock Options Outstanding Weighted Average Grant-Date Fair Value Weighted Average Exercise Price Nonvested stock options and restricted stock unit awards at December 31, 2020 100,972 $ 22.91 $ 34.70 Options granted 333,880 19.25 42.84 Restricted stock units granted 5,089 — — Vested (85,957) 17.32 30.20 Forfeited (36,767) 23.91 40.42 Ending Balance at December 31, 2021 317,217 $ 25.80 $ 40.13 |
Statutory Net Income and Surp_2
Statutory Net Income and Surplus (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Statutory Net Income and Surplus | |
Statutory Accounting Practices Disclosure | The following table represents the net gains or (losses) as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3: Year ended December 31, (In thousands) 2022 2021 American Life $ 2,330 $ (6,355) SRC1 $ 1,199 $ (1,004) SRC3 $ 1,291 $ (6,851) The following table represents the Capital and Surplus as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3: (In thousands) December 31, 2022 December 31, 2021 American Life $ 69,936 $ 74,011 SRC1 $ 9,615 $ 8,415 SRC3 $ 6,088 $ 3,150 The following table represents the premiums sales as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3: Year ended December 31, (In thousands) 2022 2021 American Life $ 369,241 $ 107,767 SRC1 $ - $ 37,764 SRC3 $ 35,586 $ 88,704 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies. | |
Schedule of other commitments | (In thousands) December 31, 2022 December 31, 2021 Due in one year or less $ 52,951 $ 19,245 Due in two years 43,604 26,753 Due in three years 7,731 4,705 Due in four years 13,277 8,741 Due in five years and after 61,432 86,497 $ 178,995 $ 145,941 |
Nature of Operations and Summ_4
Nature of Operations and Summary of Significant Accounting Policies - (Narrative) (Details) $ / shares in Units, € in Millions, £ in Millions | 12 Months Ended | ||||||||||||||||
Feb. 28, 2023 | Nov. 22, 2022 USD ($) | Sep. 30, 2022 USD ($) | Feb. 02, 2022 USD ($) | Dec. 30, 2021 USD ($) | Nov. 10, 2021 USD ($) | Sep. 28, 2020 GBP (£) | May 12, 2020 USD ($) | Apr. 24, 2020 | Dec. 31, 2022 USD ($) product segment $ / shares | Dec. 31, 2021 USD ($) $ / shares | Dec. 31, 2021 EUR (€) | Dec. 31, 2020 GBP (£) | Dec. 31, 2022 GBP (£) | Dec. 31, 2022 EUR (€) | Dec. 31, 2021 GBP (£) | Dec. 31, 2021 EUR (€) | |
Number of reporting segment | segment | 1 | ||||||||||||||||
Number of products | product | 6 | ||||||||||||||||
Number of bonus plans | product | 2 | ||||||||||||||||
Mortgage backed and asset backed securities at fair value | $ 7,700,000 | ||||||||||||||||
Mortgage servicing rights MSR impairment recovery | 1,400,000 | ||||||||||||||||
Valuation allowances on mortgage loans | $ 0 | ||||||||||||||||
Equity securities, fair value | 5,111,000 | 21,869,000 | |||||||||||||||
Investment escrow | 800,000 | 3,600,000 | |||||||||||||||
Fund investments | 84,734,000 | 95,529,000 | |||||||||||||||
Other investments in fund | 19,000,000 | ||||||||||||||||
Other investments in private credit and equipment leases | 13,000,000 | ||||||||||||||||
Pledged assets, market value | 121,100,000 | 0 | |||||||||||||||
Premiums receivable | 362,000 | 354,000 | |||||||||||||||
FHLB borrowing capacity | 109,800,000 | ||||||||||||||||
Other invested assets | 112,431,000 | 35,293,000 | |||||||||||||||
Impairment allowance on investment | 0 | 0 | |||||||||||||||
Perpetual preferred stock | 10,000,000 | ||||||||||||||||
Impairment on preferred stock | 1,415,000 | ||||||||||||||||
Notes receivable | 6,300,000 | 6,000,000 | |||||||||||||||
Valuation allowance on policy loans | 0 | ||||||||||||||||
Realized gains (losses) on foreign exchange translation | 3,700,000 | € 2 | |||||||||||||||
Money market investments | 0 | 0 | |||||||||||||||
Depreciation | 300,000 | 100,000 | |||||||||||||||
Accumulated depreciation | 1,400,000 | 1,100,000 | |||||||||||||||
Unrealized gains (losses) | (10,500,000) | 200,000 | |||||||||||||||
Embedded derivative gains | 10,600,000 | ||||||||||||||||
Embedded derivatives gain loss | $ 10,600,000 | $ (2,800,000) | |||||||||||||||
Basic Income (loss) per common share | $ / shares | $ 1.91 | $ (4.45) | |||||||||||||||
Investment portfolio not marked to market | $ 1,000,000 | ||||||||||||||||
Other-than-temporary impairment | 1,400,000 | $ 0 | |||||||||||||||
Outstanding advances under FHLB funding agreements | $ 29,000,000 | ||||||||||||||||
BBB+ | |||||||||||||||||
Interest rate | 5% | 5% | 5% | ||||||||||||||
Ascona Group Holdings Ltd | |||||||||||||||||
Preferred equity | £ | £ 3.6 | ||||||||||||||||
Market value | $ 2,200,000 | 3,900,000 | |||||||||||||||
Warrants market value | 9,000,000 | ||||||||||||||||
Investment income | 9,000,000 | ||||||||||||||||
Investment income, non-controlling interest | 2,400,000 | ||||||||||||||||
SRC3 | |||||||||||||||||
Ownership interest | 100% | ||||||||||||||||
Ascona Asset Holding LLC | |||||||||||||||||
Preferred equity | £ | £ 3.6 | ||||||||||||||||
PF Collinwood Holdings LLC | |||||||||||||||||
Other invested assets | 13,700,000 | 14,500,000 | |||||||||||||||
SRC1 | |||||||||||||||||
Payments to acquire SRC | $ 21,400,000 | ||||||||||||||||
Sale of non controlling interest | 15,000,000 | ||||||||||||||||
Python Asset Holding LLC | |||||||||||||||||
Fund investments | $ 400,000 | ||||||||||||||||
Other investments in fund | $ 7,400,000 | ||||||||||||||||
Ownership (as a percent) | 100% | ||||||||||||||||
United Kingdom, Pounds | |||||||||||||||||
Cash held in custody accounts | 100,000 | 3,000,000 | £ 0.1 | £ 2.2 | |||||||||||||
Euro Member Countries, Euro | |||||||||||||||||
Cash held in custody accounts | $ 100,000 | 10,600,000 | € 0.1 | € 9.3 | |||||||||||||
Computer Software, Intangible Asset | |||||||||||||||||
Useful life of intangible assets | 5 years | ||||||||||||||||
Capitalized software | $ 1,400,000 | $ 1,200,000 | |||||||||||||||
Furniture and Fixtures | Minimum | |||||||||||||||||
Useful life | 3 years | ||||||||||||||||
Furniture and Fixtures | Maximum | |||||||||||||||||
Useful life | 7 years | ||||||||||||||||
Computer Software, Intangible Asset | |||||||||||||||||
Useful life | 3 years | ||||||||||||||||
FHLB advances | |||||||||||||||||
Percentage of borrowing equals the purchase of FHLB activity-based common stock | 4.50% | 4.50% | |||||||||||||||
Percentage of net aggregate admitted retained assets equals the maximum amount of borrowing | 5% | 5% | |||||||||||||||
Advances received from FHLB under funding agreements | $ 29,000,000 | ||||||||||||||||
Repayments on FHLB funding agreements | 0 | ||||||||||||||||
Outstanding advances under FHLB funding agreements | 29,000,000 | $ 0 | |||||||||||||||
FHLB funding agreements, matured on January 22, 2025 | |||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 13,000,000 | ||||||||||||||||
Interest Rate | 4.69% | 4.69% | 4.69% | ||||||||||||||
FHLB funding agreements, matured on August 16, 2025 | |||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 8,000,000 | ||||||||||||||||
Interest Rate | 4.96% | 4.96% | 4.96% | ||||||||||||||
FHLB funding agreements, matured on September 15, 2027 | |||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 8,000,000 | ||||||||||||||||
Interest Rate | 4.97% | 4.97% | 4.97% | ||||||||||||||
Securities Purchase Agreement | SRC1 | |||||||||||||||||
Ownership (as a percent) | 30% | 30% | 30% | ||||||||||||||
Seneca Re Agreement | |||||||||||||||||
Basic Income (loss) per common share | $ / shares | $ (1.91) | ||||||||||||||||
Seneca Re Agreement | MYGA | |||||||||||||||||
Percentage of indemnity coinsurance | 25% | ||||||||||||||||
Seneca Re Agreement | FIA | |||||||||||||||||
Percentage of indemnity coinsurance | 40% | ||||||||||||||||
Seneca Re Agreement | SRC1 | MYGA-3 | |||||||||||||||||
Percentage of multi year guaranteed annuity | 10% | ||||||||||||||||
SRC1 | SRC1 | |||||||||||||||||
Ownership (as a percent) | 100% | ||||||||||||||||
SRC3 | |||||||||||||||||
Shares sold, value | $ 5,700,000 | ||||||||||||||||
Proceeds from capital contribution | $ 5,500,000 | ||||||||||||||||
Credit Agreement | Revolving Credit Facility | |||||||||||||||||
Loan term | 3 years | ||||||||||||||||
Maximum borrowing capacity | $ 30,000,000 | ||||||||||||||||
Outstanding balance | $ 25,000,000 | ||||||||||||||||
Unutilized credit | 5,000,000 | ||||||||||||||||
American Life and Security National Life Insurance | |||||||||||||||||
Percentage of quota share of liabilities | 0% | ||||||||||||||||
Net premium income | 37,500,000 | 37,500,000 | |||||||||||||||
Net statutory reserves | 34,800,000 | 34,800,000 | |||||||||||||||
Amount owed deposit account | $ 2,400,000 | $ 2,400,000 | |||||||||||||||
American Life and Security National Life Insurance | US Alliance Agreement | MYGA | |||||||||||||||||
Percentage of multi year guaranteed annuity | 20% | 20% | |||||||||||||||
American Life and Security National Life Insurance | US Alliance Agreement | FIA | |||||||||||||||||
Percentage of fixed indexed annuity | 20% | 20% | 20% | ||||||||||||||
SRC4 | |||||||||||||||||
Net premium income | $ 21,400,000 | $ 21,400,000 | |||||||||||||||
Net statutory reserves | $ 21,500,000 | ||||||||||||||||
Amount owed deposit account | $ 21,500,000 | ||||||||||||||||
SRC4 | Seneca Re Agreement | MYGA-5 | |||||||||||||||||
Percentage of multi year guaranteed annuity | 45% | ||||||||||||||||
Percentage of indemnity coinsurance | 45% | ||||||||||||||||
SRC4 | Seneca Re Agreement | MYGA-3 | |||||||||||||||||
Percentage of indemnity coinsurance | 10% | ||||||||||||||||
Multi Year Guaranteed Annuity | |||||||||||||||||
Number of products | product | 2 | ||||||||||||||||
Multi Year Guaranteed Annuity | SRC3 | |||||||||||||||||
Percentage of indemnity coinsurance | 45% | ||||||||||||||||
Multi Year Guaranteed Annuity | Crestline Assurance Holdings LLC | Master Letter Agreement | |||||||||||||||||
Percentage of indemnity coinsurance | 25% | ||||||||||||||||
Fixed Index Annuity | |||||||||||||||||
Number of products | product | 2 | ||||||||||||||||
Fixed Index Annuity | SRC3 | |||||||||||||||||
Percentage of indemnity coinsurance | 45% | ||||||||||||||||
One time reinsurance funding for a quota share of the liabilities | $ 10,000,000 | ||||||||||||||||
Fixed Index Annuity | Crestline Assurance Holdings LLC | Master Letter Agreement | |||||||||||||||||
Percentage of indemnity coinsurance | 40% | ||||||||||||||||
Exchange Traded Funds | |||||||||||||||||
Equity securities, fair value | 5,100,000 | $ 21,900,000 | |||||||||||||||
ORIX USA | SRC1 | |||||||||||||||||
Ownership (as a percent) | 30% | 30% | 30% | 30% | |||||||||||||
Sale of non controlling interest | $ 15,000,000 | $ 15,000,000 | |||||||||||||||
Percentage of ownership interest sold | 70% | 70% | 70% | ||||||||||||||
ORIX USA | Securities Purchase Agreement | |||||||||||||||||
Percentage of ownership interest sold | 70% | ||||||||||||||||
American Life | PF Collinwood Holdings LLC | |||||||||||||||||
Ownership (as a percent) | 100% | 100% | 100% | ||||||||||||||
Investment Manager | |||||||||||||||||
Other investments in fund | $ 98,400,000 | ||||||||||||||||
Other invested assets | $ 112,400,000 | ||||||||||||||||
American Life | Ascona Group Holdings Ltd | |||||||||||||||||
