Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 13, 2023 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2023 | |
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, $0.001 par value | |
Trading Symbol | MDWT | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 3,744,645 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0000355379 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Assets | ||
Fixed maturities, available for sale, at fair value (amortized cost: $1,717,921 in 2023, and $1,269,735 in 2022. Allowance for credit losses of $8,917 in 2023.) (See Note 3) | $ 1,643,832 | $ 1,214,635 |
Mortgage loans on real estate, held for investment (Allowance for credit losses of $1,577 in 2023.) | 421,232 | 227,047 |
Derivative instruments (See Note 4) | 26,559 | 15,934 |
Equity securities, at fair value (cost: $5,592 in 2023 and $5,592 in 2022) | 5,112 | 5,111 |
Other invested assets (Allowance for credit losses of $1,600 in 2023.) | 126,777 | 112,431 |
Preferred stock | 33,926 | 31,415 |
Deposits and notes receivable | 10,774 | 8,359 |
Policy loans | 83 | 25 |
Total investments | 2,268,295 | 1,614,957 |
Cash and cash equivalents | 197,804 | 191,414 |
Deferred acquisition costs, net | 69,470 | 43,433 |
Premiums receivable | 63 | 362 |
Accrued investment income | 44,694 | 25,165 |
Reinsurance recoverables (See Note 8) | 27,870 | 20,190 |
Property and equipment, net | 1,721 | 1,897 |
Receivable for securities sold | 10,518 | |
Other assets | 14,335 | 12,495 |
Total assets | 2,624,252 | 1,920,431 |
Liabilities: | ||
Benefit reserves | 11,532 | 12,945 |
Deposit-type contracts (See Note 6) | 2,453,282 | 1,743,348 |
Other policy-holder funds | 4,530 | 4,105 |
Notes payable (See Note 7) | 25,000 | 25,000 |
Deferred gain on coinsurance transactions | 44,140 | 38,063 |
Payable for securities purchased | 27,029 | 8,872 |
Other liabilities | 36,786 | 53,721 |
Total liabilities | 2,602,299 | 1,886,054 |
Stockholders' Equity: | ||
Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and outstanding as of September 30, 2023 or December 31, 2022 | ||
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,744,645 shares issued and outstanding as of September 30, 2023, and 3,727,976 as of December 31, 2022, respectively; non-voting common stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding September 30, 2023 and December 31, 2022, respectively | 4 | 4 |
Additional paid-in capital | 138,122 | 138,482 |
Treasury stock | (175) | (175) |
Accumulated deficit | (67,361) | (63,019) |
Accumulated other comprehensive loss | (66,886) | (51,386) |
Total Midwest Holding Inc.'s stockholders' equity | 3,704 | 23,906 |
Noncontrolling interests | 18,249 | 10,471 |
Total stockholders' equity | 21,953 | 34,377 |
Total liabilities and stockholders' equity | $ 2,624,252 | $ 1,920,431 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Consolidated Balance Sheets | ||
Amortized Cost | $ 1,717,921 | $ 1,269,735 |
Fixed maturities, Allowance for credit losses | 8,917 | |
Mortgage loan on real estate, Allowance for credit losses | 1,577 | |
Equity securities, amortized cost | 5,592 | $ 5,592 |
Other invested assets, Allowance for credit losses | $ 1,600 | |
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 | 3,744,645 | 3,727,976 |
Common stock, shares outstanding | 3,744,645 | 3,727,976 |
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 | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Revenues | ||||
Investment income, net of expenses | $ 20,796 | $ 12,938 | $ 64,237 | $ 29,721 |
Net realized (loss) gain on investments | (8,946) | 4,135 | 9,427 | (14,676) |
Amortization of deferred gain on reinsurance transactions | 1,392 | 1,239 | 4,463 | 3,251 |
Policy administration fees | 874 | 536 | 1,992 | 1,398 |
Service fee revenue, net of expenses | 2,298 | 118 | 3,582 | 1,632 |
Other revenue | 5 | 33 | 235 | 132 |
Total revenue | 16,419 | 18,999 | 83,936 | 21,458 |
Expenses | ||||
Interest credited | 2,524 | 5,682 | 22,803 | (6,489) |
Benefits | (526) | 1,351 | 1,638 | 2,345 |
Amortization of deferred acquisition costs | 2,215 | 1,193 | 5,832 | 3,095 |
Salaries and benefits | 3,805 | 3,751 | 15,124 | 12,366 |
Other operating expenses | 956 | 2,317 | 19,869 | (1,744) |
Total expenses | 8,974 | 14,294 | 65,266 | 9,573 |
Net income before income tax expense | 7,445 | 4,705 | 18,670 | 11,885 |
Income tax expense (See Note 9) | (4,606) | (1,250) | (10,482) | (3,848) |
Net income after income tax expense | 2,839 | 3,455 | 8,188 | 8,037 |
Less: Income (loss) attributable to noncontrolling interest | 2,454 | (3,976) | 7,856 | (8,846) |
Net income attributable to Midwest Holding Inc. | 385 | 7,431 | 332 | 16,883 |
Comprehensive loss: | ||||
Unrealized losses on investments arising during the three months ended September 2023 and 2022, net of offsets, net of tax ($1.9 million and $5.4 million, respectively); Unrealized losses on investments arising during the nine months ended September 2023 and 2022, net of offsets, net of tax ($3.2 million and $10.4 million, respectively) | (9,937) | (26,114) | (16,167) | (55,483) |
Less: Reclassification adjustment for net realized gains (losses) on investments, net of offsets during the three months ended September 2023 and 2022 (net of tax less than $(0.1) million and $(19.9) million respectively); Reclassification adjustment for net realized gains (losses) on investments, net of offsets during the nine months ended September 2023 and 2022 (net of tax $(0.2) million and $(24.9) million respectively) | 484 | (952) | 667 | (94) |
Other comprehensive loss | (9,453) | (27,066) | (15,500) | (55,577) |
Comprehensive loss: | $ (9,068) | (19,635) | $ (15,168) | (38,694) |
Total other-than-temporary impairment | 346 | 880 | ||
Net other-than-temporary impairment loss recognized in net income | $ 346 | $ 880 | ||
Income per common share | ||||
Basic (in dollars per share) | $ 0.10 | $ 1.99 | $ 0.09 | $ 4.52 |
Diluted (in dollars per share) | $ 0.10 | $ 1.96 | $ 0.09 | $ 4.45 |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Consolidated Statements of Comprehensive Loss | ||||
Unrealized losses on investments arising during period, net of tax | $ 2.1 | $ 5.4 | $ 3.4 | $ 10.4 |
Reclassification adjustment for net realized losses on investments, net of tax | $ (0.1) | $ (19.9) | $ (0.2) | $ (24.9) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Treasury Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit Cumulative effect of change in accounting estimate | Accumulated Deficit | AOCI | Noncontrolling Interest | Cumulative effect of change in accounting estimate | Total |
Balance at Dec. 31, 2021 | $ (175) | $ 4 | $ 138,452 | $ (70,159) | $ 2,634 | $ 15,000 | $ 85,756 | ||
Net income | 16,883 | 16,883 | |||||||
Employee stock options | (286) | (286) | |||||||
Unrealized losses on investments, net of taxes | (55,577) | (55,577) | |||||||
Noncontrolling interest | (6,906) | (6,906) | |||||||
Balance at Sep. 30, 2022 | (175) | 4 | 138,166 | (53,276) | (52,943) | 8,094 | 39,870 | ||
Balance at Jun. 30, 2022 | (175) | 4 | 138,838 | (60,707) | (25,877) | 12,413 | 64,496 | ||
Net income | 7,431 | 7,431 | |||||||
Employee stock options | (672) | (672) | |||||||
Unrealized losses on investments, net of taxes | (27,066) | (27,066) | |||||||
Noncontrolling interest | (4,319) | (4,319) | |||||||
Balance at Sep. 30, 2022 | (175) | 4 | 138,166 | (53,276) | (52,943) | 8,094 | 39,870 | ||
Balance at Dec. 31, 2022 | (175) | 4 | 138,482 | $ (4,674) | (63,019) | (51,386) | 10,471 | $ (4,674) | 34,377 |
Net income | 332 | 332 | |||||||
Employee stock options | 691 | 691 | |||||||
Unrealized losses on investments, net of taxes | (15,500) | (15,500) | |||||||
Dividends paid | (1,051) | (1,051) | |||||||
Noncontrolling interest | 7,778 | 7,778 | |||||||
Balance at Sep. 30, 2023 | (175) | 4 | 138,122 | (67,361) | (66,886) | 18,249 | 21,953 | ||
Balance at Jun. 30, 2023 | (175) | 4 | 139,085 | (67,746) | (57,433) | 15,565 | 29,300 | ||
Net income | 385 | 385 | |||||||
Employee stock options | 88 | 88 | |||||||
Unrealized losses on investments, net of taxes | (9,453) | (9,453) | |||||||
Dividends paid | (1,051) | (1,051) | |||||||
Noncontrolling interest | 2,684 | 2,684 | |||||||
Balance at Sep. 30, 2023 | $ (175) | $ 4 | $ 138,122 | $ (67,361) | $ (66,886) | $ 18,249 | $ 21,953 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash flows from operating activities: | ||
Income attributable to Midwest Holding Inc. | $ 332 | $ 16,883 |
Adjustments to arrive at cash provided by operating activities: | ||
Net premium and discount on investments | (16,055) | (6,982) |
Depreciation and amortization | 281 | 229 |
Stock options | 691 | (287) |
Amortization of deferred acquisition costs | 5,832 | 3,095 |
Deferred acquisition costs capitalized | (32,425) | (18,285) |
Net realized (loss) gain on investments | (5,950) | 14,676 |
Allowance for Credit Losses | 4,751 | |
Deferred gain on coinsurance transactions | 6,077 | 6,875 |
Changes in operating assets and liabilities: | ||
Reinsurance recoverable | (3,679) | 33,698 |
Interest and dividends due and accrued | (19,530) | (10,292) |
Premiums receivable | 299 | (10) |
Deposit-type liabilities | 92,184 | (17,245) |
Policy liabilities | (989) | 2,740 |
Receivable and payable for securities | 28,673 | 22,100 |
Other assets and liabilities | (21,186) | 17,697 |
Net cash provided by operating activities | 39,306 | 64,892 |
Fixed maturities available for sale: | ||
Purchases | (576,960) | (692,348) |
Proceeds from sale or maturity | 147,965 | 296,179 |
Mortgage loans on real estate, held for investment | ||
Purchases | (306,010) | (75,985) |
Proceeds from sale | 110,785 | 58,033 |
Derivatives | ||
Purchases | (22,249) | (22,981) |
Proceeds from sale | 12,730 | 3,232 |
Equity securities | ||
Purchases | (1) | |
Proceeds from sale | 12,772 | |
Other invested assets | ||
Purchases | (88,825) | (48,302) |
Proceeds from sale | 69,639 | 3,334 |
Purchase of restricted common stock | (1,700) | (1) |
Preferred stock | ||
Purchases | (2,511) | (2,893) |
Net change in policy loans | (58) | 66 |
Net purchases of property and equipment | (102) | (1,830) |
Net cash used in investing activities | (657,297) | (470,724) |
Cash flows from financing activities: | ||
Net transfer to noncontrolling interest | 7,682 | (6,906) |
Dividends Paid | (1,051) | |
Receipts on deposit-type contracts | 716,540 | 509,660 |
Withdrawals on deposit-type contracts | (98,790) | (30,271) |
Net cash provided by financing activities | 624,381 | 472,483 |
Net increase in cash and cash equivalents | 6,390 | 66,651 |
Cash and cash equivalents: | ||
Beginning | 191,414 | 142,013 |
Ending | 197,804 | 208,664 |
Supplementary information | ||
Cash paid for taxes | $ 9,682 | $ 2,870 |
Nature of Operations and Summar
Nature of Operations and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2023 | |