Ownership interest | 74% | 74% | 74% | ||||||||||||||
Seneca Reinsurance Company, LLC | |||||||||||||||||
Contributions made | $ 300,000 | ||||||||||||||||
Ownership percentage acquired | 100% | ||||||||||||||||
Crestline Assurance Holdings LLC | Ascona Group Holdings Ltd | |||||||||||||||||
Ownership interest | 26% | 26% | 26% |
Nature of Operations and Summ_5
Nature of Operations and Summary of Significant Accounting Policies - Deferred acquisition costs (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Deferred Acquisition Costs | ||
Deferred Policy Acquisition Cost, Beginning Balance | $ 24,530 | $ 13,456 |
Additions | 23,857 | 13,402 |
Amortization | (3,905) | (2,886) |
Interest | (883) | 632 |
Impact of unrealized investment losses | (166) | (74) |
Deferred Policy Acquisition Cost, Ending Balance | $ 43,433 | $ 24,530 |
Nature of Operations and Summ_6
Nature of Operations and Summary of Significant Accounting Policies - Earnings (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Nature of Operations and Summary of Significant Accounting Policies. | ||
Net income (loss) attributable to Midwest Holding Inc. | $ 7,140 | $ (16,637) |
Weighted average common shares outstanding | 3,736,283 | 3,737,564 |
Stock options and deferred compensation agreements | 68,000 | |
Denominator for earnings (loss) per common share | 3,804,283 | 3,737,564 |
Basic Income (loss) per common share | $ 1.91 | $ (4.45) |
Diluted Income (loss) per common share | $ 1.88 | $ (4.45) |
Common stock, shares issued | 3,727,976 | 3,737,564 |
Common stock, shares outstanding | 3,727,976 | 3,737,564 |
Non-voting common shares authorized | 2,000,000 | 2,000,000 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Non-controlling Interest (Detai
Non-controlling Interest (Details) £ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 30, 2021 USD ($) | Sep. 28, 2020 GBP (£) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2020 | |
SRC1 | |||||
Sale of non controlling interest | $ 15 | ||||
Ascona Collinwood HoldCo LLC (ACH) | |||||
Market value | $ 9 | ||||
Ascona Asset Holding LLC | |||||
Preferred equity | £ | £ 3.6 | ||||
American Life | Ascona Collinwood HoldCo LLC (ACH) | |||||
Fair value of preferred stock | 2.2 | $ 3.9 | |||
American Life | Ascona Collinwood HoldCo LLC (ACH) | Ascona Collinwood HoldCo LLC (ACH) | |||||
Ownership interest | 74% | ||||
Crestline SP 1 | Ascona Collinwood HoldCo LLC (ACH) | |||||
Market value | 2.4 | ||||
Crestline SP 1 | Ascona Collinwood HoldCo LLC (ACH) | Ascona Asset Holding LLC | |||||
Ownership interest | 26% | ||||
ORIX USA | SRC1 | |||||
Percentage of ownership interest sold | 70% | 70% | |||
Sale of non controlling interest | $ 15 | 15 | |||
Ownership (as a percent) | 30% | 30% | |||
Income attributable to non-controlling interest | $ 7.3 |
Investments (Schedule of Amorti
Investments (Schedule of Amortized Cost and Estimated Fair Value of Investments) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Amortized Cost | $ 1,269,735 | $ 679,921 |
Total fixed maturities | 1,214,635 | 683,296 |
Mortgage loans on real estate, held for investment | 227,047 | 183,203 |
Derivatives, Cost | 30,239 | 18,654 |
Derivatives, Gross Unrealized Gains | 2,694 | 6,391 |
Derivatives, Gross Unrealized Losses | 16,999 | 2,023 |
Estimated Fair Value | 15,934 | 23,022 |
Equity Securities, Amortized Cost | 5,592 | 22,158 |
Equity securities, Gross Unrealized Losses | 481 | 289 |
Equity securities, fair value | 5,111 | 21,869 |
Other invested assets, Cost | 108,979 | 34,491 |
Other invested assets, Gross Unrealized Gains | 3,667 | 813 |
Other invested assets, Gross Unrealized Losses | 215 | 11 |
Other invested assets | 112,431 | 35,293 |
Investment escrow | 800 | 3,600 |
Preferred stock , Amortized cost | 35,644 | 14,885 |
Preferred stock, Gross Unrealized Gains | 1,757 | 3,801 |
Preferred stock, Gross Unrealized Losses | 5,986 | |
Preferred stock, Fair value | 31,415 | 18,686 |
Deposits and notes receivable, Amortized Cost | 8,359 | 10,071 |
Deposits and notes receivable, Estimated Fair Value | 8,359 | 10,071 |
Notes receivable | 6,300 | 6,000 |
Policy Loans | 25 | 87 |
Total investments, Amortized Cost | 1,685,620 | 963,470 |
Investments, Gross Unrealized Gains | 11,668 | 18,273 |
Investments, Gross Unrealized Losses | 82,331 | 6,216 |
Investments, Fair Value Disclosure | 1,614,957 | 975,527 |
Estimated Fair Value | 1,614,957 | |
Redeemable preferred stock | ||
Amortized Cost | 14,282 | |
Gross Unrealized Gains | 53 | |
Gross Unrealized Losses | 245 | |
Total fixed maturities | 14,090 | |
Fixed Maturities | ||
Amortized Cost | 1,269,735 | 679,921 |
Gross Unrealized Gains | 3,550 | 7,268 |
Gross Unrealized Losses | 58,650 | 3,893 |
Total fixed maturities | 1,214,635 | 683,296 |
U.S. government obligations | ||
Amortized Cost | 1,343 | 1,855 |
Gross Unrealized Gains | 32 | |
Gross Unrealized Losses | 81 | 5 |
Total fixed maturities | 1,262 | 1,882 |
Mortgage-back securities | ||
Amortized Cost | 316,105 | 55,667 |
Gross Unrealized Gains | 469 | 368 |
Gross Unrealized Losses | 22,508 | 755 |
Total fixed maturities | 294,066 | 55,280 |
Asset-backed securities | ||
Amortized Cost | 34,728 | 24,675 |
Gross Unrealized Gains | 17 | 443 |
Gross Unrealized Losses | 3,989 | 167 |
Total fixed maturities | 30,756 | 24,951 |
Collateralized loan obligation | ||
Amortized Cost | 308,871 | 272,446 |
Gross Unrealized Gains | 726 | 2,928 |
Gross Unrealized Losses | 21,924 | 851 |
Total fixed maturities | 287,673 | 274,523 |
States and Political Subdivisions - general obligations | ||
Amortized Cost | 104 | 105 |
Gross Unrealized Gains | 9 | |
Gross Unrealized Losses | 3 | |
Total fixed maturities | 101 | 114 |
States and Political Subdivisions - special revenue | ||
Amortized Cost | 228 | 4,487 |
Gross Unrealized Gains | 1,129 | |
Gross Unrealized Losses | 23 | 4 |
Total fixed maturities | 205 | 5,612 |
Corporate | ||
Amortized Cost | 46,700 | 35,392 |
Gross Unrealized Gains | 415 | 1,846 |
Gross Unrealized Losses | 5,515 | 99 |
Total fixed maturities | 41,600 | 37,139 |
Term loans | ||
Amortized Cost | 561,656 | 268,794 |
Gross Unrealized Gains | 1,923 | 441 |
Gross Unrealized Losses | 4,607 | 1,767 |
Total fixed maturities | $ 558,972 | 267,468 |
Trust preferred. | ||
Amortized Cost | 2,218 | |
Gross Unrealized Gains | 19 | |
Total fixed maturities | $ 2,237 |
Investments (Schedule of Credit
Investments (Schedule of Credit Ratings of Fixed Maturity Securities) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 1,214,635 | $ 683,296 |
Fixed Maturities | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 1,214,635 | $ 683,296 |
Percent | 100% | 100% |
Fixed Maturities | Investment grade | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 1,115,885 | $ 633,996 |
Percent | 91.90% | 92.80% |
Fixed Maturities | Investment grade | AAA and U.S. Government | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 124,183 | $ 2,674 |
Percent | 10.20% | 0.40% |
Fixed Maturities | Investment grade | AA | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 815 | $ 482 |
Percent | 0.10% | 0.10% |
Fixed Maturities | Investment grade | A | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 371,371 | $ 168,141 |
Percent | 30.60% | 24.60% |
Fixed Maturities | Investment grade | BBB | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 619,516 | $ 462,699 |
Percent | 51% | 67.70% |
Fixed Maturities | Non investment grade | BB and other | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 98,750 | $ 49,300 |
Percent | 8.10% | 7.20% |
Investments (Schedule of Unreal
Investments (Schedule of Unrealized Loss of Securities) (Details) $ in Thousands | Dec. 31, 2022 USD ($) security | Dec. 31, 2021 USD ($) security |
Redeemable preferred stock | ||
Estimated Fair Value, Less than 12 months | $ 10,837 | |
Gross Unrealized Loss, Less than 12 months | $ 245 | |
Number of Securities, Less than 12 months | security | 6 | |
Fixed Maturities | ||
Estimated Fair Value, Total | $ 1,120,411 | $ 258,081 |
Gross Unrealized Loss, Total | $ 58,650 | $ 3,893 |
Number of Securities, Total | security | 568 | 231 |
U.S. government obligations | ||
Estimated Fair Value, Less than 12 months | $ 1,135 | $ 104 |
Gross Unrealized Loss, Less than 12 months | $ 70 | $ 2 |
Number of Securities, Less than 12 months | security | 13 | 1 |
Estimated Fair value, Greater than 12 months | $ 126 | $ 66 |
Gross Unrealized Loss, Greater than 12 months | $ 11 | $ 3 |
Number of Securities, Greater than 12 months | security | 5 | 3 |
Mortgage-back securities | ||
Estimated Fair Value, Less than 12 months | $ 233,624 | $ 35,403 |
Gross Unrealized Loss, Less than 12 months | $ 18,464 | $ 755 |
Number of Securities, Less than 12 months | security | 89 | 35 |
Estimated Fair value, Greater than 12 months | $ 17,985 | |
Gross Unrealized Loss, Greater than 12 months | $ 4,044 | |
Number of Securities, Greater than 12 months | security | 14 | |
Asset-backed securities | ||
Estimated Fair Value, Less than 12 months | $ 24,552 | $ 12,355 |
Gross Unrealized Loss, Less than 12 months | $ 3,278 | $ 167 |
Number of Securities, Less than 12 months | security | 23 | 13 |
Estimated Fair value, Greater than 12 months | $ 5,321 | |
Gross Unrealized Loss, Greater than 12 months | $ 711 | |
Number of Securities, Greater than 12 months | security | 7 | |
Collateralized loan obligation | ||
Estimated Fair Value, Less than 12 months | $ 203,549 | $ 90,731 |
Gross Unrealized Loss, Less than 12 months | $ 16,730 | $ 851 |
Number of Securities, Less than 12 months | security | 252 | 115 |
Estimated Fair value, Greater than 12 months | $ 37,814 | |
Gross Unrealized Loss, Greater than 12 months | $ 5,194 | |
Number of Securities, Greater than 12 months | security | 47 | |
States and Political Subdivisions - general obligations | ||
Estimated Fair Value, Less than 12 months | $ 101 | |
Gross Unrealized Loss, Less than 12 months | $ 3 | |
Number of Securities, Less than 12 months | security | 1 | |
States and Political Subdivisions - special revenue | ||
Estimated Fair Value, Less than 12 months | $ 47 | $ 217 |
Gross Unrealized Loss, Less than 12 months | $ 2 | $ 4 |
Number of Securities, Less than 12 months | security | 3 | 0 |
Estimated Fair value, Greater than 12 months | $ 158 | |
Gross Unrealized Loss, Greater than 12 months | $ 21 | |
Number of Securities, Greater than 12 months | security | 7 | |
Corporate | ||
Estimated Fair Value, Less than 12 months | $ 37,286 | $ 2,367 |
Gross Unrealized Loss, Less than 12 months | $ 5,426 | $ 73 |
Number of Securities, Less than 12 months | security | 64 | 9 |
Estimated Fair value, Greater than 12 months | $ 376 | $ 324 |
Gross Unrealized Loss, Greater than 12 months | $ 89 | $ 26 |
Number of Securities, Greater than 12 months | security | 7 | 2 |
Term loans | ||
Estimated Fair Value, Less than 12 months | $ 558,337 | $ 105,677 |
Gross Unrealized Loss, Less than 12 months | $ 4,607 | $ 1,767 |
Number of Securities, Less than 12 months | security | 36 | 47 |
Investments (Schedule of Fixed
Investments (Schedule of Fixed Maturities) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Investments. | ||
Amortized Cost, Due in one year or less | $ 67,088 | |