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 25 states and the District of Columbia as of September 30, 2023. 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 Certificate 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 September 30, 2023, Seneca Re has three incorporated cells, including Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Incorporated Cell, LLC 2021-03 (“SRC3”), which are consolidated in our financial statements. Additionally, Seneca Incorporated Cell, LLC 2022-04 (“SRC4”) was established on September 30, 2022; however, management has determined that the entity does not qualify for consolidation into our financial statements. Midwest initially owned a 100% interest in SRC1; however, 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”), an affiliate of Crestline Assurance Holdings LLC, a significant shareholder of Midwest. The Reinsurance Agreement, which was effective as of April 24, 2020, was entered into pursuant to a Master Letter Agreement (the “Master Agreement”) also dated and effective as of April 24, 2020, by and 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 indexed 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. Effective December 8, 2020, American Life entered into a novation agreement with SRC2 and Crestline Re SPC, an exempted segregated portfolio company incorporated under the laws of the Cayman Islands, for and on behalf of Crestline SP1, a segregated portfolio company of Crestline Re SPC, under which the above-described Reinsurance Agreement, as well as the trust and related asset management agreements, were novated and replaced with substantially similar agreements entered into by American Life and Crestline SP1. The Reinsurance Agreement was most recently amended effective in April 2023 to allow Crestline to provide reinsurance funding for a quota share percentage of 20% of the liabilities of American Life arising from its three-year MYGAs, a quota share percentage of 10% of its five-year MYGAs, and a quota share percentage of 0% of the liabilities of American Life arising from its FIAs. The amended agreement limited the total amounts to be reinsured to $550 million. 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 was executed on June 29, 2021. Under the Modco AEG Agreement, American Life initially ceded to AEG (and subsequently renewed), on a modified coinsurance basis, a 20% quota share of certain liabilities with respect to its five-year MYGA 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. 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 both MYGA and FIA policies is 0%. The Modco AEG Agreement remains in place, and AEG remains responsible for previously ceded liabilities. As of November 10, 2021, Midwest formed and purchased 100% of the common stock of an intermediary holding company which immediately purchased 100% of SRC3 Class A and B membership interests. Also dated as of November 10, 2021 but effective as of July 1, 2021, American Life and SRC3 entered into a Funds Withheld and Modified Coinsurance Agreement, whereby SRC3 agreed to provide reinsurance funding for an ongoing 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. The agreement with SRC3 has been amended, most recently in the fourth quarter of 2022, to provide one-time reinsurance funding for a quota share of $10.0 million of the liabilities of American Life arising from its 10-year FIA products. As of 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. and Tillman Networks LLC. The Reinsurance Agreement was effective as of July 1, 2022, by and between American Life and SRC4. 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 initially agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its five-year MYGA products and a quota share percentage of 10% of the liabilities of American Life arising from its three-year MYGA 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 Modco Deposit 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 three and nine months ended September 30, 2023 and 2022 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. Credit Loss Impairments for Fixed Maturities and Other Invested Assets The Company adopted new current expected credit loss guidance on January 1, 2023 impacting the Company’s investment portfolio. on a quarterly basis that may require a credit loss allowance. These reviews, in conjunction with the Company’s investment managers’ reports and relevant factors such as (1) the financial condition and near-term prospects of the issuer; (2) the Company’s intent to sell a fixed maturity or whether it is more likely than not that the Company will be required to sell a fixed maturity before the anticipated recovery in value; (3) the market leadership of the issuer; (4) the debt ratings of the issuer; and (5) the cash flows and liquidity of the issuer or the underlying cash flows, as required for our investment models, are all considered in the impairment assessment. If the Company has not made the decision to sell and it is not more likely than not that the Company will be required to sell before the anticipated recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the fixed maturity. The Company estimates the anticipated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the fixed maturity’s current effective rate and are compared to the amortized cost basis of the fixed maturity. The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the fixed maturity. All reasonably available information relevant to the collectability of the fixed maturity are considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, the remaining payment terms of the fixed maturity, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, sector credit ratings, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate the anticipated recovery value if the Company determines that the fixed maturity is dependent on the liquidation of collateral for ultimate settlement. If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis, a credit loss allowance is recorded as a net investment loss for the shortfall in expected cash flows; however, the amortized cost basis, net of the credit loss allowance, may not be lower than the fair value of the fixed maturity. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If the Company determines that the fixed maturity does not have sufficient cash flows or other information to estimate a recovery value for the fixed maturity, the Company may conclude that the entire decline in fair value is deemed to be credit-related and the loss is recognized as a net investment loss. When a fixed maturity is sold or otherwise disposed of or the fixed maturity is deemed uncollectible and written-off, the Company reverses amounts previously recognized in the credit loss allowance through net investment gains (losses). Recoveries after write-offs are recognized when received. The Company does not measure a credit loss allowance on accrued interest receivable as accrued interest receivable is written off to net investment income in a timely manner when there are concerns regarding collectability. 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, net of allowances for expected credit losses, 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 fixed maturities 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. 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 an 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, net of allowance for expected credit losses. 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 added information becomes available. As of September 30, 2023, the Company held one asset valued at $7.7 million with a total impairment of $1.4 million , and another asset with an impairment for the full value of $0.6 million. At December 31, 2022, the company had one asset valued at $7.7 million with a total impairment of $1.4 million. 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 change in fair market values of these futures were recorded on our Consolidated Statements of Comprehensive Loss as realized gains or (losses). Additionally, reinsurance agreements written on an 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 custody accounts are reflected as realized (losses) or gains in the Consolidated Statements of Comprehensive Loss. Equity Securities Equity securities at September 30, 2023, 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 September 30, 2023, and December 31, 2022 we held $5.1 million of ETFs. Preferred Stock The company holds investments in preferred stock of $33.9 million as of September 30, 2023 and $31.4 million as of December 31, 2022, of which $10.0 million was redeemable at both dates. Changes in the fair value of preferred stock are recorded through unrealized gains and losses in net investment income in the Consolidated Statements of Comprehensive Loss. In 2020 American Life entered into a series of transactions with an unaffiliated entity, Ascona Group Holdings Ltd (“AGH”), acquiring preferred equity and warrants, and later created a special purpose vehicle, Ascona Asset Holding LLC (“AAH”), to hold the preferred equity and warrants, and also 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 $12.3 million as of September 30, 2023 and $10.5 million of December 31, 2022. For the three months ended September 30, 2023, $ (0.7) million of investment income related to ACH was recognized, and $ (0.2) million was attributed to the noncontrolling interest held by Crestline Re SP1. For the three months ended September 30, 2022, $0.2 million of investment income was recognized, and less than $0.1 million was attributed to Crestline Re SP1. Other Invested Assets Other invested assets consists of approximately $126.8 million of various investments. Of this total, approximately $113.7 million are primarily collateral loans, and $13.1 million of private credit and equipment leases. The collateral loans, private credit and equipment leases are carried at fair market value, net of allowance for expected credit losses. 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 September 30, 2023, was $11.2 million and as of December 31, 2022, $13.7 million, respectively, with any 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, 2023, our investment in Python was carried at the net asset value (“NAV”) plus approximately $0.7 million of investment income. Deposits and notes receivable Investment escrow The Company held in escrow $1.3 million and $0.8 million as of September 30, 2023 and December 31, 2022, respectively. The cash held at year end was used to purchase mortgages in October and January 2023, 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 made 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 September 30, 2023, the Company had pledged assets with a market value of $233.5 million to FHLB to allow a borrowing capacity of $212.0 million and $121.1 million pledged as of December 31, 2022 to allow a borrowing capacity of $109.8 million. As of September 30, 2023 we had $68.0 million of outstanding funding arrangements, and $29.0 million outstanding as of December 31, 2022. Notes Receivable The Company held notes receivable carried at fair value of $6.5 million and $6.3 million as of September 30, 2023 and December 31, 2022, 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 16 – 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. 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) September 30, 2023 December 31, 2022 Beginning balance $ 43,433 $ 24,530 Additions 32,425 23,857 Amortization (4,369) (3,905) Interest (1,463) (883) Impact of unrealized investment losses (556) (166) Ending balance $ 69,470 $ 43,433 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 third quarter of 2023 and determined that all DAC balances were recoverable as of September 30, 2023 and 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 less than $0.1 million and $0.4 million at September 30, 2023 and December 31, 2022 respectively. 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 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 approximately 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. 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 Seneca Incorporated Cell, LLC 2020-02 (“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 and/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 an FW agreement, assets that would normally be paid over to a |
Non-controlling Interest
Non-controlling Interest | 9 Months Ended |
Sep. 30, 2023 | |