Amortized Cost, Due after one year through five years | 631,956 | |
Amortized Cost, Due after five years through ten years | 481,819 | |
Amortized Cost, Due after ten years through twenty years | 57,113 | |
Amortized Cost, Due after twenty years | 31,759 | |
Amortized Cost | 1,269,735 | $ 679,921 |
Estimated Fair Value, Due in one year or less | 65,223 | |
Estimated Fair Value, Due after one year through five years | 618,744 | |
Estimated Fair Value, Due after five years through ten years | 452,108 | |
Estimated Fair Value, Due after ten years through twenty years | 53,238 | |
Estimated Fair Value, Due after twenty years | 25,322 | |
Estimated Fair Value | $ 1,214,635 | $ 683,296 |
Investments (Schedule of Invest
Investments (Schedule of Investments Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | $ 227,047 | $ 183,203 |
1-4 Family | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 59,579 | 72,324 |
Hospitality | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 12,902 | 12,822 |
Land | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 62,119 | 15,904 |
Multifamily(5+) | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 34,072 | 31,583 |
Retail Mortgage Loans | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 22,119 | 17,655 |
Other. | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | 36,256 | 32,915 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Carrying Value | $ 227,047 | $ 183,203 |
Investments (Schedule of Mortga
Investments (Schedule of Mortgage Loan Investments) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Mortgage loans on real estate, held for investment | $ 227,047 | $ 183,203 |
0%-59.99% | ||
Mortgage loans on real estate, held for investment | 108,281 | 91,104 |
60%-69.99% | ||
Mortgage loans on real estate, held for investment | 79,968 | 42,819 |
70%-79.99% | ||
Mortgage loans on real estate, held for investment | 33,268 | 44,106 |
80% or greater | ||
Mortgage loans on real estate, held for investment | $ 5,530 | $ 5,174 |
Investments (Components of Net
Investments (Components of Net Investment Income) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Gross investment income | $ 41,092 | $ 17,591 |
Less: investment (expenses) refund | (5,977) | (1,854) |
Investment income, net of expenses | 35,115 | 15,737 |
Fixed Maturities | ||
Gross investment income | 38,299 | 16,443 |
Mortgage loans | ||
Gross investment income | 2,456 | 185 |
Other invested assets | ||
Gross investment income | 1,854 | 665 |
Other interest income | ||
Gross investment income | $ (1,517) | $ 298 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Impairment on fixed maturities | $ 0 | $ 0 |
Amortized cost | 1,200,000 | 3,000,000 |
Fair value | 1,000,000 | 3,000,000 |
Mortgage backed and asset backed securities at fair value | 7,700,000 | |
Mortgage servicing rights MSR impairment recovery | 1,400,000 | |
Valuation allowances on mortgage loans | 0 | |
Proceeds from sales of available-for-sale investments | 456,600,000 | 356,800,000 |
Gross realized gain | 1,700,000 | 6,000,000 |
Gross realized losses | 39,000,000 | 1,400,000 |
Unrealized gains (losses) associated with assets of third party reinsurers that are retained by American Life | $ (69,200,000) | $ 12,100,000 |
Mortgage Loans Secured by Property | Delaware | Geographic Concentration Risk | ||
Concentration risk percentage | 10% | |
Mortgage Loans Secured by Property | New York | Geographic Concentration Risk | ||
Concentration risk percentage | 24% | 32% |
Mortgage Loans Secured by Property | Arizona | Geographic Concentration Risk | ||
Concentration risk percentage | 5% | 4% |
Mortgage Loans Secured by Property | California | Geographic Concentration Risk | ||
Concentration risk percentage | 6% | 4% |
Mortgage Loans Secured by Property | Florida | Geographic Concentration Risk | ||
Concentration risk percentage | 15% | |
Mortgage Loans Secured by Property | Non-US | Geographic Concentration Risk | ||
Concentration risk percentage | 9% |
Derivative Instruments (Details
Derivative Instruments (Details) $ in Thousands | Dec. 31, 2022 USD ($) contract | Dec. 31, 2021 USD ($) contract |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Estimated Fair Value | $ 15,934 | $ 23,022 |
Derivatives not designated as hedge | Equity-indexed options | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 831,657 | $ 526,096 |
Number of Contracts | contract | 595 | 482 |
Estimated Fair Value | $ 15,592 | $ 23,766 |
Derivatives not designated as hedge | Equity-indexed embedded derivative | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 782,997 | $ 525,548 |
Number of Contracts | contract | 6,131 | 4,205 |
Estimated Fair Value | $ 111,618 | $ 123,692 |
Derivative Instruments - Funds
Derivative Instruments - Funds Withheld Provision (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Total return swap value | $ 10,600 | $ (2,800) |
Unrealized gains (losses) | (10,500) | 200 |
Unrealized gains (losses) | 54,020 | 3,797 |
Reinsurance recoverables (See Note 8) | 20,190 | 38,579 |
Embedded derivative losses | 2,800 | |
Embedded derivative gains | 10,600 | |
Embedded derivatives gain loss | 10,600 | (2,800) |
American Republic Insurance Company | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Reinsurance recoverables (See Note 8) | 5,879 | 4,885 |
Crestline SP 1 | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Reinsurance recoverables (See Note 8) | 18,288 | |
US Alliance Life and Security Company | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Reinsurance recoverables (See Note 8) | 52,378 | 5,064 |
Funds With held Provision Agreement | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 782,573 | 560,877 |
Market value of assets | 772,109 | 561,038 |
Total return swap value | 10,464 | (161) |
Unrealized gain (loss) on embedded derivatives | (10,600) | 2,800 |
Embedded derivatives gain loss | 10,464 | (161) |
Funds With held Provision Agreement | American Republic Insurance Company | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 150,413 | 74,983 |
Market value of assets | 143,952 | 74,670 |
Total return swap value | 6,461 | 313 |
Embedded derivatives gain loss | 6,461 | 313 |
Funds With held Provision Agreement | Crestline SP 1 | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 354,806 | 228,560 |
Market value of assets | 356,374 | 228,450 |
Total return swap value | (1,568) | 110 |
Embedded derivatives gain loss | (1,568) | 110 |
Funds With held Provision Agreement | Ironbound Reinsurance Company Limited | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 159,644 | 154,867 |
Market value of assets | 154,477 | 155,755 |
Total return swap value | 5,167 | (888) |
Embedded derivatives gain loss | 5,167 | (888) |
Funds With held Provision Agreement | Ascendent Re | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 56,064 | 56,246 |
Market value of assets | 54,790 | 56,078 |
Total return swap value | 1,274 | 168 |
Embedded derivatives gain loss | 1,274 | 168 |
Funds With held Provision Agreement | SRC1 | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 61,646 | |
Market value of assets | 62,516 | |
Total return swap value | (870) | |
Embedded derivatives gain loss | $ (870) | |
Funds With held Provision Agreement | US Alliance Agreement | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Book value of assets | 46,221 | |
Market value of assets | 46,085 | |
Total return swap value | 136 | |
Embedded derivatives gain loss | $ 136 |
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 ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 1,214,635 | $ 683,296 |
Mortgage loans on real estate, held for investment | 227,047 | 183,203 |
Derivative instruments (See Note 4) | 15,934 | 23,022 |
Equity securities, fair value | 5,111 | 21,869 |
Other Invested assets | 112,431 | 35,293 |
Investment escrow | 800 | 3,600 |
Preferred stock | 31,415 | 18,686 |
Deposits and notes receivable | 8,359 | 10,071 |
Notes receivable | 6,300 | 6,000 |
Policy Loans | 25 | 87 |
Total Investments | 1,614,957 | 975,527 |
Embedded derivative for equity-indexed contracts | 111,618 | 123,692 |
Transfers between levels | 0 | 0 |
Redeemable preferred stock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 14,090 | |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Other Invested assets | 12,434 | |
Total Investments | 12,434 | |
Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments (See Note 4) | 15,934 | 23,022 |
Equity securities, fair value | 5,111 | 21,869 |
Preferred stock | 9,544 | |
Deposits and notes receivable | 7,053 | 9,571 |
Total Investments | 693,305 | 470,290 |
Fair Value, Inputs, Level 2 | Redeemable preferred stock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 14,090 | |
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 | 227,047 | 183,203 |
Other Invested assets | 99,997 | 35,293 |
Preferred stock | 21,871 | 18,686 |
Deposits and notes receivable | 1,306 | 500 |
Policy Loans | 25 | 87 |
Total Investments | 909,218 | 505,237 |
Embedded derivative for equity-indexed contracts | 111,618 | 123,692 |
Fixed Maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 1,214,635 | 683,296 |
Fixed Maturities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 655,663 | 415,828 |
Fixed Maturities | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 558,972 | 267,468 |
U.S. government obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 1,262 | 1,882 |
U.S. government obligations | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 1,262 | 1,882 |
Mortgage-back securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 294,066 | 55,280 |
Mortgage-back securities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 294,066 | 55,280 |
Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 30,756 | 24,951 |
Asset-backed securities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 30,756 | 24,951 |
Collateralized loan obligation | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 287,673 | 274,523 |
Collateralized loan obligation | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 287,673 | 274,523 |
States and Political Subdivisions - general obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 101 | 114 |
States and Political Subdivisions - general obligations | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 101 | 114 |
States and Political Subdivisions - special revenue | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 205 | 5,612 |
States and Political Subdivisions - special revenue | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 205 | 5,612 |
Trust preferred | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,237 | |
Trust preferred | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,237 | |
Trust preferred. | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 2,237 | |
Corporate | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 41,600 | 37,139 |
Corporate | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 41,600 | 37,139 |
Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 558,972 | 267,468 |
Term loans | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 558,972 | $ 267,468 |
Preferred Stock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 31,415 | |