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. Midwest carries the original purchase amount of $15.0 million as noncontrolling interest in the equity section of the Consolidated Balance Sheets plus cumulative income of $0.5 million as of September 30, 2023, and a cumulative loss of $5.5 million as of December 31, 2022. 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 $12.3 million as of September 30, 2023, and $10.5 million as of December 31, 2022. The change in market value for the three months ended September 30, 2023 and 2022, of $ (0.7) million and $0.2 million for the preferred stock and warrants was recorded in net investment income on the Consolidated Statements of Comprehensive Loss. Of the $ (0.7) million of investment income, $ (0.2) million was attributable to noncontrolling interest. The change in market value for the nine months ended September 30, 2023 and 2022, of $2.1 million and $1.8 million for the preferred stock and warrants was recorded in net investment income on the Consolidated Statements of Comprehensive Loss. Of the $2.1 million of investment income, $0.6 million was attributable to noncontrolling interest. Dividends In September 2023, SRC1 declared and paid a cash dividend of $1.5 million to its shareholders. Of the amounts declared and paid, $1.0 million were received by the subsidiary of ORIX Corporation USA and $0.5 million was received by Midwest. The amounts received by Midwest have been eliminated in the consolidation of our financial statements in accordance with accounting principles generally accepted in the United States. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2023 | |
Investments. | |
Investments | Note 3. Investments The following table represents the amortized cost, allowance for credit losses, gross unrealized gains and losses, and estimated fair value of investments classified as available-for-sale as of September 30, 2023 and December 31, 2022: Allowance Gross Gross Amortized for Credit Unrealized Unrealized Estimated (In thousands) Cost Losses Gains Losses Fair Value September 30, 2023: Fixed maturities: Bonds: U.S. government obligations $ 1,448 $ - $ 521 $ (64) $ 1,905 Mortgage-backed securities 522,767 (386) 1,988 (42,045) 482,324 Asset-backed securities 39,121 - 84 (2,831) 36,374 Collateralized loan obligations 385,942 (613) 3,758 (12,363) 376,724 States and political subdivisions-general obligations 128 - - (4) 124 States and political subdivisions-special revenue - - - - - Corporate 68,242 (1,206) 31 (5,283) 61,784 Term loans 700,273 (5,332) 1,710 (12,054) 684,597 Total fixed maturities $ 1,717,921 $ (7,537) $ 8,092 $ (74,644) $ 1,643,832 Mortgage loans on real estate, held for investment 422,809 (1,577) - - 421,232 Derivatives 37,829 - 5,296 (16,566) 26,559 Equity securities 5,592 - - (480) 5,112 Other invested assets 126,696 (1,600) 2,154 (473) 126,777 Preferred stock 38,801 - 177 (5,052) 33,926 Deposits and notes receivable 10,774 - - - 10,774 Policy loans 83 - - - 83 Total investments $ 2,360,505 $ (10,714) $ 15,719 $ (97,215) $ 2,268,295 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 The following table presents information related to allowance for credit losses as of September 30, 2023: (In Thousands) Balance December 31, 2022 Additional Allowance Recognized Due to Adoption of Accounting Guidance Credit Loss Expense for the Current Period Balance September 30, 2023 Fixed maturities Bonds: Mortgage-backed securities $ - $ 3,564 $ (3,178) $ 386 Corporate - - 1,206 1,206 Asset-backed securities - 273 (273) - Collateralized loan obligations - 588 25 613 Term loans - 8,518 (3,186) 5,332 Mortgage loans on real estate, held for investment - 2,024 (447) 1,577 Other invested asset - 1,703 (103) 1,600 Total allowance $ - $ 16,670 $ (5,956) $ 10,714 (In Thousands) Balance June 30, 2023 Additional Allowance Recognized Due to Adoption of Accounting Guidance Credit Loss Expense for the Current Period Balance September 30, 2023 Fixed maturities Bonds: Mortgage-backed securities $ 1,035 $ - $ (649) $ 386 Corporate 1,297 - (91) 1,206 Asset-backed securities - - - - Collateralized loan obligations 480 - 133 613 Term loans 6,104 - (772) 5,332 Mortgage loans on real estate, held for investment 1,493 - 84 1,577 Other invested asset 1,343 - 257 1,600 Total allowance $ 11,752 $ - $ (1,038) $ 10,714 The following table shows the distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of September 30, 2023 and December 31, 2022. September 30, 2023 December 31, 2022 Carrying Carrying (In thousands) Value Percent Value Percent AAA and U.S. Government $ 230,903 14.0 % $ 124,183 10.2 % AA 19,363 1.2 815 0.1 A 411,517 25.0 371,371 30.6 BBB 814,049 49.6 619,516 51.0 Total investment grade 1,475,832 89.8 1,115,885 91.9 BB and below 168,000 10.2 98,750 8.1 Total $ 1,643,832 100.0 % $ 1,214,635 100.0 % Reflecting the quality of fixed maturities maintained by us, as of September 30, 2023 and December 31, 2022, 89.8% and 91.9%, 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 September 30, 2023 and December 31, 2022 for which an allowance for credit losses has not been recorded and the estimated fair value, pre-tax gross unrealized loss, and number of fixed maturities by consecutive months they have been in an unrealized loss position. September 30, 2023 December 31, 2022 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 Mortgage-backed securities 250,705 (8,878) 82 233,624 (18,464) 89 Asset-backed securities 7,576 (311) 6 24,552 (3,278) 23 Collateralized loan obligations 35,221 (740) 24 203,549 (16,730) 252 States and political subdivisions-general obligations - - - 101 (3) 1 States and political subdivisions-special revenue - - - 47 (2) 3 Corporate 30,732 (419) 16 37,286 (5,426) 64 Term loans 689,833 (12,052) - 558,337 (4,607) 36 Greater than 12 months: U.S. government obligations 1,149 (64) 9 126 (11) 5 Asset-backed securities 25,030 (2,520) 25 5,321 (711) 7 Collateralized loan obligations 175,805 (11,621) 246 37,814 (5,194) 47 States and political subdivisions-special revenue 124 (4) 2 158 (21) 7 Mortgage-backed securities 143,544 (33,168) 91 17,985 (4,044) 14 Corporate 20,952 (4,867) 52 376 (89) 7 Total fixed maturities $ 1,380,671 $ (74,644) 553 $ 1,120,411 $ (58,650) 568 (1) Our securities positions resulted in a gross unrealized loss position as of September 30, 2023 that was greater than the gross unrealized loss position at December 31, 2022. The Company views the decrease in fair value for all of the fixed maturity securities with unrealized losses as of September 30, 2023, which are driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility, as temporary. As of September 30, 2023, the Company has not made the decision to sell these securities and the Company does not believe it will be required to sell the fixed maturity securities with unrealized losses before an anticipated recovery in value. Therefore, it was determined that the unrealized losses on the fixed maturity securities were not indicative of any credit loss impairments as of September 30, 2023. The Company reviews and analyzes all investments on an ongoing basis for changes in market interest rates and credit deterioration. The review process includes analyzing the recoverability of the amortized cost basis of each investment that has a fair value that is materially lower than its amortized cost and requires a high degree of management judgment and involves uncertainty. The evaluation of securities for credit loss is a quantitative and qualitative process, which is subject to risks and uncertainties. The process to identify securities that could potentially have credit loss involves monitoring market events and other items that could impact issuers. The evaluation includes but is not limited to such factors as: •the determination of whether a mark-to-market loss on a fixed income security is due to a deterioration in the underlying credit quality of the security or to temporary market effects such as interest rates through a comprehensive understanding of both the specific security and the broader market context; •the issuer’s payment history and adherence; •the remaining payment terms and the financial condition and near-term prospects of the issuer; •the lack of ability to refinance due to liquidity problems in the credit market; •the fair value of any associated collateral; •the availability of any credit protection; •our intent to sell and the likelihood of needing to sell prior to recovery for debt securities; •consideration of rating agency actions; and •changes in estimated cash flows of mortgage and asset backed securities. See the discussion in Note 8 Reinsurance regarding unrealized gains/(losses) on investments that are owned by our reinsurers and the corresponding offset carried as a (loss)/gain in the associated embedded derivatives. The Company purchases and sells equipment leases in its investment portfolio. As of September 30, 2023, the Company owned several leases, all of which were performing. No impairment was required as of September 30, 2023. The amortized cost and estimated fair value of fixed maturities as of September 30, 2023, 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 $ 199,892 $ 195,433 Due after one year through five years 879,623 860,178 Due after five years through ten years 433,369 401,992 Due after ten years through twenty years 162,978 152,915 Due after twenty years 42,059 33,314 $ 1,717,921 $ 1,643,832 The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At September 30, 2023 and December 31, 2022, these required deposits had a total amortized cost of $1.7 million and $1.2 million, respectively, and fair values of $1.7 million and $1.0 million, respectively. Mortgage loans consist of the following: (In thousands) September 30, 2023 December 31, 2022 1-4 Family $ 59,820 $ 59,579 Hospitality 6,385 12,902 Land 66,743 62,119 Multifamily (5+) 107,330 34,072 Retail 48,182 22,119 Other 134,349 36,256 Allowance for credit loss (1,577) - Total mortgage loans $ 421,232 $ 227,047 Geographic Location: As of September 30, 2023, the commercial mortgages loans were secured by properties geographically dispersed (with the largest concentrations in loans secured by properties in New York (22%), New Zealand (16%), New Jersey (14%), Florida (8%), and California (5%)). As of December 31, 2022, the commercial mortgages loans were secured by properties geographically dispersed (with the largest concentrations in New York (24%), Florida (15%), Delaware (10%), California (6%), and Arizona (5%)). 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 September 30, 2023, the Company held one asset valued at $7.7 million with an impairment of $1.4 million and one asset with an impairment for the full value of $0.6 million. At December 31, 2022, the company had one asset valued at $7.7 million with a total impairment of $1.4 million. Commercial Mortgage Loans (In thousands) September 30, 2023 December 31, 2022 Loan-to-Value Ratio: 0%-59.99% $ 285,205 $ 108,281 60%-69.99% 85,990 79,968 70%-79.99% 35,536 33,268 80% or greater 14,501 5,530 Total mortgage loans $ 421,232 $ 227,047 The components of net investment income for three and nine months ended September 30, 2023 and 2022 are as follows: Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 Fixed maturities $ 47,552 $ 21,466 $ 115,452 $ 69,699 Mortgage loans 7,636 1,627 20,610 11,265 Other invested assets 4,654 334 10,117 6,157 Other interest income 8,179 11,158 26,457 27,222 Gross investment income 68,021 34,585 172,636 114,343 Less: investment expenses (9,447) (3,911) (20,711) (25,273) Less: amounts ceded to reinsurers (37,778) (17,736) (87,688) (59,349) Investment income, net of expenses $ 20,796 $ 12,938 $ 64,237 $ 29,721 Proceeds for the three months ended September 30, 2023 and 2022 from sales of investments classified as available-for-sale were $15.0 million, and $94 million, respectively. Proceeds for the nine months ended September 30, 2023 and 2022 from sales of investments classified as available-for-sale were $28.0 million, and $187.6 million, respectively. The proceeds included those assets associated with the third-party reinsurers. Gross gains of $0.6 million and $0.1 million and gross losses of less than $0.1 million and $1.2 million were realized on sales and the realized losses on sales during the three months ended September 30, 2023 and 2022, respectively. Gross gains of $0.9 million and $1.5 million and gross losses of less than $0.1 million and $1.7 million were realized on sales and the realized losses on sales during the nine months ended September 30, 2023 and 2022, respectively. Unrealized gain/(loss) included as part of net investment income were losses of $(14.2) million and gains of $10.5 million for the three months ended September 30, 2023 and 2022. Unrealized gain/loss included as part of net investment income were losses of $16.6 million and gains of $16.8 million for the nine months ended September 30, 2023 and 2022. The gains and losses relate only to the assets retained by American Life. |
Derivative Instruments
Derivative Instruments | 9 Months Ended |
Sep. 30, 2023 | |
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 derivatives not designated as hedges and embedded derivatives in our FIA product as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 (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 $ 984,622 705 $ 26,954 $ 831,657 595 $ 15,592 Equity-indexed embedded derivatives Deposit-type 936,754 7,807 146,143 782,997 6,131 111,618 At September 30, 2023, 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 increased unrealized losses at September 30, 2023, compared to December 31, 2022, 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 losses. The unrealized losses as of September 30, 2023 were $12.3 million compared to unrealized losses of $10.5 million as of December 31, 2022. 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: September 30, 2023 December 31, 2022 (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 $ 169,677 $ 161,920 $ 7,757 $ 150,413 $ 143,952 $ 6,461 Crestline Re SP1 448,450 450,908 (2,458) 354,806 356,374 (1,568) Ironbound 160,688 154,966 5,722 159,644 154,477 5,167 Ascendent Re 65,615 63,998 1,617 56,064 54,790 1,274 SRC4 213,013 213,366 (353) 61,646 62,516 (870) Total $ 1,057,443 $ 1,045,158 $ 12,285 $ 782,573 $ 772,109 $ 10,464 Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained cumulative unrealized losses of approximately $12.3 million as of September 30, 2023, and cumulative unrealized losses of $10.5 million as of December 31, 2022, respectively. The terms of the contracts with the third-party reinsurers provide that the changes in unrealized gains or losses 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 $1.8 million and a gain in the embedded derivative of $14.6 million for the nine months ended September 30, 2023 and 2022, 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 | 9 Months Ended |
Sep. 30, 2023 | |
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 and 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 September 30, 2023 and December 31, 2022. 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 September 30, 2023 Financial assets Fixed maturity securities: Bonds U.S. government obligations $ - $ 1,905 $ - $ - $ 1,905 Mortgage-backed securities - 482,324 - - 482,324 Asset-backed securities - 36,374 - - 36,374 Collateralized loan obligations - 376,724 - - 376,724 States and political subdivisions-general obligations - 124 - - 124 States and political subdivisions-special revenue - - - - - Corporate - 61,784 - - 61,784 Term loans - - 684,597 - 684,597 Total fixed maturity securities - 959,235 684,597 - 1,643,832 Mortgage loans on real estate, held for investment - - 421,232 - 421,232 Derivatives - 26,559 - - 26,559 Equity securities - 5,112 - - 5,112 Other invested assets - - 114,013 12,764 126,777 Preferred stock - 10,940 22,986 - 33,926 Deposits and notes receivable - 7,768 3,006 - 10,774 Policy loans - - 83 - 83 Total investments $ - $ 1,009,614 $ 1,245,917 $ 12,764 $ 2,268,295 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 146,143 $ — 146,143 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 There were no transfers of financial instruments between any levels during the nine months ended September 30, 2023 or the year ended December 31, 2022. 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 September 30, 2023 or December 31, 2022, there were no financial assets or financial liabilities measured at fair value on a non-recurring basis. The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of September 30, 2023 and December 31, 2022, respectively: September 30, 2023 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 $ 83 $ — $ — $ 83 $ 83 Cash 197,804 197,804 — — 197,804 Liabilities: Policyholder deposits (deposit-type contracts) 2,453,282 — — 2,453,282 2,453,282 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 191,414 191,414 — — 191,414 Liabilities: Policyholder deposits (deposit-type contracts) 1,743,348 — — 1,743,348 1,743,348 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 nine months ended September 30, 2023: September 30, 2023 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 $ 558,972 $ - $ (12,054) $ 137,679 $ 684,597 Mortgage loans on real estate, held for investment 227,047 - - 194,185 421,232 Deposits and notes receivable 1,306 - - 1,700 3,006 Other invested assets 99,997 - 1,681 12,335 114,013 Preferred stock 21,871 (4,874) - 5,989 22,986 Policy loans 25 - - 58 83 Total level 3 assets $ 909,218 $ (4,874) $ (10,373) $ 351,946 $ 1,245,917 Liabilities Embedded derivative for equity-indexed contracts (111,618) 33,170 - (67,695) (146,143) Total level 3 liabilities $ (111,618) $ 33,170 $ - $ (67,695) $ (146,143) 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, 2022: December 31, 2022 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 $ 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) 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, 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 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): September 30, 2023 (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 $684.6 Yield Analysis Discount rates 4.6% 17.3% 12.4% Decrease Mortgage loans on real estate $421.2 Yield Analysis Principal funded NA NA NA Decrease Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $146.1 Option Budget Method Nonperformance risk 0.6% 1.5% 1.1% Decrease Option budget 1.1% 5.9% 2.9% Increase Surrender rate 0.5% 15% (base) 12.5% Decrease Other invested assets $114.0 Market Approach EBITDA Multiples 2.6x 3.1x 2.8x NA Discount rates 8.0% 25.5% 14.5% NA Preferred stock $9.8 Yield Analysis Discount rates 24.0% 28.0% 26.0% Increase Detachable warrants $2.5 Market Approach GPCM EBITDA Multiples 10.0x 11.5x 100.0% Decrease Preferred stock $10.7 Market Approach EBITDA Multiples 2.55x 3.05x 2.8x Decrease * Weighted by account value 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 2.6x 3.1x 2.8x 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 2.55x 3.05x 2.8x Decrease * Weighted by account value |
Deposit-Type Contracts
Deposit-Type Contracts | 9 Months Ended |
Sep. 30, 2023 | |
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 nine months ended September 30, 2023 and the year ended December 31, 2022: (In thousands) September 30, 2023 December 31, 2022 Beginning balance $ 1,743,348 $ 1,075,439 US Alliance (452) (2,176) Unified Life Insurance Company (129) (10) Ironbound Reinsurance Company Limited 4,748 5,959 Ascendant Re 149 (3,185) Crestline SP1 4,402 (11,623) American Republic Insurance Company 2,523 (4,080) SRC4 5,475 613 Deposits received 755,213 745,083 Investment earnings (includes embedded derivative) 33,170 (10,193) Withdrawals (95,165) (51,659) Policy charges - (820) Ending balance $ 2,453,282 $ 1,743,348 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 September 30, 2023 and December 31, 2022 funding agreements of $68.0 million and $29.0 million were outstanding. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2023 | |
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 September 30, 2023, and 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. Interest paid for the three months ended September 30, 2023 and 2022 was $0.7 million and $0.0 million respectively. Interest paid for the nine months ended September 30, 2023 and 2022 was $1.7 million and $0.0 million respectively. 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 | 9 Months Ended |
Sep. 30, 2023 | |
Reinsurance | |
Reinsurance | Note 8. Reinsurance A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of September 30, 2023 and December 31, 2022 is as follows: (In thousands) September 30, 2023 December 31, 2022 Assets: Reinsurance recoverables $ 27,870 $ 20,190 Liabilities: Deposit-type contracts Direct $ 2,453,282 $ 1,743,348 Reinsurance ceded (1,157,854) (912,982) Retained deposit-type contracts $ 1,295,428 $ 830,366 The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third-party reinsurers as of September 30, 2023: 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 $ - $ - $ 1,327 $ - $ 1,327 Optimum Re Insurance Company A - - 690 - 690 Sagicor Life Insurance Company A- - 299 10,006 (15) 10,290 Ascendant Re NR - - (4,724) - (4,724) Crestline SP1 NR - - (9,907) - (9,907) American Republic Insurance Company A - - 6,057 - 6,057 SRC4 NR - - (26,407) - (26,407) Unified Life Insurance Company NR - 25 772 (14) 783 US Alliance Life and Security Company NR - - 49,784 (23) 49,761 $ - $ 324 $ 27,598 $ (52) $ 27,870 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 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 $ - $ - $ (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 Our securities positions resulted in changes in the unrealized loss position as of September 30, 2023, compared to December 31, 2022, 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 gains 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. 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 was executed on June 29, 2021. Under the Modco AEG Agreement, American Life initially ceded to AEG (and subsequently renewed), 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. 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 Modco AEG 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 again amended to provide one-time reinsurance funding for $10.0 million of the liabilities of American Life arising from its 10-year FIA products. On September 21, 2022, the NDOI issued its approval 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. and Tillman Networks LLC. The Reinsurance Agreement was effective as of July 1, 2022, by and between American Life and SRC4. 