Other invested assets | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 112,431 |
Fair Values of Financial Inst_4
Fair Values of Financial Instruments (Schedule of Financial Assets and Liabilities at Fair Value) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Assets | ||
Cash | $ 191,414 | $ 142,013 |
Liabilities: | ||
Notes payable | 25,000 | |
Fair Value, Inputs, Level 2 | ||
Assets | ||
Cash | 191,414 | 142,013 |
Fair Value, Inputs, Level 3 | ||
Assets | ||
Policy loans | 25 | 87 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 1,743,348 | 1,075,439 |
Carrying Amount | ||
Assets | ||
Policy loans | 25 | 87 |
Cash | 191,414 | 142,013 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 1,743,348 | 1,075,439 |
Fair Value | ||
Assets | ||
Policy loans | 25 | 87 |
Cash | 191,414 | 142,013 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | $ 1,743,348 | $ 1,075,439 |
Fair Values of Financial Inst_5
Fair Values of Financial Instruments (Recurring Basis Level 3) (Details) - Fair Value, Inputs, Level 3 - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Assets | ||
Beginning Balance | $ 505,237 | $ 228,085 |
Total realized and unrealized gains (losses) Included In Income | $ (516) | |
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Net realized gains (losses) on investments | |
Total realized and unrealized gains (losses) Included In AOCI | $ (3,460) | $ (289) |
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Asset, Gain (Loss), Statement of Other Comprehensive Income or Comprehensive Income [Extensible Enumeration] | Other comprehensive (loss) before reclassifications, net of tax | Other comprehensive (loss) before reclassifications, net of tax |
Net Purchases, Issuances, Sales, and Settlements | $ 407,441 | $ 277,947 |
Ending Balance | 909,218 | 505,237 |
Liabilities | ||
Beginning Balance | (123,692) | (84,501) |
Total realized and unrealized gains (losses) Included In Income | $ (10,193) | $ (4,169) |
Fair Value, Liability, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Net realized gains (losses) on investments | Net realized gains (losses) on investments |
Net Purchases, Issuances, Sales, and Settlements | $ 22,267 | $ (35,022) |
Ending Balance | (111,618) | (123,692) |
Equity-indexed embedded derivative | ||
Liabilities | ||
Beginning Balance | (123,692) | (84,501) |
Total realized and unrealized gains (losses) Included In Income | (10,193) | (4,169) |
Net Purchases, Issuances, Sales, and Settlements | 22,267 | (35,022) |
Ending Balance | (111,618) | (123,692) |
Term loans | ||
Assets | ||
Beginning Balance | 267,468 | 107,254 |
Total realized and unrealized gains (losses) Included In Income | (1,326) | |
Total realized and unrealized gains (losses) Included In AOCI | (2,683) | 225 |
Net Purchases, Issuances, Sales, and Settlements | 294,187 | 161,315 |
Ending Balance | 558,972 | 267,468 |
Policy loans | ||
Assets | ||
Beginning Balance | 87 | 46 |
Net Purchases, Issuances, Sales, and Settlements | (62) | 31 |
Ending Balance | 25 | 87 |
Mortgage loans on real estate, held for investment | ||
Assets | ||
Beginning Balance | 183,203 | 94,990 |
Net Purchases, Issuances, Sales, and Settlements | 43,844 | 88,213 |
Ending Balance | 227,047 | 183,203 |
Deposits and notes receivable | ||
Assets | ||
Beginning Balance | 500 | |
Net Purchases, Issuances, Sales, and Settlements | 806 | 500 |
Ending Balance | 1,306 | 500 |
Other invested assets | ||
Assets | ||
Beginning Balance | 35,293 | 21,897 |
Total realized and unrealized gains (losses) Included In Income | 810 | |
Total realized and unrealized gains (losses) Included In AOCI | 3,452 | (671) |
Net Purchases, Issuances, Sales, and Settlements | 61,252 | 13,257 |
Ending Balance | 99,997 | 35,293 |
Preferred Stock | ||
Assets | ||
Beginning Balance | 18,686 | 3,898 |
Total realized and unrealized gains (losses) Included In AOCI | (4,229) | 157 |
Net Purchases, Issuances, Sales, and Settlements | 7,414 | 14,631 |
Ending Balance | $ 21,871 | $ 18,686 |
Fair Values of Financial Inst_6
Fair Values of Financial Instruments (Summary of unobservable inputs) (Details) $ in Thousands | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 1,214,635 | $ 683,296 |
Mortgage loans on real estate, held for investment | 227,047 | 183,203 |
Other Invested assets | 112,431 | 35,293 |
Preferred stock | 31,415 | 18,686 |
Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 558,972 | 267,468 |
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 | $ 227,047 | 183,203 |
Mortgage Loans on Real Estate, Valuation Technique [Extensible Enumeration] | mdwt:ValuationTechniqueYieldAnalysisMember | |
Mortgage Loans on Real Estate, Measurement Input [Extensible Enumeration] | Principal funded | |
Other Invested assets | $ 99,997 | 35,293 |
Preferred stock | $ 21,871 | 18,686 |
Preferred Stock, Valuation Technique [Extensible Enumeration] | us-gaap:MarketApproachValuationTechniqueMember | |
Preferred Stock, Measurement Input [Extensible Enumeration] | EBITDA Multiple | |
Fair Value, Inputs, Level 3 | Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 558,972 | 267,468 |
Fair Value, Inputs, Level 3 | Non performance risk | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 111,600 | $ 123,700 |
Embedded Derivative Liability, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueOptionPricingModelMember | us-gaap:ValuationTechniqueOptionPricingModelMember |
Fair Value, Inputs, Level 3 | Non performance risk | Minimum | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.006 | 0.003 |
Fair Value, Inputs, Level 3 | Non performance risk | Maximum | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.015 | 0.011 |
Fair Value, Inputs, Level 3 | Non performance risk | Weighted average | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.011 | 0.006 |
Fair Value, Inputs, Level 3 | Option budget | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.011 | |
Fair Value, Inputs, Level 3 | Option budget | Minimum | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.011 | |
Fair Value, Inputs, Level 3 | Option budget | Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.057 | |
Fair Value, Inputs, Level 3 | Option budget | Maximum | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.034 | |
Fair Value, Inputs, Level 3 | Option budget | Weighted average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.027 | |
Fair Value, Inputs, Level 3 | Option budget | Weighted average | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.024 | |
Fair Value, Inputs, Level 3 | Discount rates | Preferred equity | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 6,100 | $ 4,900 |
Embedded Derivative Liability, Valuation Technique [Extensible List] | mdwt:ValuationTechniqueYieldAnalysisMember | mdwt:ValuationTechniqueYieldAnalysisMember |
Embedded Derivative Liability, Measurement Input [Extensible Enumeration] | Discount rates | Discount rates |
Fair Value, Inputs, Level 3 | Discount rates | Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 559,000 | |
Debt Securities, Available-for-sale, Valuation Technique [Extensible List] | mdwt:ValuationTechniqueYieldAnalysisMember | |
Debt Securities, Available-for-Sale, Measurement Input [Extensible Enumeration] | Discount rates | |
Fair Value, Inputs, Level 3 | Discount rates | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, other invested assets (as a percent) | 0.080 | |
Fair Value, Inputs, Level 3 | Discount rates | Minimum | Preferred equity | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.240 | 0.175 |
Fair Value, Inputs, Level 3 | Discount rates | Minimum | Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, term loans (as a percent) | 0.046 | |
Fair Value, Inputs, Level 3 | Discount rates | Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, other invested assets (as a percent) | 0.255 | |
Fair Value, Inputs, Level 3 | Discount rates | Maximum | Preferred equity | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.280 | 0.195 |
Fair Value, Inputs, Level 3 | Discount rates | Maximum | Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, term loans (as a percent) | 0.173 | |
Fair Value, Inputs, Level 3 | Discount rates | Weighted average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, other invested assets (as a percent) | 0.145 | |
Fair Value, Inputs, Level 3 | Discount rates | Weighted average | Preferred equity | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.260 | 0.185 |
Fair Value, Inputs, Level 3 | Discount rates | Weighted average | Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, term loans (as a percent) | 0.124 | |
Fair Value, Inputs, Level 3 | EBITDA Multiple | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Other Invested assets | $ 100,000 | |
Alternative Investment, Valuation Technique [Extensible Enumeration] | us-gaap:MarketApproachValuationTechniqueMember | |
Preferred stock | $ 31,400 | |
Fair Value, Inputs, Level 3 | EBITDA Multiple | Detachable warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 2,200 | $ 3,800 |
Embedded Derivative Liability, Valuation Technique [Extensible List] | us-gaap:MarketApproachValuationTechniqueMember | us-gaap:MarketApproachValuationTechniqueMember |
Embedded Derivative Liability, Measurement Input [Extensible Enumeration] | EBITDA Multiple | EBITDA Multiple |
Fair Value, Inputs, Level 3 | EBITDA Multiple | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, other invested assets (as a percent) | 0.026 | |
Fair Value, Inputs, Level 3 | EBITDA Multiple | Minimum | Detachable warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.100 | 9 |
Fair Value, Inputs, Level 3 | EBITDA Multiple | Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, other invested assets (as a percent) | 0.031 | |
Fair Value, Inputs, Level 3 | EBITDA Multiple | Maximum | Detachable warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.115 | 10 |
Fair Value, Inputs, Level 3 | EBITDA Multiple | Weighted average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, other invested assets (as a percent) | 0.028 | |
Fair Value, Inputs, Level 3 | EBITDA Multiple | Weighted average | Detachable warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 1 | 1 |
Fair Value, Inputs, Level 3 | Surrender rate | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.005 | |
Fair Value, Inputs, Level 3 | Surrender rate | Minimum | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.005 | |
Fair Value, Inputs, Level 3 | Surrender rate | Maximum | Base | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.15 | 0.15 |
Fair Value, Inputs, Level 3 | Surrender rate | Maximum | Additional Shock | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.30 | 0.30 |
Fair Value, Inputs, Level 3 | Surrender rate | Weighted average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.105 | |
Fair Value, Inputs, Level 3 | Surrender rate | Weighted average | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest sensitive contract liabilities, embedded derivative (as a percent) | 0.077 | |
Fair Value, Inputs, Level 3 | Principal funded | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage loans on real estate, held for investment | $ 227,000 |