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 initially 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 SRC3, and what was earned on a GAAP basis for the three and nine months ended September 30, 2023 and 2022: Three months ended September 30, (In thousands) 2023 2022 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 $ — $ — $ — $ 2 $ - $ - $ - $ 6 Ironbound Reinsurance Company Limited — — 45 121 - - 48 123 Ascendant Re 43 42 25 101 - - 23 88 US Alliance Life and Security Company — — 12 93 - - 13 96 Crestline Re SP 1 492 475 146 846 1,972 2,794 103 604 American Republic Insurance Company — (132) 52 294 1,144 1,631 38 242 SRC4 849 822 78 (65) 878 784 5 80 $ 1,384 $ 1,207 $ 358 $ 1,392 $ 3,994 $ 5,209 $ 230 $ 1,239 Nine months ended September 30, (In thousands) 2023 2022 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 $ — $ — $ — $ 14 $ — $ — $ — $ 20 Ironbound Reinsurance Company Limited — — 138 374 — — 146 381 Ascendant Re 224 217 71 287 — — 70 250 US Alliance Life and Security Company — — 37 249 — — 41 259 Crestline SP1 2,298 2,106 418 2,486 4,497 7,026 271 1,669 American Republic Insurance Company 560 621 158 856 2,971 4,859 90 592 SRC4 4,730 4,436 164 197 878 783 5 80 $ 7,812 $ 7,380 $ 986 $ 4,463 $ 8,346 $ 12,668 $ 623 $ 3,251 (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) September 30, 2023 December 31, 2022 Reinsurer Deferred Gain on Reinsurance Transactions Deferred Gain on Reinsurance Transactions US Alliance Life and Security Company (1) $ - $ 152 Unified Life Insurance Company (1) 249 217 Ironbound Reinsurance Company Limited (2) 4,750 4,876 Ascendant Re 3,096 2,947 US Alliance Life and Security Company (2) 1,961 2,069 American Republic Insurance Company (2) 7,400 7,502 Crestline SP1 (2) 19,488 18,475 SRC4 (2) 7,196 1,825 $ 44,140 $ 38,063 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 September 30, 2023 or December 31, 2022, 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: September 30, 2023 December 31, 2022 (In thousands) Retained Reinsured Consolidated Retained Reinsured Consolidated Assets Total investments $ 1,212,973 $ 1,055,322 $ 2,268,295 $ 812,177 $ 802,780 $ 1,614,957 Cash and cash equivalents 111,119 86,685 197,804 127,291 64,123 191,414 Deferred acquisition costs, net 69,470 - 69,470 43,433 - 43,433 Premiums receivable - 63 63 - - - Accrued investment income 18,835 25,859 44,694 11,307 13,858 25,165 Reinsurance recoverables (8,944) 36,814 27,870 (6,853) 27,405 20,552 Property and equipment, net 1,721 - 1,721 1,897 - 1,897 Receivable for securities sold (9,650) 9,650 - 2,033 8,485 10,518 Other assets 12,760 1,575 14,335 12,259 236 12,495 Total assets $ 1,408,284 $ 1,215,968 $ 2,624,252 $ 1,003,544 $ 916,887 $ 1,920,431 Liabilities and Stockholders’ Equity Liabilities: Benefit reserves $ 526 $ 11,006 $ 11,532 $ 1,332 $ 11,613 $ 12,945 Deposit-type contracts 1,301,754 1,151,528 2,453,282 841,980 901,368 1,743,348 Other policy-holder funds 4,219 311 4,530 4,105 - 4,105 Notes payable 25,000 - 25,000 25,000 - 25,000 Deferred gain on coinsurance transactions 416 43,724 44,140 38,063 - 38,063 Payable for securities sold 27,029 - 27,029 8,872 - 8,872 Other liabilities 27,387 9,399 36,786 49,815 3,906 53,721 Total liabilities $ 1,386,331 $ 1,215,968 $ 2,602,299 $ 969,167 $ 916,887 $ 1,886,054 Stockholders’ Equity: Preferred stock $ - $ - $ - $ - $ - $ - Voting common stock 4 - 4 4 - 4 Additional paid-in capital 138,122 - 138,122 138,482 - 138,482 Treasury stock (175) - (175) (175) - (175) Accumulated deficit (67,361) - (67,361) (63,019) - (63,019) Accumulated other comprehensive loss (66,886) - (66,886) (51,386) - (51,386) Total Midwest Holding Inc.'s stockholders' equity $ 3,704 $ - $ 3,704 $ 23,906 $ - $ 23,906 Noncontrolling interest 18,249 - 18,249 10,471 - 10,471 Total stockholders' equity 21,953 - 21,953 34,377 - 34,377 Total liabilities and stockholders' equity $ 1,408,284 $ 1,215,968 $ 2,624,252 $ 1,003,544 $ 916,887 $ 1,920,431 |
Income Tax Matters
Income Tax Matters | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Matters | |
Income Tax Matters | Note 9. Income Tax Matters Significant components of the Company’s deferred tax assets and liabilities as of September 30, 2023 and December 31, 2022 are as follows: (In thousands) September 30, 2023 December 31, 2022 Deferred tax assets: Loss carryforwards $ 4,146 $ 2,672 Capitalized costs 44 79 Stock option granted 1,190 1,066 Policy acquisition costs 9,803 6,489 General business credits 6 6 Derivative option allowance - - Sec 163(j) limitation 171 171 Benefit reserves 17,189 12,010 Impairments 535 403 Unrealized losses on investments 17,780 13,624 Other 1,928 1,928 Total deferred tax assets 52,792 38,448 Less valuation allowance (46,138) (35,305) Total deferred tax assets, net of valuation allowance 6,654 3,143 Deferred tax liabilities: Unrealized losses on investments - - Due premiums - - Intangible assets 147 147 Derivative option allowance 4,246 2,150 Bond Discount 2,400 936 Property and equipment (139) (90) Total deferred tax liabilities 6,654 3,143 Net deferred tax assets $ - $ - At September 30, 2023 and December 31, 2022, the Company recorded a valuation allowance of $46.1 million and $35.3 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 $4.6 million and $1.3 million for the three months ended September 30, 2023 and 2022. and $10.5 million and $3.8 million of tax expense for the nine months ended September 30, 2023 and 2022. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 Computed expected income tax benefit (expense) $ (1,564) $ (796) $ (3,921) $ (2,305) Reduction (increase) in income taxes resulting from: Interest maintenance reserve and reinsurance (47) 176 4 158 Nondeductible expenses (3) (3) (9) (8) Change in valuation allowance (2,896) (641) (6,677) (1,693) Deferred tax adjustment - 14 - - AETR adjustment (19) - (19) - Prior year true-up (77) - 140 - Subtotal of (increases) decreases (3,042) (454) (6,561) (1,543) Tax (benefit) expense $ (4,606) $ (1,250) $ (10,482) $ (3,848) Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss (“NOL”) carryforwards following a change of control, which occurred on June 28, 2018. As of September 30, 2023, the deferred tax assets included the expected tax benefit attributable to federal NOLs of $10.6 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 $0.9 million prior to 2017 will expire through the year of 2032. The NOLs generated by SRC1 prior to December 30, 2021 of less than $3.6 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 $2.2 million on the deferred tax assets related to these federal NOL carryforwards. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2023 | |
Leases | |
Leases | Note 10. Leases Our operating lease activities consist of leases for office space and equipment and do not include variable lease payments. The right of use assets and lease liabilities generated by our lease agreements are included in on the Consolidated Balance Sheets in the Other Assets and Other Liabilities categories, respectively. Supplemental balance sheet information for our leases as of September 30, 2023 and December 31, 2022 is as follows: (In thousands) Classification September 30, 2023 December 31, 2022 Assets Operating Operating lease right-of-use assets $ 1,997 $ 2,119 Liabilities Operating lease Operating lease liabilities $ 2,005 $ 2,135 Our operating lease expense for the three and nine months ended September 30, 2023 and 2022 is as follows: Three months ended September 30, Nine months ended September 30, (In thousands) Classification 2023 2022 2023 2022 Operating General and administrative expense $ 3 $ 3 $ 10 $ 10 Minimum contractual obligations for our leases as of September 30, 2023 are as follows: (In thousands) Operating Leases 2023 $ 112 2024 378 2025 342 2026 345 2027 353 2028 362 2029 and after 1,041 Total remaining lease payments $ 2,933 The cash flows related to the operating lease were less than $0.1 million for both the three and the nine months ended September 30, 2023 and 2022. The weighted average remaining lease terms of our operating leases were approximately eight-and-one-half years |
Equity
Equity | 9 Months Ended |
Sep. 30, 2023 | |
Equity | |
Equity | Note 11. Equity Preferred stock As of September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, Midwest had 3,744,645 and 3,727,976 shares of voting common stock issued 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 certain 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, 2021 $ 2,634 Other comprehensive (loss) before reclassifications, net of tax (54,975) Less: Reclassification adjustments for losses realized in net income 955 Balance, December 31, 2022 (51,386) Other comprehensive (loss) before reclassifications, net of tax (16,167) Less: Reclassification adjustments for losses realized in net income, net of tax 667 Balance, September 30, 2023 $ (66,886) |
Long-Term Incentive Plans
Long-Term Incentive Plans | 9 Months Ended |
Sep. 30, 2023 | |
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, Vested and December 31, 2022 $ 32.19 $ 11.20 - 55.02 319,121 271,517 47,604 Granted 17.12 17.20 5,750 5,750 - Prior year adjustment 39.16 16.37 - 55.02 - (7,390) 7,390 Vested - - - - - Exercised - - - - - Forfeited 46.92 25.00 - 55.02 (19,267) (19,267) - Expired - - - - - September 30, 2023 $ 30.90 $ 11.20 - 55.02 305,604 250,610 54,994 Option information segregated by ranges of exercise prices were as follows: September 30, 2023 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 35,853 $ 55.02 7.60 6,390 $ 55.02 7.33 $40.00 - $49.99 127,751 41.25 7.69 36,042 41.25 7.33 $30.00 - $39.99 - - - - - - $20.00 - $29.99 23,600 23.36 7.54 5,877 25.00 7.04 $10.00 - $19.99 115,000 13.43 9.00 4,285 16.37 7.33 < $10.00 - $ - - - $ - - The weighted average exercise prices of vested and exercisable options as of September 30, 2023, were $39.16. As of September 30, 2023, based on a closing stock price of $26.15 per share, the aggregate intrinsic (in-the-money) values of vested options and all options outstanding were less than $0.1 million and $1.6 million, respectively. Restricted Stock and Restricted Stock Units In 2020, the Company awarded 18,597 shares of restricted stock, with a grant date fair value of $41.25 per share and subject to time-based vesting requirements of one-fourth 5,089 restricted stock units (“RSUs”) were granted to our non-employee directors in June 2021 with 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, although 2,674 of those RSUs were forfeited by former MHI director Douglas Bratton when he left the Board in September 2022. The remaining 16,044 RSUs vested on June 6, 2023 in conjunction with our annual stockholders meeting. The compensation expense relating to these awards was calculated using the grant date fair value and was amortized on a straight-line basis over the requisite service periods. On June 6, 2023, the Company granted 6,984 RSUs to our non-employee directors with a grant date fair value of $25.70 per share. By their terms, the RSUs will vest on the earlier of June 6, 2024 or the date of our 2024 annual stockholders meeting, although they are also subject to accelerated vesting in connection with the transaction described in Note 18. The compensation expense relating to these awards was calculated using the grant date fair value and will be amortized on a straight-line basis over the requisite service period. Total Outstanding Units Vested Units Units Weighted Average Grand Date Fair Value Units Weighted Average Grant Date Fair Value December 31, 2022 17,207 $ 13.84 1,163 $ 50.00 Granted 6,984 25.76 - - Vested - - - - Forfeited - - - - Released (16,044) 11.22 - - September 30, 2023 8,147 $ 22.08 1,163 $ 50.00 The table below identifies the assumptions used in the Black Scholes Model to calculate the compensation expense for options granted during the nine months ended September 30, 2023 and the year ended December 31, 2022: September 30, December 31, 2023 2022 Volatility 287.3% 4.16% - 4.26% Weighted-average volatility 287.3% 3.7% Expected term (in years) 6.54 yrs 2 - 7 Risk-free rate 3.57% 0.02% - 2.15% For the three months ended September 30, 2023 and 2022, 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 $0.1 million and negative $(0.7) million, respectively. For the nine months ended September 30, 2023 and 2022, 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 $0.7 million and negative $(0.3) million, respectively. The tables below shows the remaining non-vested shares under the 2019 and 2020 Plans as of September 30, 2023 and December 31, 2022, respectively: September 30, 2023 Awards Outstanding Weighted Average Grant-Date Fair Value Weighted Average Exercise Price Nonvested stock options and restricted Stock unit awards at December 31, 2022 287,561 $ 16.96 $ 32.29 Options granted 5,750 16.56 17.12 Restricted stock units granted 6,984 16.56 - Vested (23,434) 13.59 55.02 Forfeited or expired (20,517) 27.99 46.92 Ending Balance at September 30, 2023 256,344 $ 16.92 $ 30.90 December 31, 2022 Stock Options 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 or expired (109,063) 23.82 38.87 Ending Balance at December 31, 2022 287,561 $ 16.96 $ 32.29 |
Statutory Net Income and Surplu
Statutory Net Income and Surplus | 9 Months Ended |
Sep. 30, 2023 | |
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: Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 American Life $ 38,395 $ (1,836) $ 3,279 $ 16,055 SRC1 $ (458) $ 1,129 $ 6,853 $ 181 SRC3 $ 745 $ 1,951 $ 1,662 $ 960 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) September 30, 2023 December 31, 2022 American Life $ 67,018 $ 69,936 SRC1 $ 14,968 $ 9,615 SRC3 $ 7,983 $ 6,088 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: Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 American Life $ 207,689 $ 141,602 $ 438,896 $ 272,218 SRC1 $ - $ - $ - $ - SRC3 $ - $ 174 $ 123 $ 23,931 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 September 30, 2023 and December 31, 2022, exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements as of those dates. As of September 30, 2023 and December 31, 2022, American Life did not hold any participating policyholder contracts where dividends were required to be paid. |
Third-party Administration
Third-party Administration | 9 Months Ended |
Sep. 30, 2023 | |
Third-party Administration | |
Third-party Administration | Note 14. Third-party Administration The Company, through its investment advisory subsidiary 1505 Capital, offers investment and structuring services. Our reinsurance partners may choose to engage 1505 as the investment advisor for their portfolios. Services are also available to unaffiliated investors. As of September 30, 2023, and December 31, 2022, 1505 Capital had $531.6 million and $501.9 of third-party assets under management, respectively. |
Policy Administration Fees
Policy Administration Fees | 9 Months Ended |
Sep. 30, 2023 | |
Policy Administration Fees | |
Policy Administration Fees | Note 15. Policy Administration Fees The company generates revenue through policy administration for our third-party reinsurers, as well as fees received from early termination of policies. For the three months ended September 30, 2023 and 2022, we received $0.9 million and $0.5 million of fees and for the nine months ended September 30, 2023 and 2022 we received $2.0 million and $1.4 million of fees. |
Related Party
Related Party | 9 Months Ended |
Sep. 30, 2023 | |
Third-party Administration | |
Related Party | Note 16. 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 Bratton, a principal of Crestline, was initially 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 a quota share percentage of 40% the liabilities of American Life arising from its FIA products. Through September 30, 2023, American Life had ceded $534.6 million face amount of annuities to Crestline Re SP1. American Life received total ceding commissions of $0.5 million and expense reimbursements of $0.5 million in connection with these transactions for the three months ended September 30, 2023 and commissions of $2.3 million and expense reimbursements of $2.1 million for the nine months ended September 30, 2023. The Reinsurance Agreement also contains the following agreements: ● American Life and Crestline Re 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 Re 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 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. As of September 30, 2023, and December 31, 2022, Crestline has approximately $504.4 million and $423.6 of the Company’s assets under management, respectively, and was a subadvisor on approximately $151.6 million and $134.3 million of additional investments as of September 30, 2023 and December 31, 2022, respectively. 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 $6.5 million, and the preferred shares are carried at a fair market value of $1.9 million as of September 30, 2023 and $2.3 million as of December 31, 2022, based upon valuations received from an independent third-party. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies. | |
Commitments and Contingencies | Note 17. Commitments and Contingencies Contingent Commitments: (In thousands) September 30, 2023 December 31, 2022 Due in one year or less $ 83,137 $ 52,951 Due in two years 41,058 43,604 Due in three years 20,329 7,731 Due in four years 24,947 13,277 Due in five years and after 53,569 61,432 $ 223,040 $ 178,995 Legal Proceedings: Regulatory Matters: |
Pending Merger
Pending Merger | 9 Months Ended |
Sep. 30, 2023 | |
Pending Merger | |
Pending Merger | Note 18. Pending Merger On April 30, 2023, Midwest Holding Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Midas Parent, LP, a Delaware limited partnership (“Parent”) and an affiliate of Antarctica Capital, LLC (“Antarctica”), and Midas Merger Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, subject to the satisfaction (or waiver) of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company and whereupon Merger Sub will cease to exist and the Company will be the surviving corporation in the Merger and will continue as a wholly-owned subsidiary of Parent (the “Merger”). The board of directors of the Company (the “Company Board”) unanimously approved and declared it advisable to enter into the Merger Agreement and resolved to recommend that the Company’s stockholders approve the adoption of the Merger Agreement and the transactions contemplated thereby (the “Transactions”), including the Merger on the terms and subject to the conditions set forth in the Merger Agreement. As a result of the Merger, at the effective time of the Merger (the “Effective Time”), each outstanding share of common stock of the Company, par value $0.001 per share (the “Company Common Stock”) (other than (i) Company Common Stock held by Parent or the Company or any of their respective wholly owned subsidiaries, and (ii) any shares of Company Common Stock held by stockholders who properly exercise appraisal rights under Delaware law), outstanding immediately prior to the Effective Time, will be converted into the right to receive $27.00 per share in cash, without interest. Consummation of the Merger is subject to certain conditions, including, but not limited to, (i) the Company’s receipt of approval of the Company’s stockholders, (ii) the absence of any law or order prohibiting or making illegal the consummation of the Merger, (iii) the approval of the Merger by the Nebraska Department of Insurance and the Vermont Department of Financial Regulation (“DFR”) without the imposition of any Burdensome Condition (as defined in the Merger Agreement), and (iv) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement). On May 14, 2023, the DFR granted its approval of the Merger. The transaction was approved by stockholders on July 26, 2023, and has been approved by the Vermont Department of Financial Regulation. The merger is still subject to the approval of the Nebraska Department of Insurance. We continue to work with Antarctica to provide all information requested by the Nebraska Department of Insurance (NDOI). Upon completion of the NDOI review, a public NDOI hearing will be required before final regulatory approval is received to proceed with closing the merger. We still anticipate closing the transaction shortly after the hearing and by year-end. |
Nature of Operations and Summ_2
Nature of Operations and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
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 25 states and the District of Columbia as of September 30, 2023. 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 Certificate 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 September 30, 2023, Seneca Re has three incorporated cells, including Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Incorporated Cell, LLC 2021-03 (“SRC3”), which are consolidated in our financial statements. Additionally, Seneca Incorporated Cell, LLC 2022-04 (“SRC4”) was established on September 30, 2022; however, management has determined that the entity does not qualify for consolidation into our financial statements. Midwest initially owned a 100% interest in SRC1; however, 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”), an affiliate of Crestline Assurance Holdings LLC, a significant shareholder of Midwest. The Reinsurance Agreement, which was effective as of April 24, 2020, was entered into pursuant to a Master Letter Agreement (the “Master Agreement”) also dated and effective as of April 24, 2020, by and 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 indexed 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. Effective December 8, 2020, American Life entered into a novation agreement with SRC2 and Crestline Re SPC, an exempted segregated portfolio company incorporated under the laws of the Cayman Islands, for and on behalf of Crestline SP1, a segregated portfolio company of Crestline Re SPC, under which the above-described Reinsurance Agreement, as well as the trust and related asset management agreements, were novated and replaced with substantially similar agreements entered into by American Life and Crestline SP1. The Reinsurance Agreement was most recently amended effective in April 2023 to allow Crestline to provide reinsurance funding for a quota share percentage of 20% of the liabilities of American Life arising from its three-year MYGAs, a quota share percentage of 10% of its five-year MYGAs, and a quota share percentage of 0% of the liabilities of American Life arising from its FIAs. The amended agreement limited the total amounts to be reinsured to $550 million. 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 was executed on June 29, 2021. Under the Modco AEG Agreement, American Life initially ceded to AEG (and subsequently renewed), on a modified coinsurance basis, a 20% quota share of certain liabilities with respect to its five-year MYGA 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. 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 both MYGA and FIA policies is 0%. The Modco AEG Agreement remains in place, and AEG remains responsible for previously ceded liabilities. As of November 10, 2021, Midwest formed and purchased 100% of the common stock of an intermediary holding company which immediately purchased 100% of SRC3 Class A and B membership interests. Also dated as of November 10, 2021 but effective as of July 1, 2021, American Life and SRC3 entered into a Funds Withheld and Modified Coinsurance Agreement, whereby SRC3 agreed to provide reinsurance funding for an ongoing 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. The agreement with SRC3 has been amended, most recently in the fourth quarter of 2022, to provide one-time reinsurance funding for a quota share of $10.0 million of the liabilities of American Life arising from its 10-year FIA products. As of 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. and Tillman Networks LLC. The Reinsurance Agreement was effective as of July 1, 2022, by and between American Life and SRC4. 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 initially agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its five-year MYGA products and a quota share percentage of 10% of the liabilities of American Life arising from its three-year MYGA 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 Modco Deposit 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 three and nine months ended September 30, 2023 and 2022 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. |