Fair Values of Financial Inst_7
Fair Values of Financial Instruments (Narrative) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Investment escrow | $ 800,000 | $ 3,600,000 |
Equity securities, fair value | 5,111,000 | 21,869,000 |
Notes receivable | 6,300,000 | 6,000,000 |
Mortgage backed and asset backed securities at fair value | 7,700,000 | |
Mortgage servicing rights MSR impairment recovery | 1,400,000 | |
Valuation allowances on mortgage loans | 0 | |
Perpetual preferred stock | 10,000,000 | |
Preferred stock | 31,415,000 | 18,686,000 |
Other Invested assets | 112,431,000 | 35,293,000 |
Transfers between levels | $ 0 | 0 |
BBB+ | ||
Interest rate | 5% | |
Exchange Traded Funds | ||
Equity securities, fair value | $ 5,100,000 | $ 21,900,000 |
Deposit-Type Contracts (Details
Deposit-Type Contracts (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Beginning balance | $ 1,075,439 | $ 597,868 |
US Alliance | (2,176) | 1,873 |
Unified Life Insurance Company | (10) | 468 |
Deposits received | 745,083 | 471,646 |
Investment earnings (includes embedded derivative) | (10,193) | 7,012 |
Withdrawals | (51,659) | (18,446) |
Policy charges | (820) | (842) |
Ending balance | 1,743,348 | 1,075,439 |
FHLB borrowings outstanding | 29,000 | 0 |
Ironbound Reinsurance Company Limited | ||
Ironbound Reinsurance Company Limited | 5,959 | 6,579 |
Ascendant Re | ||
Deposit contract | (3,185) | 2,880 |
Crestline SP 1 | ||
Deposit contract | (11,623) | 4,834 |
American Republic Insurance Company | ||
Deposit contract | (4,080) | $ 1,567 |
SRC4 | ||
Deposit contract | $ 613 |
Debt (Details)
Debt (Details) - USD ($) $ in Millions | Nov. 22, 2022 | Dec. 31, 2022 |
Minimum | ||
Line of Credit Facility [Line Items] | ||
Percentage of risk based capital percent | 300% | |
Minimum consolidated liquidity requirement | $ 3 | |
Maximum | ||
Line of Credit Facility [Line Items] | ||
Percentage of consolidated debt to capitalization | 35% | |
Revolving Credit Facility | Credit Agreement | ||
Line of Credit Facility [Line Items] | ||
Loan term | 3 years | |
Maximum borrowing capacity | $ 30 | |
Outstanding balance | $ 25 | |
Unutilized credit | $ 5 | |
Revolving Credit Facility | Credit Agreement | Minimum | Base rate | ||
Line of Credit Facility [Line Items] | ||
Applicable margin | 2.50% | |
Revolving Credit Facility | Credit Agreement | Minimum | SOFR | ||
Line of Credit Facility [Line Items] | ||
Applicable margin | 3.50% | |
Revolving Credit Facility | Credit Agreement | Maximum | Base rate | ||
Line of Credit Facility [Line Items] | ||
Applicable margin | 3.25% | |
Revolving Credit Facility | Credit Agreement | Maximum | SOFR | ||
Line of Credit Facility [Line Items] | ||
Applicable margin | 4.25% |
Reinsurance (Summary of Signifi
Reinsurance (Summary of Significant Reinsurance Amounts) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Reinsurance | |||
Reinsurance recoverables | $ 20,190 | $ 38,579 | |
Deposit-type contracts | 1,743,348 | 1,075,439 | $ 597,868 |
Deposit-type contracts Reinsurance ceded | (912,982) | (647,632) | |
Retained deposit-type contracts | 830,366 | 427,807 | |
Premiums | |||
Direct | 238 | 258 | |
Reinsurance ceded | (238) | (258) | |
Future policy and other policy benefits | |||
Direct | 7 | 159 | |
Reinsurance ceded | $ (7) | $ (159) |
Reinsurance (Schedule of Signif
Reinsurance (Schedule of Significant Reinsurance Balances) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Recoverable on Unpaid Losses | $ 195 | $ 202 |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | 20,337 | 38,727 |
Ceded Due Premiums | (342) | (350) |
Reinsurance recoverables | $ 20,190 | $ 38,579 |
Ironbound Reinsurance Company Limited [Member] | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ (344) | $ (3,561) |
Reinsurance payable | $ (344) | $ (3,561) |
Optimum Reinsurance Company [Member] | ||
AM Best Rating | A | A |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ 601 | $ 561 |
Reinsurance recoverables | $ 601 | $ 561 |
Sagicor Life Insurance Company [Member] | ||
AM Best Rating | A- | A- |
Recoverable on Unpaid Losses | $ 154 | $ 157 |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | 10,744 | 10,901 |
Ceded Due Premiums | (303) | (303) |
Reinsurance recoverables | $ 10,595 | $ 10,755 |
Ascendant Re | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ (2,130) | $ 1,550 |
Reinsurance payable | $ (2,130) | |
Reinsurance recoverables | $ 1,550 | |
Crestline SP 1 | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ (3,357) | $ 18,288 |
Reinsurance payable | $ (3,357) | |
Reinsurance recoverables | $ 18,288 | |
American Republic Insurance Company | ||
AM Best Rating | A | A |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ 5,879 | $ 4,885 |
Reinsurance recoverables | $ 5,879 | $ 4,885 |
Unified Life Insurance Company | ||
AM Best Rating | NR | NR |
Recoverable on Unpaid Losses | $ 41 | $ 45 |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | 986 | 1,013 |
Ceded Due Premiums | (17) | (21) |
Reinsurance recoverables | $ 1,010 | $ 1,037 |
US Alliance Life and Security Company | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ 52,400 | $ 5,090 |
Ceded Due Premiums | (22) | (26) |
Reinsurance recoverables | $ 52,378 | $ 5,064 |
SRC4 | ||
AM Best Rating | NR | |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ (44,442) | |
Reinsurance payable | $ (44,442) |
Reinsurance (Narrative) (Detail
Reinsurance (Narrative) (Details) - USD ($) $ in Thousands | 12 Months Ended | |||||
Feb. 28, 2023 | Sep. 30, 2022 | Nov. 10, 2021 | Apr. 24, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | |
Reinsurance recoverables (See Note 7) | $ 20,190 | $ 38,579 | ||||
Unrealized gains (losses) | (10,500) | 200 | ||||
Embedded derivative gains | 10,600 | |||||
Embedded derivative losses | 2,800 | |||||
Contingency reserves | 0 | 0 | ||||
Seneca Re Agreement | MYGA | ||||||
Percentage of indemnity coinsurance | 25% | |||||
Seneca Re Agreement | FIA | ||||||
Percentage of indemnity coinsurance | 40% | |||||
SRC3 | Multi Year Guaranteed Annuity | ||||||
Percentage of indemnity coinsurance | 45% | |||||
SRC3 | Fixed Index Annuity | ||||||
Percentage of indemnity coinsurance | 45% | |||||
One time reinsurance funding | 10,000 | |||||
US Alliance Life and Security Company | ||||||
Reinsurance recoverables (See Note 7) | 52,378 | 5,064 | ||||
Value of assets transferred to the reinsurer | $ 37,900 | |||||
US Alliance Life and Security Company | US Alliance Agreement | MYGA | ||||||
Percentage of multi year guaranteed annuity | 20% | |||||
American Life | ||||||
Net premium income | $ 37,500 | |||||
Net statutory reserves | $ 43,600 | |||||
American Life | FW, Modco Agreement | MYGA | ||||||
Percentage of multi year guaranteed annuity | 45% | |||||
American Life | FW, Modco Agreement | FIA | ||||||
Percentage of fixed indexed annuity | 45% | |||||
Unified Life Insurance Company | ||||||
Reinsurance recoverables (See Note 7) | $ 1,010 | 1,037 | ||||
Optimum Reinsurance Company [Member] | ||||||
Reinsurance recoverables (See Note 7) | 601 | 561 | ||||
Sagicor Life Insurance Company [Member] | ||||||
Reinsurance recoverables (See Note 7) | 10,595 | 10,755 | ||||
American Life and Security National Life Insurance [Member] | ||||||
Percentage of quota share of liabilities | 0% | |||||
Net premium income | 37,500 | 37,500 | ||||
Net statutory reserves | 34,800 | 34,800 | ||||
Amount owed deposit account | $ 2,400 | $ 2,400 | ||||
American Life and Security National Life Insurance [Member] | US Alliance Agreement | MYGA | ||||||
Percentage of multi year guaranteed annuity | 20% | |||||
American Life and Security National Life Insurance [Member] | US Alliance Agreement | FIA | ||||||
Percentage of fixed indexed annuity | 20% | 20% | ||||
Crestline SP 1 | ||||||
Reinsurance recoverables (See Note 7) | $ 18,288 | |||||
SRC4 | ||||||
Net premium income | $ 21,400 | $ 21,400 | ||||
Net statutory reserves | $ 21,500 | |||||
Amount owed deposit account | $ 21,500 | |||||
SRC4 | Seneca Re Agreement | MYGA-5 | ||||||
Percentage of indemnity coinsurance | 45% | |||||
Percentage of multi year guaranteed annuity | 45% | |||||
SRC4 | Seneca Re Agreement | MYGA-3 | ||||||
Percentage of indemnity coinsurance | 10% |
Reinsurance (Ceding commissions
Reinsurance (Ceding commissions deferred) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Ceded Commission Earned | $ 11,496 | $ 11,170 |
Expense Allowances | 16,524 | 19,728 |
Interest On Ceding Commissions | 888 | 645 |
Earned Ceding Commission | 4,816 | 3,022 |
Deferred gain on coinsurance transactions | 38,063 | 28,589 |
Unified Life Insurance Company | ||
Earned Ceding Commission | 25 | 35 |
Deferred gain on coinsurance transactions | 217 | 242 |
Ironbound Reinsurance Company Limited [Member] | ||
Expense Allowances | (461) | |
Interest On Ceding Commissions | 193 | 211 |
Earned Ceding Commission | 513 | 684 |
Deferred gain on coinsurance transactions | 4,876 | 5,137 |
Ascendant Re | ||
Ceded Commission Earned | 498 | |
Expense Allowances | 904 | |
Interest On Ceding Commissions | 93 | 93 |
Earned Ceding Commission | 332 | 367 |
Deferred gain on coinsurance transactions | 2,947 | 3,101 |
US Alliance Life and Security Company | ||
Ceded Commission Earned | 2 | |
Expense Allowances | (75) | |
Interest On Ceding Commissions | 54 | 60 |
Earned Ceding Commission | 348 | 401 |
Deferred gain on coinsurance transactions | 152 | 162 |
Crestline SP 1 | ||
Ceded Commission Earned | 5,875 | 6,699 |
Expense Allowances | 8,754 | 12,321 |
Interest On Ceding Commissions | 391 | 255 |
Earned Ceding Commission | 2,569 | 1,185 |
Deferred gain on coinsurance transactions | 18,475 | 13,515 |
American Republic Insurance Company | ||
Ceded Commission Earned | 3,851 | 3,971 |
Expense Allowances | 6,189 | 7,039 |
Interest On Ceding Commissions | 136 | 26 |
Earned Ceding Commission | 863 | 350 |
Deferred gain on coinsurance transactions | 7,502 | 4,146 |
US Alliance Life and Security Company(3) | ||
Deferred gain on coinsurance transactions | 2,069 | $ 2,286 |
SRC4 | ||
Ceded Commission Earned | 1,770 | |
Expense Allowances | 1,581 | |
Interest On Ceding Commissions | 21 | |
Earned Ceding Commission | 166 | |
Deferred gain on coinsurance transactions | $ 1,825 |
Reinsurance (Retained and Reins
Reinsurance (Retained and Reinsured Balance Sheets) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Assets [Abstract] | |||
Total investments | $ 1,614,957 | $ 975,527 | |
Cash and cash equivalents | 191,414 | 142,013 | |
Accrued investment income | 25,165 | 13,623 | |
Deferred acquisition costs, net | 43,433 | 24,530 | $ 13,456 |
Reinsurance recoverables | 20,552 | 38,579 | |
Other assets | 24,910 | 25,645 | |
Total assets | 1,920,431 | 1,219,917 | |
Liabilities: | |||
Policyholder liabilities | 1,760,398 | 1,088,618 | |
Notes payable | 25,000 | ||
Deferred gain on coinsurance transactions | 38,063 | 28,589 | |
Payable for securities purchased | 8,872 | 5,546 | |
Other liabilities | 53,721 | 11,408 | |
Total liabilities | 1,886,054 | 1,134,161 | |
Stockholders' Equity: | |||
Voting common stock | 4 | 4 | |
Additional paid-in capital | 138,307 | 138,277 | |
Retained Earnings (Accumulated Deficit) | (63,019) | (70,159) | |
Accumulated other comprehensive income (loss) | (51,386) | 2,634 | |
Total Midwest Holding Inc.'s stockholders' equity | 23,906 | 70,756 | |
Noncontrolling interests | 10,471 | 15,000 | |
Total stockholders' equity | 34,377 | 85,756 | $ 86,330 |
Total liabilities and stockholders' equity | 1,920,431 | 1,219,917 | |
Reinsurance Contract [Axis]: Reinsurance [Member] | |||
Assets [Abstract] | |||
Total investments | 802,780 | 561,109 | |
Cash and cash equivalents | 64,123 | 46,607 | |
Accrued investment income | 13,858 | 9,770 | |
Reinsurance recoverables | 27,405 | 38,579 | |
Other assets | 8,721 | (2,189) | |
Total assets | 916,887 | 653,876 | |
Liabilities: | |||
Policyholder liabilities | 912,981 | 660,811 | |
Other liabilities | 3,906 | (6,935) | |
Total liabilities | 916,887 | 653,876 | |
Stockholders' Equity: | |||
Total liabilities and stockholders' equity | 916,887 | 653,876 | |
Reinsurance Contract [Axis]: Retained [Member] | |||
Assets [Abstract] | |||
Total investments | 812,177 | 414,418 | |
Cash and cash equivalents | 127,291 | 95,406 | |
Accrued investment income | 11,307 | 3,853 | |
Deferred acquisition costs, net | 43,433 | 24,530 | |
Reinsurance recoverables | (6,853) | ||
Other assets | 16,189 | 27,834 | |
Total assets | 1,003,544 | 566,041 | |
Liabilities: | |||
Policyholder liabilities | 847,417 | 427,807 | |
Notes payable | 25,000 | ||
Deferred gain on coinsurance transactions | 38,063 | 28,589 | |
Payable for securities purchased | 8,872 | 5,546 | |
Other liabilities | 49,815 | 18,343 | |
Total liabilities | 969,167 | 480,285 | |
Stockholders' Equity: | |||
Voting common stock | 4 | 4 | |
Additional paid-in capital | 138,307 | 138,277 | |
Retained Earnings (Accumulated Deficit) | (63,019) | (70,159) | |
Accumulated other comprehensive income (loss) | (51,386) | 2,634 | |
Total Midwest Holding Inc.'s stockholders' equity | 23,906 | 70,756 | |
Noncontrolling interests | 10,471 | 15,000 | |
Total stockholders' equity | 34,377 | 85,756 | |
Total liabilities and stockholders' equity | $ 1,003,544 | $ 566,041 |
Income Tax Matters (Schedule of
Income Tax Matters (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Loss carryforwards | $ 2,672 | $ 2,244 |
Capitalized costs | 79 | 127 |
Stock option granted | 1,066 | 1,060 |
Policy acquisition costs | 6,489 | 3,640 |
General business credits | 6 | 6 |
Derivative option allowance | 510 | |
Sec 163(j) limitation | 171 | 171 |
Benefit reserves | 12,010 | 5,186 |
Property and equipment | 33 | |
Impairments | 403 | |
Unrealized losses on investments | 13,624 | 1,534 |
Other | 1,928 | 1,464 |
Total deferred tax assets | 38,448 | 15,975 |
Less valuation allowance | (35,305) | (14,431) |
Total deferred tax assets, net of valuation allowance | 3,143 | 1,544 |
Deferred tax liabilities: | ||
Unrealized losses on investments | 1,084 | |
Intangible assets | 147 | 147 |
Derivative option allowance | 2,150 | |
Bond Discount | 936 | 313 |
Property and equipment | (90) | |
Total deferred tax liabilities | 3,143 | 1,544 |
Net deferred tax assets |
Income Tax Matters (Schedule _2
Income Tax Matters (Schedule of Effective Tax Rate Reconciliation) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Tax Matters | ||
Computed expected income tax benefit (expense) | $ (1,762) | $ 2,815 |
Reduction (increase) in income taxes resulting from: | ||
Interest maintenance reserve and reinsurance | 212 | (157) |
Non deductible expenses | (16) | (9) |
Gain on sale of SRC1 | (368) | |
Change in valuation allowance | (6,061) | (7,429) |
Amended Return - 2019/2020 | (339) | |
Adjustment to payable | 110 | |
Deferred tax adjustment | 14 | 382 |
Prior year true-up | 13 | 229 |
Subtotal of increases | (5,838) | (7,581) |
Tax benefit (expense) | $ (7,600) | $ (4,766) |
Income Tax Matters (Narratives)
Income Tax Matters (Narratives) (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2016 | |
Deferred Tax Assets, Valuation Allowance | $ 35,305,000 | $ 14,431,000 | |
U.S. federal income tax rate | 21% | ||
Net operating loss ("NOL") carryforwards | $ 8,600,000 | $ 1 | |
Percentage of carry forward year limited taxable income | 80% | ||
NOLs carryforwards, valuation allowance | $ 1,800,000 | ||
Income tax (benefit) expense | $ 7,600,000 | 4,766,000 | |
SRC1 | |||
Net operating loss ("NOL") carryforwards | $ 3,900,000 |
Leases (Schedule of Supplementa
Leases (Schedule of Supplemental Balance Sheet Information Related to Leases) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Noncurrent: | ||
Operating lease right of use assets | $ 2,119 | $ 2,360 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other assets | Other assets |
Liabilities | ||
Operating lease | $ 2,135 | $ 2,364 |
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration] | Other liabilities | Other liabilities |
Leases (Schedule of Finance and
Leases (Schedule of Finance and Operating Leases Mature) (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Operating Leases | |
2023 | $ 342 |
2024 | 342 |
2025 | 342 |
2026 | 345 |
2027 | 353 |
2028 and after | 1,404 |
Total remaining lease payments | $ 3,128 |
Leases (Schedule of Components
Leases (Schedule of Components of Leases Expenses) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Leases | ||
Operating lease cost (General and administrative expense) | $ 10 | $ 8 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Lessee, Lease, Description [Line Items] | ||
Operating cash flows from operating leases | $ 0.1 | |
Weighted Average Remaining Term - Operating lease | 8 years 6 months | 10 years |
Weighted Average Discount Rate - Operating lease | 8% | 8% |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Operating cash flows from operating leases | $ 0.1 |
Equity (Narrative) (Details)
Equity (Narrative) (Details) - shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Preferred stock | ||
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common Stock | ||
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 3,727,976 | 3,737,564 |
Common stock, shares outstanding | 3,727,976 | 3,737,564 |
Non Voting Common Stock, Shares Issued | 0 | 0 |
Non Voting Common Stock, Shares Outstanding | 0 | 0 |
Reverse stock split fractions retired (in shares) | 4,500 | |
Voting common share | ||
Common Stock | ||
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Non-voting common shares | ||
Common Stock | ||
Common stock, shares authorized | 2,000,000 | 2,000,000 |
Equity (AOCI) (Details)
Equity (AOCI) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | $ 85,756 | $ 86,330 |
Other comprehensive (loss) before reclassifications, net of tax | (54,975) | (1,422) |
Less: Reclassification adjustments for losses realized in net income, net of tax | 955 | (2,375) |
Balance | 34,377 | 85,756 |
Unrealized investment gains (losses) on fixed maturities, net of offsets | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | 2,634 | 6,431 |
Other comprehensive (loss) before reclassifications, net of tax | (54,975) | (1,422) |
Less: Reclassification adjustments for losses realized in net income, net of tax | 955 | (2,375) |
Balance | $ (51,386) | $ 2,634 |
Long-Term Incentive Plans (Deta
Long-Term Incentive Plans (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Jun. 14, 2022 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Employee stock options | $ 30 | $ 4,981 | ||||
Stock Options | ||||||
Expiration period | 10 years | |||||
Exercise price grant date intrinsic value | $ 0 | |||||
Weighted average exercise prices of vested and exercisable (in dollars per share) | 36.53 | |||||
Share price | $ 12.74 | |||||
Vested options | $ 0 | |||||
Options outstanding | $ 300 | |||||
Restricted Stock | ||||||
Restricted stock granted (in shares) | 18,597 | |||||
Vesting percentage | 0.25% | |||||
Restricted stock granted (in dollars per share) | $ 41.25 | |||||
Vested (in shares) | 5,812 | |||||
Forfeited (in shares) | 12,785 | |||||
Restricted stock unit | ||||||
Restricted stock granted (in shares) | 18,718 | 18,718 | 5,089 | |||
Restricted stock granted (in dollars per share) | $ 11.22 | $ 11.22 | $ 24.34 | |||
Vested (in shares) | 1,163 | |||||
Forfeited (in shares) | 10,810 | |||||
Minimum | Stock Options | ||||||
Vesting period | 2 years | |||||
Maximum | Stock Options | ||||||
Vesting period | 4 years | |||||
Long-Term Incentive Plans. | ||||||
Restricted stock granted (in shares) | 18,718 | 5,089 | ||||
2019 LTIP | Maximum | ||||||
Employee stock options | $ 100 | |||||
2019 LTIP | Maximum | Stock Options | ||||||
Shares authorized | 102,000 | |||||
2020 LTIP | ||||||
Additional shares authorized | 150,000 | |||||
Employee stock options | $ 5,000 | |||||
2020 LTIP | Maximum | Stock Options | ||||||
Shares authorized | 350,000 |
Long-Term Incentive Plans (Opti
Long-Term Incentive Plans (Options Outstanding) (Details) | 12 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Weighted Average Exercise Price Per Share | |
Balance at the end (in dollars per share) | $ 36.53 |
Granted (in dollars per share) | 14.92 |
Vested (in dollars per share) | 36.53 |
Forfeited (in dollars per share) | 37.44 |
Expired (in dollars per share) | 40.38 |
Balance at the beginning (in dollars per share) | $ 40.74 |
Total Outstanding | |
Outstanding at the beginning (in shares) | shares | 399,053 |
Granted (in shares) | shares | 117,367 |
Vested (in shares) | shares | 45,777 |
Forfeited (in shares) | shares | (110,653) |
Expired (in shares) | shares | (86,646) |
Outstanding at the end (in shares) | shares | 319,121 |
Outstanding, Non-vested | |
Outstanding, Non-vested Options at beginning (in shares) | shares | 298,180 |
Granted (in shares) | shares | 117,367 |
Vested (in shares) | shares | (45,777) |
Forfeited (in shares) | shares | (98,253) |
Outstanding, Non-vested Options at ending (in shares) | shares | 271,517 |
Vested and Exercisable | |
Vested and Exercisable Balance at the beginning (in shares) | shares | 100,873 |
Vested and Exercisable Vested (in shares) | shares | 45,777 |
Vested and Exercisable Forfeited (in shares) | shares | (12,400) |
Vested and Exercisable Expired (in shares) | shares | (86,646) |
Vested and Exercisable Balance at the end (in shares) | shares | 47,604 |
Minimum | |
Range of Option Exercise Prices Per Share | |
Balance at the beginning (in dollars per share) | $ 16.37 |
Granted (in dollars per share) | 11.20 |
Vested (in dollars per share) | 16.37 |
Forfeited (in dollars per share) | 15.57 |
Expired (in dollars per share) | 25 |
Balance at the end (in dollars per share) | 11.20 |
Maximum | |
Range of Option Exercise Prices Per Share | |
Balance at the beginning (in dollars per share) | 55.02 |
Granted (in dollars per share) | 21.16 |
Vested (in dollars per share) | 41.25 |
Forfeited (in dollars per share) | 55.02 |
Expired (in dollars per share) | 41.25 |
Balance at the end (in dollars per share) | $ 55.02 |
Long-Term Incentive Plans (Op_2
Long-Term Incentive Plans (Option information segregated by ranges of exercise prices) (Details) | 12 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Greater than $50.00 | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise price range, upper limit | $ 50 |
Outstanding options | shares | 52,603 |