Credit Loss Impairments for Fixed Maturities and Other Invested Assets | Credit Loss Impairments for Fixed Maturities and Other Invested Assets The Company adopted new current expected credit loss guidance on January 1, 2023 impacting the Company’s investment portfolio. on a quarterly basis that may require a credit loss allowance. These reviews, in conjunction with the Company’s investment managers’ reports and relevant factors such as (1) the financial condition and near-term prospects of the issuer; (2) the Company’s intent to sell a fixed maturity or whether it is more likely than not that the Company will be required to sell a fixed maturity before the anticipated recovery in value; (3) the market leadership of the issuer; (4) the debt ratings of the issuer; and (5) the cash flows and liquidity of the issuer or the underlying cash flows, as required for our investment models, are all considered in the impairment assessment. If the Company has not made the decision to sell and it is not more likely than not that the Company will be required to sell before the anticipated recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the fixed maturity. The Company estimates the anticipated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the fixed maturity’s current effective rate and are compared to the amortized cost basis of the fixed maturity. The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the fixed maturity. All reasonably available information relevant to the collectability of the fixed maturity are considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, the remaining payment terms of the fixed maturity, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, sector credit ratings, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate the anticipated recovery value if the Company determines that the fixed maturity is dependent on the liquidation of collateral for ultimate settlement. If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis, a credit loss allowance is recorded as a net investment loss for the shortfall in expected cash flows; however, the amortized cost basis, net of the credit loss allowance, may not be lower than the fair value of the fixed maturity. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If the Company determines that the fixed maturity does not have sufficient cash flows or other information to estimate a recovery value for the fixed maturity, the Company may conclude that the entire decline in fair value is deemed to be credit-related and the loss is recognized as a net investment loss. When a fixed maturity is sold or otherwise disposed of or the fixed maturity is deemed uncollectible and written-off, the Company reverses amounts previously recognized in the credit loss allowance through net investment gains (losses). Recoveries after write-offs are recognized when received. The Company does not measure a credit loss allowance on accrued interest receivable as accrued interest receivable is written off to net investment income in a timely manner when there are concerns regarding collectability. |
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, net of allowances for expected credit losses, 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 fixed maturities 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. 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 an 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, net of allowance for expected credit losses. 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 added information becomes available. As of September 30, 2023, the Company held one asset valued at $7.7 million with a total impairment of $1.4 million , and another asset with an impairment for the full value of $0.6 million. At December 31, 2022, the company had one asset valued at $7.7 million with a total impairment of $1.4 million. |
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 change in fair market values of these futures were recorded on our Consolidated Statements of Comprehensive Loss as realized gains or (losses). Additionally, reinsurance agreements written on an 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 custody accounts are reflected as realized (losses) or gains in the Consolidated Statements of Comprehensive Loss. |
Equity Securities | Equity Securities Equity securities at September 30, 2023, 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 September 30, 2023, and December 31, 2022 we held $5.1 million of ETFs. |
Preferred Stock | Preferred Stock The company holds investments in preferred stock of $33.9 million as of September 30, 2023 and $31.4 million as of December 31, 2022, of which $10.0 million was redeemable at both dates. Changes in the fair value of preferred stock are recorded through unrealized gains and losses in net investment income in the Consolidated Statements of Comprehensive Loss. In 2020 American Life entered into a series of transactions with an unaffiliated entity, Ascona Group Holdings Ltd (“AGH”), acquiring preferred equity and warrants, and later created a special purpose vehicle, Ascona Asset Holding LLC (“AAH”), to hold the preferred equity and warrants, and also 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 $12.3 million as of September 30, 2023 and $10.5 million of December 31, 2022. For the three months ended September 30, 2023, $ (0.7) million of investment income related to ACH was recognized, and $ (0.2) million was attributed to the noncontrolling interest held by Crestline Re SP1. For the three months ended September 30, 2022, $0.2 million of investment income was recognized, and less than $0.1 million was attributed to Crestline Re SP1. |
Other Invested Assets | Other Invested Assets Other invested assets consists of approximately $126.8 million of various investments. Of this total, approximately $113.7 million are primarily collateral loans, and $13.1 million of private credit and equipment leases. The collateral loans, private credit and equipment leases are carried at fair market value, net of allowance for expected credit losses. 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 September 30, 2023, was $11.2 million and as of December 31, 2022, $13.7 million, respectively, with any 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, 2023, our investment in Python was carried at the net asset value (“NAV”) plus approximately $0.7 million of investment income. |
Deposits and notes receivable | Deposits and notes receivable Investment escrow The Company held in escrow $1.3 million and $0.8 million as of September 30, 2023 and December 31, 2022, respectively. The cash held at year end was used to purchase mortgages in October and January 2023, 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 made 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 September 30, 2023, the Company had pledged assets with a market value of $233.5 million to FHLB to allow a borrowing capacity of $212.0 million and $121.1 million pledged as of December 31, 2022 to allow a borrowing capacity of $109.8 million. As of September 30, 2023 we had $68.0 million of outstanding funding arrangements, and $29.0 million outstanding as of December 31, 2022. Notes Receivable The Company held notes receivable carried at fair value of $6.5 million and $6.3 million as of September 30, 2023 and December 31, 2022, 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 16 – 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. |
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) September 30, 2023 December 31, 2022 Beginning balance $ 43,433 $ 24,530 Additions 32,425 23,857 Amortization (4,369) (3,905) Interest (1,463) (883) Impact of unrealized investment losses (556) (166) Ending balance $ 69,470 $ 43,433 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 third quarter of 2023 and determined that all DAC balances were recoverable as of September 30, 2023 and 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 less than $0.1 million and $0.4 million at September 30, 2023 and December 31, 2022 respectively. |
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 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 approximately 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. 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 Seneca Incorporated Cell, LLC 2020-02 (“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 and/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 an 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 gains and (losses) as of September 30, 2023 and December 31, 2022. 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 gains and (losses), American Life records the year-to-date change as an offsetting realized (loss) or gain in Net Realized (Loss) Gain on Investments on the Consolidated Statements of Comprehensive Loss and in amounts recoverable from third-party reinsurers on the Consolidated Balance Sheets. 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 2023 and 2022, American Life received advances of $39.0 million and $29.0 million respectively, 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 $68.0 million as of September 30, 2023, and $29.0 million as of December 31, 2022. Interest on the funding agreements accrues at their effective interest rates. As of September 30, 2023, scheduled maturity dates for outstanding FHLB funding agreements were as follows: (Dollar amounts in thousands) Interest Maturity Date Rate Amount March 1, 2024 5.540% $ 16,000 January 22, 2025 5.690% 13,000 January 22, 2025 5.655% 2,000 August 16, 2025 5.955% 8,000 September 1, 2027 5.885% 4,000 September 15, 2027 5.965% 8,000 October 1, 2027 5.895% 9,000 December 1, 2027 5.875% 6,000 December 1, 2027 5.860% 2,000 $ 68,000 |
Note Payable | (Dollar amounts in thousands) Interest Maturity Date Rate Amount March 1, 2024 5.540% $ 16,000 January 22, 2025 5.690% 13,000 January 22, 2025 5.655% 2,000 August 16, 2025 5.955% 8,000 September 1, 2027 5.885% 4,000 September 15, 2027 5.965% 8,000 October 1, 2027 5.895% 9,000 December 1, 2027 5.875% 6,000 December 1, 2027 5.860% 2,000 $ 68,000 |
Deferred Gain on Coinsurance Transactions | Deferred Gain on Coinsurance Transactions American Life 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, unrealized gains and losses from other invested assets, and unrealized gains and losses from preferred stock, 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. |
Earnings Per Share | Earnings Per Share Basic income per share for the three months ended September 30, 2023 and 2022 was $0.10 and $1.99 respectively, which includes a loss of $ (2.1) million and a gain of $0.1 million from an embedded derivative, respectively. Basic income per share for the nine months ended September 30, 2023 and 2022 was $0.09 and $4.52 respectively, which includes a gain of $1.8 million and $14.6 million from an embedded derivative, 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 3,744,645 voting common shares issued December 31, 2022 Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 (In thousands, except per share amounts) Numerator: Net income attributable to Midwest Holding Inc. $ 385 $ 7,431 $ 332 $ 16,883 Denominator: Weighted average common shares outstanding 3,738,070 3,736,933 3,734,946 3,791,082 Effect of dilutive securities: Stock options and deferred compensation agreements 138,600 52,000 138,600 52,000 Denominator for earnings per common share 3,876,670 3,788,933 3,873,546 3,843,082 Income per common share $ 0.10 $ 1.99 $ 0.09 $ 4.52 Income per common share, diluted $ 0.10 $ 1.96 $ 0.09 $ 4.45 |
Adoption of New Accounting Standards | Adoption of New Accounting Standards 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. Measurement of Credit Losses on Financial Instruments 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 fixed maturities. One such change is to require credit losses to be presented as an allowance rather than a write-down on available for sale debt fixed maturities 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 became 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 accumulated deficit. The Company’s implementation activities are complete, and the impacts relate to the Company’s investment portfolio. The Company adopted the new guidance on January 1, 2023 and recognized a cumulative effect adjustment that decreased retained earnings by $4.7 million, in conjunction with the $16.5 million allowance for credit losses and $11.8 million to Reinsurance Recoverables. an other-than-temporary impairment on a prospective basis. Accordingly, the amortized cost basis will remain the same before and after adoption and the effective interest rate was not changed at the time of adoption. Future Adoption of New Accounting Standards Accounting for Long-Duration Insurance Contracts 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. |