Outstanding, Exercise price (in dollars per share) | $ 55.02 |
Outstanding, Remaining term | 8 years 2 months 12 days |
$40.00 - $49.99 | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise price range, lower limit | $ 40 |
Exercise price range, upper limit | $ 49.99 |
Outstanding options | shares | 127,751 |
Outstanding, Exercise price (in dollars per share) | $ 41.25 |
Outstanding, Remaining term | 8 years 2 months 12 days |
Vested and exercisable options | shares | 36,042 |
Vested and exercisable, Exercise price (in dollars per share) | $ 41.25 |
Share-Based Payment Arrangement, Option, Exercise Price Range, Exercisable, Weighted Average Remaining Contractual Term | 7 years 7 months 6 days |
$30.00 - $39.99 | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise price range, lower limit | $ 30 |
Exercise price range, upper limit | 39.99 |
$20.00 - $29.99 | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise price range, lower limit | 20 |
Exercise price range, upper limit | $ 29.99 |
Outstanding options | shares | 29,767 |
Outstanding, Exercise price (in dollars per share) | $ 23.27 |
Outstanding, Remaining term | 8 years 1 month 6 days |
Vested and exercisable options | shares | 7,277 |
Vested and exercisable, Exercise price (in dollars per share) | $ 25 |
Share-Based Payment Arrangement, Option, Exercise Price Range, Exercisable, Weighted Average Remaining Contractual Term | 7 years 7 months 6 days |
$10.00 - $19.99 | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise price range, lower limit | $ 10 |
Exercise price range, upper limit | $ 19.99 |
Outstanding options | shares | 109,000 |
Outstanding, Exercise price (in dollars per share) | $ 13.28 |
Outstanding, Remaining term | 9 years 6 months |
Vested and exercisable options | shares | 4,285 |
Vested and exercisable, Exercise price (in dollars per share) | $ 16.37 |
Share-Based Payment Arrangement, Option, Exercise Price Range, Exercisable, Weighted Average Remaining Contractual Term | 9 years |
Less than $10.00 | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise price range, lower limit | $ 10 |
Long-Term Incentive Plans (Rest
Long-Term Incentive Plans (Restricted Stock Units) (Details) - Restricted stock unit - $ / shares | 12 Months Ended | ||
Jun. 14, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Restricted Stock and Restricted Stock Units (RSUs) | |||
Outstanding at beginning (in shares) | 19,037 | ||
Granted (in shares) | 18,718 | 18,718 | 5,089 |
Vested (in shares) | (1,163) | ||
Forfeited (in shares) | (10,810) | ||
Vested (in shares) | (9,738) | ||
Outstanding at ending (in shares) | 17,207 | 19,037 | |
Weighted Average Grant-Date Fair Value | |||
Weighted average grant-date fair value, at the beginning (in dollars per share) | $ 47.62 | ||
Weighted average grant-date fair value, Granted (in dollars per share) | $ 11.22 | 11.22 | $ 24.34 |
Weighted average grant-date fair value, Vested (in dollars per share) | 50 | ||
Weighted average grant-date fair value, Awards Forfeited (in dollars per share) | 40.41 | ||
Weighted average grant-date fair value, Awards released (in dollars per share) | 45.35 | ||
Weighted average grant-date fair value, at the ending (in dollars per share) | $ 13.84 | $ 47.62 | |
Vested (in shares) | 1,163 | ||
Weighted average grant-date fair value, Vested (in dollars per share) | $ 50 |
Long-Term Incentive Plans (Assu
Long-Term Incentive Plans (Assumptions) (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Fair value assumptions | ||
Expected volatility, minimum (as a percent) | 4.16% | 4.40% |
Expected volatility, maximum (as a percent) | 4.26% | 66.30% |
Weighted-average volatility (as a percent) | 3.70% | 38.90% |
Risk free rate, minimum (as a percent) | 0.02% | 0.80% |
Risk free rate, maximum (as a percent) | 2.15% | 1.50% |
Minimum | ||
Fair value assumptions | ||
Expected term (in years) | 2 years | 2 years |
Maximum | ||
Fair value assumptions | ||
Expected term (in years) | 7 years | 7 years |
Long-Term Incentive Plans (Non-
Long-Term Incentive Plans (Non-vested shares) (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Outstanding, Non-vested Options at beginning (in shares) | 298,180 | |
Granted (in shares) | 117,367 | |
Vested (in shares) | (45,777) | |
Forfeited (in shares) | (98,253) | |
Expired (in shares) | (86,646) | |
Outstanding, Non-vested Options at ending (in shares) | 271,517 | 298,180 |
Balance at the beginning (in dollars per share) | $ 40.74 | |
Granted (in dollars per share) | 14.92 | |
Vested (in dollars per share) | 36.53 | |
Expired, weighted average exercise price (in dollars per share) | 40.38 | |
Balance at the end (in dollars per share) | $ 36.53 | $ 40.74 |
Long-Term Incentive Plans. | ||
Outstanding, Non-vested Options at beginning (in shares) | 317,217 | 100,972 |
Granted (in shares) | 117,367 | 333,880 |
Restricted stock granted (in shares) | 18,718 | 5,089 |
Vested (in shares) | (56,678) | (85,957) |
Forfeited (in shares) | (109,063) | (36,767) |
Outstanding, Non-vested Options at ending (in shares) | 287,561 | 317,217 |
Outstanding at beginning (in dollars per share) | $ 25.80 | $ 22.91 |
Options granted (in dollars per share) | 9.57 | 19.25 |
Vested (in dollars per share) | 21.12 | 17.32 |
Forfeited (in dollars per share) | 23.82 | 23.91 |
Outstanding at ending (in dollars per share) | 16.96 | 25.80 |
Balance at the beginning (in dollars per share) | 40.13 | 34.70 |
Granted (in dollars per share) | 14.92 | 42.84 |
Vested (in dollars per share) | 36.53 | 30.20 |
Forfeited, weighted average exercise price (in dollars per share) | 38.87 | 40.42 |
Balance at the end (in dollars per share) | $ 32.29 | $ 40.13 |
Statutory Net Income and Surp_3
Statutory Net Income and Surplus (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Mar. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Net realized loss on investments | $ (14,878) | $ 7,752 | |
SRC1 | |||
Statutory Net Income/(Loss) | 1,199 | (1,004) | |
Statutory Capital and Surplus | 9,615 | 8,415 | |
Premiums Sales | 37,764 | ||
SRC3 | |||
Statutory Net Income/(Loss) | 1,291 | (6,851) | |
Statutory Capital and Surplus | 6,088 | 3,150 | |
Premiums Sales | 35,586 | 88,704 | |
Ironbound Reinsurance Company Limited | FW, Modco Agreement | |||
Net realized loss on investments | $ 2,400 | ||
American Life and Security Corporation | |||
Statutory Net Income/(Loss) | 2,330 | (6,355) | |
Statutory Capital and Surplus | 69,936 | 74,011 | |
Premiums Sales | $ 369,241 | $ 107,767 |
Third-party Administration (Det
Third-party Administration (Details) - TPA [Member] - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Related Party Transaction [Line Items] | ||
Amount of transaction | $ 2.4 | $ 2.3 |
Third party assets under management | $ 501.9 |
Related Party (Details)
Related Party (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 29, 2022 | Apr. 24, 2020 | Dec. 31, 2022 | |
BBB+ | |||
Related Party Transaction [Line Items] | |||
Interest rate | 5% | ||
Seneca Re Agreement | |||
Related Party Transaction [Line Items] | |||
Reinsurance term | 3 years | ||
Seneca Re Agreement | MYGA | |||
Related Party Transaction [Line Items] | |||
Percentage of indemnity coinsurance | 25% | ||
Seneca Re Agreement | FIA | |||
Related Party Transaction [Line Items] | |||
Percentage of indemnity coinsurance | 40% | ||
Crestline Assurance Holdings LLC | |||
Related Party Transaction [Line Items] | |||
Assets under management | $ 423.6 | ||
Additional investments | 134.3 | ||
Crestline Assurance Holdings LLC | Securities Purchase Agreement | |||
Related Party Transaction [Line Items] | |||
Shares issued | 444,444 | ||
American Life | |||
Related Party Transaction [Line Items] | |||
Capital contribution | $ 5 | ||
American Life | UK Limited | |||
Related Party Transaction [Line Items] | |||
Percentage of interest acquired in financial guarantee | 17% | ||
SRC1 | |||
Related Party Transaction [Line Items] | |||
Capital contribution | $ 3.3 | ||
Chelsea Holdings Midwest LLC | BBB+ | |||
Related Party Transaction [Line Items] | |||
Interest rate | 5% | ||
Fair market value | 6.3 | ||
Chelsea Holdings Midwest LLC | Series B Preferred Stock | BBB+ | |||
Related Party Transaction [Line Items] | |||
Fair market value | 2.3 | ||
Crestline SP 1 | |||
Related Party Transaction [Line Items] | |||
Reinsurance ceded amount | 5.9 | ||
Reinsurance ceded commissions | 2.6 | ||
Reinsurance ceded expense reimbursements | $ 8.8 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) $ in Thousands | Dec. 31, 2022 USD ($) item | Dec. 31, 2021 USD ($) |
American Life and Security Corporation | ||
Other Commitments [Line Items] | ||
Number of jurisdiction licensed | item | 23 | |
Unfunded Commitments | ||
Other Commitments [Line Items] | ||
Commitments | $ 178,995 | $ 145,941 |
Commitments reinsurance | 135,000 | |
Unfunded Commitment | ||
Due in one year or less | 52,951 | 19,245 |
Due in two years | 43,604 | 26,753 |
Due in three years | 7,731 | 4,705 |
Due in four years | 13,277 | 8,741 |
Due in five years and after | 61,432 | 86,497 |
Total | 178,995 | $ 145,941 |
Unfunded Commitments | American Life and Security Corporation | ||
Other Commitments [Line Items] | ||
Commitments | 44,000 | |
Unfunded Commitment | ||
Total | $ 44,000 |
Schedule I Summary of Investm_2
Schedule I Summary of Investments - Other Than Investments in Related Parties (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Amortized Cost | $ 1,269,735 | $ 679,921 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 1,214,635 | 683,296 |
Total fixed maturities | 1,214,635 | 683,296 |
Total investments, Amortized Cost | 1,685,620 | |
Estimated Fair Value | 1,614,957 | |
Total investments | 1,614,957 | 975,527 |
Deposits and notes receivable, Amortized Cost | 8,359 | 10,071 |
Deposits and notes receivable, Estimated Fair Value | 8,359 | 10,071 |
Deposits and notes receivable | 8,359 | 10,071 |
Fixed Maturities | ||
Amortized Cost | 1,269,735 | 679,921 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 1,214,635 | 683,296 |
Total fixed maturities | 1,214,635 | 683,296 |
U.S. government obligations | ||
Amortized Cost | 1,343 | 1,855 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 1,262 | 1,882 |
Total fixed maturities | 1,262 | 1,882 |
Mortgage-back securities | ||
Amortized Cost | 316,105 | 55,667 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 294,066 | 55,280 |
Total fixed maturities | 294,066 | 55,280 |
Asset-backed securities | ||
Amortized Cost | 34,728 | 24,675 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 30,756 | 24,951 |
Total fixed maturities | 30,756 | 24,951 |
Collateralized loan obligation | ||
Amortized Cost | 308,871 | 272,446 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 287,673 | 274,523 |
Total fixed maturities | 287,673 | 274,523 |
States and Political Subdivisions - general obligations | ||
Amortized Cost | 104 | 105 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 101 | 114 |
Total fixed maturities | 101 | 114 |
States and Political Subdivisions - special revenue | ||
Amortized Cost | 228 | 4,487 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 205 | 5,612 |
Total fixed maturities | 205 | 5,612 |
Trust preferred | ||
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 2,237 | |
Total fixed maturities | 2,237 | |
Term loans | ||
Amortized Cost | 561,656 | 268,794 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 558,972 | 267,468 |
Total fixed maturities | 558,972 | 267,468 |
Corporate | ||
Amortized Cost | 46,700 | 35,392 |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 41,600 | 37,139 |
Total fixed maturities | 41,600 | $ 37,139 |
Mortgage loans on real estate, held for investment | ||
Total investments, Amortized Cost | 227,047 | |
Estimated Fair Value | 227,047 | |
Total investments | 227,047 | |
Derivatives | ||
Total investments, Amortized Cost | 30,239 | |
Estimated Fair Value | 15,934 | |
Total investments | 15,934 | |
Preferred Stock | ||
Amortized Cost | 35,644 | |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 31,415 | |
Total fixed maturities | 31,415 | |
Deposits and notes payable | ||
Deposits and notes receivable, Amortized Cost | 8,359 | |
Deposits and notes receivable, Estimated Fair Value | 8,359 | |
Deposits and notes receivable | 8,359 | |
Other invested assets | ||
Amortized Cost | 108,979 | |
Fixed maturities, available for sale, at fair value(amortized cost: $1,269,735 and $679,921, respectively) (See Note 3) | 112,431 | |
Total fixed maturities | 112,431 | |
Equity Securities [Member] | ||
Total investments, Amortized Cost | 5,592 | |
Estimated Fair Value | 5,111 | |
Total investments | 5,111 | |
Policy loans | ||
Total investments, Amortized Cost | 25 | |
Estimated Fair Value | 25 | |
Total investments | $ 25 |
Schedule II Condensed Financi_4
Schedule II Condensed Financial Information of Registrant Balance Sheets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Assets [Abstract] | |||
Preferred stock | $ 31,415 | $ 18,686 | |
Cash and cash equivalents | 191,414 | 142,013 | |
Notes receivable | 6,300 | 6,000 | |
Property and equipment, net | 1,897 | 386 | |
Operating lease right of use assets | 2,119 | 2,360 | |
Other assets | 12,495 | 5,173 | |
Total assets | 1,920,431 | 1,219,917 | |
Liabilities: | |||
Lease Liability | 2,135 | 2,364 | |
Total liabilities | 1,886,054 | 1,134,161 | |
Stockholders' Equity: | |||
Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and out-standing as of December 31, 2022 or December 31, 2021 | |||
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,727,976 shares issued and outstanding as of December 31, 2022 and 3,737,564 at December 31, 2021, respectively; non-voting common stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding December 31, 2022 and December 31, 2021, respectively | 4 | 4 | |
Additional Paid in Capital. | 138,482 | 138,452 | |
Treasury stock | (175) | (175) | |
Retained Earnings (Accumulated Deficit) | (63,019) | (70,159) | |
Accumulated other comprehensive (loss) income | (51,386) | 2,634 | |
Total Midwest Holding Inc.'s stockholders' equity | 23,906 | 70,756 | |
Noncontrolling interests | 10,471 | 15,000 | |
Total stockholders' equity | 34,377 | 85,756 | $ 86,330 |
Total liabilities and stockholders' equity | 1,920,431 | 1,219,917 | |
Parent Company [Member] | |||
Assets [Abstract] | |||
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures | 56,054 | 79,532 | |
Preferred stock | 1 | ||
Cash and cash equivalents | 115 | 7,540 | $ 7,682 |
Notes receivable | 34 | 31 | |
Property and equipment, net | 1,878 | 334 | |
Operating lease right of use assets | 2,118 | 2,360 | |
Other assets | 5,750 | 3,257 | |
Total assets | 65,950 | 93,054 | |
Liabilities: | |||
Notes payable | 25,000 | 500 | |
Lease Liability | 2,135 | 2,364 | |
Accounts payable and accrued expenses | 4,438 | 4,434 | |
Total liabilities | 31,573 | 7,298 | |
Stockholders' Equity: | |||
Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and out-standing as of December 31, 2022 or December 31, 2021 | |||
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,727,976 shares issued and outstanding as of December 31, 2022 and 3,737,564 at December 31, 2021, respectively; non-voting common stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding December 31, 2022 and December 31, 2021, respectively | 4 | 4 | |
Additional Paid in Capital. | 138,482 | 138,452 | |
Treasury stock | (175) | (175) | |
Retained Earnings (Accumulated Deficit) | (63,019) | (70,159) | |
Accumulated other comprehensive (loss) income | (51,386) | 2,634 | |
Total Midwest Holding Inc.'s stockholders' equity | 23,906 | 70,756 | |
Noncontrolling interests | 10,471 | 15,000 | |
Total stockholders' equity | 34,377 | 85,756 | |
Total liabilities and stockholders' equity | $ 65,950 | $ 93,054 |
Schedule II Condensed Financi_5
Schedule II Condensed Financial Information of Registrant Balance Sheets (Parenthetical) (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 3,727,976 | 3,737,564 |
Common stock, shares outstanding | 3,727,976 | 3,737,564 |
Non Voting Common Stock, Shares Authorized | 2,000,000 | 2,000,000 |
Non Voting Common Stock, Shares Issued | 0 | 0 |
Non Voting Common Stock, Shares Outstanding | 0 | 0 |
Non-voting common shares | ||
Common stock, shares authorized | 2,000,000 | 2,000,000 |
Parent Company [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 3,727,976 | 3,737,564 |
Common stock, shares outstanding | 3,727,976 | 3,737,564 |
Non Voting Common Stock, Shares Authorized | 2,000,000 | 2,000,000 |
Non Voting Common Stock, Shares Issued | 0 | 0 |
Non Voting Common Stock, Shares Outstanding | 0 | 0 |
Parent Company [Member] | Non-voting common shares | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Schedule II Condensed Financi_6
Schedule II Condensed Financial Information of Registrant Statements of Comprehensive Loss (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenues | ||
Investment income, net of expenses | $ 35,115 | $ 15,737 |
Fee income and other revenues | 500 | 367 |
Revenues [Default Label] | 30,049 | 30,063 |
Expenses | ||
Federal income tax | 7,600 | 4,766 |
Net gain (loss) | 791 | (16,637) |
Less: gain (loss) attributable to noncontrolling interest | 6,349 | |
Net income (loss) attributable to Midwest Holding Inc. | 7,140 | (16,637) |
Comprehensive Income: | ||
Unrealized (losses) on investments arising during the year ended December 31, 2022 and 2021, net of offsets, net of tax ($10.4 million and $0.2 million, respectively) | (54,975) | (1,422) |
Less: Reclassification adjustments for losses realized in net income, net of tax | 955 | (2,375) |
Other comprehensive income, net of tax | (54,020) | (3,797) |
Comprehensive loss | (46,880) | (20,434) |
Parent Company [Member] | ||
Revenues | ||
Fee income and other revenues | 61 | 23 |
Revenues [Default Label] | 61 | 23 |
Expenses | ||
General | 1,494 | 7,193 |
Loss from continuing operations before taxes | (1,433) | (7,170) |
Federal income tax | (4,766) | |
Loss before equity in loss of consolidated subsidiaries | (1,433) | (11,936) |
Equity in loss of consolidated subsidiaries | 2,224 | (4,701) |
Net gain (loss) | 791 | (16,637) |
Less: gain (loss) attributable to noncontrolling interest | 6,349 | |
Net income (loss) attributable to Midwest Holding Inc. | 7,140 | (16,637) |
Comprehensive Income: | ||
Unrealized (losses) on investments arising during the year ended December 31, 2022 and 2021, net of offsets, net of tax ($10.4 million and $0.2 million, respectively) | (54,975) | (1,422) |
Less: Reclassification adjustments for losses realized in net income, net of tax | 955 | (2,375) |
Other comprehensive income, net of tax | (54,020) | (3,797) |
Comprehensive loss | $ (46,880) | $ (20,434) |
Schedule II Condensed Financi_7
Schedule II Condensed Financial Information of Registrant Statements of Cash Flows (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Cash Flows from Operating Activities: | ||
Net income (loss) | $ 7,140 | $ (16,637) |
Adjustments to arrive at cash provided by operating activities: | ||
Depreciation and amortization | 338 | 50 |
Stock options | 29 | 4,981 |
Other assets and liabilities | 34,612 | (1,129) |
Net cash provided by (used in) operating activities | 73,162 | (25,338) |
Cash Flows from Investing Activities: | ||
Net (purchases) disposals of property and equipment | (1,835) | (331) |
Net cash used in investing activities | (708,708) | (452,407) |
Cash Flows from Financing Activities: | ||
Capital contribution | (121) | |
Net transfer to noncontrolling interest | (4,529) | 15,000 |
Net cash provided by financing activities | 684,947 | 468,079 |
Net increase (decrease) in cash and cash equivalents | 49,401 | (9,666) |
Cash and cash equivalents: | ||
Cash and Cash Equivalents, at Carrying Value, Beginning Balance | 142,013 | |
Cash and Cash Equivalents, at Carrying Value, Ending Balance | 191,414 | 142,013 |
Supplementary information | ||
Cash paid for taxes | 2,870 | 6,450 |
Parent Company [Member] | ||
Cash Flows from Operating Activities: | ||
Net income (loss) | 7,140 | (16,637) |
Adjustments to arrive at cash provided by operating activities: | ||
Equity in net loss of consolidated subsidiaries | 2,224 | 9,506 |
Depreciation and amortization | (297) | (295) |
Stock options | 30 | 4,982 |
Other assets and liabilities | (9,246) | 1,525 |
Net cash provided by (used in) operating activities | (149) | (919) |
Cash Flows from Investing Activities: | ||
Purchase of preferred stock | (1) | |
Net (purchases) disposals of property and equipment | (1,246) | |
Net cash used in investing activities | (1,247) | |
Cash Flows from Financing Activities: | ||
Capital contribution | (26,000) | (14,102) |
Common stock purchased | 24,500 | |
Net transfer to noncontrolling interest | (4,529) | 15,000 |
Net cash provided by financing activities | (6,029) | 777 |
Net increase (decrease) in cash and cash equivalents | (7,425) | (142) |
Cash and cash equivalents: | ||
Cash and Cash Equivalents, at Carrying Value, Beginning Balance | 7,540 | 7,682 |
Cash and Cash Equivalents, at Carrying Value, Ending Balance | $ 115 | $ 7,540 |
Schedule III Supplementary In_2
Schedule III Supplementary Insurance Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Deferred gain on coinsurance transactions | $ 38,063 | $ 28,589 |
Life Insurance Premiums [Member] | ||
Future Policy Benefits, Claims and Deposit-type Contracts | 1,760,398 | 1,088,617 |
Advance Premiums | 1 | |
Deferred gain on coinsurance transactions | 38,063 | 28,589 |
Net Investment Income | 35,115 | 15,737 |
Death and Other Benefits and Increase in Benefit Reserves | (2,199) | 9,904 |
Other Operating Expenses | $ 23,857 | $ 32,030 |
Schedule IV Reinsurance Infor_2
Schedule IV Reinsurance Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Life Insurance Force [Member] | ||
Direct Premiums Earned | $ 44,236 | $ 45,930 |
Premiums ceded | 42,398 | 44,090 |
Insurance premiums | 1,838 | 1,840 |
Life Insurance Premiums [Member] | ||
Direct Premiums Earned | 1,056 | 1,055 |
Premiums ceded | $ 1,056 | $ 1,055 |
Valuation and Qualifying Acco_2
Valuation and Qualifying Accounts (Details) - Reduced Depreciation [Member] - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Beginning of the year | $ 1,072 | $ 1,023 |
Depreciation expense | 327 | 49 |
Disposals | (17) | |
End of the year | $ 1,382 | $ 1,072 |