Nature of Operations and Summ_3
Nature of Operations and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Nature of Operations and Summary of Significant Accounting Policies | |
Schedule of deferred acquisition costs | (In thousands) September 30, 2023 December 31, 2022 Beginning balance $ 43,433 $ 24,530 Additions 32,425 23,857 Amortization (4,369) (3,905) Interest (1,463) (883) Impact of unrealized investment losses (556) (166) Ending balance $ 69,470 $ 43,433 |
Summary of scheduled maturity dates for outstanding FHLB funding agreements | (Dollar amounts in thousands) Interest Maturity Date Rate Amount March 1, 2024 5.540% $ 16,000 January 22, 2025 5.690% 13,000 January 22, 2025 5.655% 2,000 August 16, 2025 5.955% 8,000 September 1, 2027 5.885% 4,000 September 15, 2027 5.965% 8,000 October 1, 2027 5.895% 9,000 December 1, 2027 5.875% 6,000 December 1, 2027 5.860% 2,000 $ 68,000 |
Schedule of earnings (loss) per share | Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 (In thousands, except per share amounts) Numerator: Net income attributable to Midwest Holding Inc. $ 385 $ 7,431 $ 332 $ 16,883 Denominator: Weighted average common shares outstanding 3,738,070 3,736,933 3,734,946 3,791,082 Effect of dilutive securities: Stock options and deferred compensation agreements 138,600 52,000 138,600 52,000 Denominator for earnings per common share 3,876,670 3,788,933 3,873,546 3,843,082 Income per common share $ 0.10 $ 1.99 $ 0.09 $ 4.52 Income per common share, diluted $ 0.10 $ 1.96 $ 0.09 $ 4.45 |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Investments | |
Schedule of Available for Sale Investments | Allowance Gross Gross Amortized for Credit Unrealized Unrealized Estimated (In thousands) Cost Losses Gains Losses Fair Value September 30, 2023: Fixed maturities: Bonds: U.S. government obligations $ 1,448 $ - $ 521 $ (64) $ 1,905 Mortgage-backed securities 522,767 (386) 1,988 (42,045) 482,324 Asset-backed securities 39,121 - 84 (2,831) 36,374 Collateralized loan obligations 385,942 (613) 3,758 (12,363) 376,724 States and political subdivisions-general obligations 128 - - (4) 124 States and political subdivisions-special revenue - - - - - Corporate 68,242 (1,206) 31 (5,283) 61,784 Term loans 700,273 (5,332) 1,710 (12,054) 684,597 Total fixed maturities $ 1,717,921 $ (7,537) $ 8,092 $ (74,644) $ 1,643,832 Mortgage loans on real estate, held for investment 422,809 (1,577) - - 421,232 Derivatives 37,829 - 5,296 (16,566) 26,559 Equity securities 5,592 - - (480) 5,112 Other invested assets 126,696 (1,600) 2,154 (473) 126,777 Preferred stock 38,801 - 177 (5,052) 33,926 Deposits and notes receivable 10,774 - - - 10,774 Policy loans 83 - - - 83 Total investments $ 2,360,505 $ (10,714) $ 15,719 $ (97,215) $ 2,268,295 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 |
Schedule of allowance for credit losses on investments | (In Thousands) Balance December 31, 2022 Additional Allowance Recognized Due to Adoption of Accounting Guidance Credit Loss Expense for the Current Period Balance September 30, 2023 Fixed maturities Bonds: Mortgage-backed securities $ - $ 3,564 $ (3,178) $ 386 Corporate - - 1,206 1,206 Asset-backed securities - 273 (273) - Collateralized loan obligations - 588 25 613 Term loans - 8,518 (3,186) 5,332 Mortgage loans on real estate, held for investment - 2,024 (447) 1,577 Other invested asset - 1,703 (103) 1,600 Total allowance $ - $ 16,670 $ (5,956) $ 10,714 (In Thousands) Balance June 30, 2023 Additional Allowance Recognized Due to Adoption of Accounting Guidance Credit Loss Expense for the Current Period Balance September 30, 2023 Fixed maturities Bonds: Mortgage-backed securities $ 1,035 $ - $ (649) $ 386 Corporate 1,297 - (91) 1,206 Asset-backed securities - - - - Collateralized loan obligations 480 - 133 613 Term loans 6,104 - (772) 5,332 Mortgage loans on real estate, held for investment 1,493 - 84 1,577 Other invested asset 1,343 - 257 1,600 Total allowance $ 11,752 $ - $ (1,038) $ 10,714 |
Schedule of credit ratings of fixed maturity securities | September 30, 2023 December 31, 2022 Carrying Carrying (In thousands) Value Percent Value Percent AAA and U.S. Government $ 230,903 14.0 % $ 124,183 10.2 % AA 19,363 1.2 815 0.1 A 411,517 25.0 371,371 30.6 BBB 814,049 49.6 619,516 51.0 Total investment grade 1,475,832 89.8 1,115,885 91.9 BB and below 168,000 10.2 98,750 8.1 Total $ 1,643,832 100.0 % $ 1,214,635 100.0 % |
Schedule of Unrealized Loss of Securities | September 30, 2023 December 31, 2022 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 Mortgage-backed securities 250,705 (8,878) 82 233,624 (18,464) 89 Asset-backed securities 7,576 (311) 6 24,552 (3,278) 23 Collateralized loan obligations 35,221 (740) 24 203,549 (16,730) 252 States and political subdivisions-general obligations - - - 101 (3) 1 States and political subdivisions-special revenue - - - 47 (2) 3 Corporate 30,732 (419) 16 37,286 (5,426) 64 Term loans 689,833 (12,052) - 558,337 (4,607) 36 Greater than 12 months: U.S. government obligations 1,149 (64) 9 126 (11) 5 Asset-backed securities 25,030 (2,520) 25 5,321 (711) 7 Collateralized loan obligations 175,805 (11,621) 246 37,814 (5,194) 47 States and political subdivisions-special revenue 124 (4) 2 158 (21) 7 Mortgage-backed securities 143,544 (33,168) 91 17,985 (4,044) 14 Corporate 20,952 (4,867) 52 376 (89) 7 Total fixed maturities $ 1,380,671 $ (74,644) 553 $ 1,120,411 $ (58,650) 568 (1) |
Schedule of Fixed Maturities | Amortized Estimated (In thousands) Cost Fair Value Due in one year or less $ 199,892 $ 195,433 Due after one year through five years 879,623 860,178 Due after five years through ten years 433,369 401,992 Due after ten years through twenty years 162,978 152,915 Due after twenty years 42,059 33,314 $ 1,717,921 $ 1,643,832 |
Schedule of investment in mortgage loans | (In thousands) September 30, 2023 December 31, 2022 Loan-to-Value Ratio: 0%-59.99% $ 285,205 $ 108,281 60%-69.99% 85,990 79,968 70%-79.99% 35,536 33,268 80% or greater 14,501 5,530 Total mortgage loans $ 421,232 $ 227,047 |
Components of net investment income | Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 Fixed maturities $ 47,552 $ 21,466 $ 115,452 $ 69,699 Mortgage loans 7,636 1,627 20,610 11,265 Other invested assets 4,654 334 10,117 6,157 Other interest income 8,179 11,158 26,457 27,222 Gross investment income 68,021 34,585 172,636 114,343 Less: investment expenses (9,447) (3,911) (20,711) (25,273) Less: amounts ceded to reinsurers (37,778) (17,736) (87,688) (59,349) Investment income, net of expenses $ 20,796 $ 12,938 $ 64,237 $ 29,721 |
Mortgage-back securities | |
Investments | |
Schedule of Mortgage Loan Activity | (In thousands) September 30, 2023 December 31, 2022 1-4 Family $ 59,820 $ 59,579 Hospitality 6,385 12,902 Land 66,743 62,119 Multifamily (5+) 107,330 34,072 Retail 48,182 22,119 Other 134,349 36,256 Allowance for credit loss (1,577) - Total mortgage loans $ 421,232 $ 227,047 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Derivative Instruments | |
Summary of the derivatives not designated as hedges | The following is a summary of the derivatives not designated as hedges and embedded derivatives in our FIA product as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 (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 $ 984,622 705 $ 26,954 $ 831,657 595 $ 15,592 Equity-indexed embedded derivatives Deposit-type 936,754 7,807 146,143 782,997 6,131 111,618 |
Summary of embedded derivatives related to the funds withheld provision | September 30, 2023 December 31, 2022 (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 $ 169,677 $ 161,920 $ 7,757 $ 150,413 $ 143,952 $ 6,461 Crestline Re SP1 448,450 450,908 (2,458) 354,806 356,374 (1,568) Ironbound 160,688 154,966 5,722 159,644 154,477 5,167 Ascendent Re 65,615 63,998 1,617 56,064 54,790 1,274 SRC4 213,013 213,366 (353) 61,646 62,516 (870) Total $ 1,057,443 $ 1,045,158 $ 12,285 $ 782,573 $ 772,109 $ 10,464 |
Fair Values of Financial Inst_2
Fair Values of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
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 September 30, 2023 and December 31, 2022. 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 September 30, 2023 Financial assets Fixed maturity securities: Bonds U.S. government obligations $ - $ 1,905 $ - $ - $ 1,905 Mortgage-backed securities - 482,324 - - 482,324 Asset-backed securities - 36,374 - - 36,374 Collateralized loan obligations - 376,724 - - 376,724 States and political subdivisions-general obligations - 124 - - 124 States and political subdivisions-special revenue - - - - - Corporate - 61,784 - - 61,784 Term loans - - 684,597 - 684,597 Total fixed maturity securities - 959,235 684,597 - 1,643,832 Mortgage loans on real estate, held for investment - - 421,232 - 421,232 Derivatives - 26,559 - - 26,559 Equity securities - 5,112 - - 5,112 Other invested assets - - 114,013 12,764 126,777 Preferred stock - 10,940 22,986 - 33,926 Deposits and notes receivable - 7,768 3,006 - 10,774 Policy loans - - 83 - 83 Total investments $ - $ 1,009,614 $ 1,245,917 $ 12,764 $ 2,268,295 Financial liabilities Embedded derivative for equity-indexed contracts $ — $ — $ 146,143 $ — 146,143 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 |
Schedule of Financial Assets and Liabilities at Fair Value | The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of September 30, 2023 and December 31, 2022, respectively: September 30, 2023 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 $ 83 $ — $ — $ 83 $ 83 Cash 197,804 197,804 — — 197,804 Liabilities: Policyholder deposits (deposit-type contracts) 2,453,282 — — 2,453,282 2,453,282 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 191,414 191,414 — — 191,414 Liabilities: Policyholder deposits (deposit-type contracts) 1,743,348 — — 1,743,348 1,743,348 |
Schedule of Recurring Basis Using Level Three Inputs | September 30, 2023 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 $ 558,972 $ - $ (12,054) $ 137,679 $ 684,597 Mortgage loans on real estate, held for investment 227,047 - - 194,185 421,232 Deposits and notes receivable 1,306 - - 1,700 3,006 Other invested assets 99,997 - 1,681 12,335 114,013 Preferred stock 21,871 (4,874) - 5,989 22,986 Policy loans 25 - - 58 83 Total level 3 assets $ 909,218 $ (4,874) $ (10,373) $ 351,946 $ 1,245,917 Liabilities Embedded derivative for equity-indexed contracts (111,618) 33,170 - (67,695) (146,143) Total level 3 liabilities $ (111,618) $ 33,170 $ - $ (67,695) $ (146,143) December 31, 2022 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 $ 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) |
Summary of unobservable inputs for AFS and trading securities | September 30, 2023 (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 $684.6 Yield Analysis Discount rates 4.6% 17.3% 12.4% Decrease Mortgage loans on real estate $421.2 Yield Analysis Principal funded NA NA NA Decrease Interest sensitive contract liabilities - fixed indexed annuities embedded derivatives $146.1 Option Budget Method Nonperformance risk 0.6% 1.5% 1.1% Decrease Option budget 1.1% 5.9% 2.9% Increase Surrender rate 0.5% 15% (base) 12.5% Decrease Other invested assets $114.0 Market Approach EBITDA Multiples 2.6x 3.1x 2.8x NA Discount rates 8.0% 25.5% 14.5% NA Preferred stock $9.8 Yield Analysis Discount rates 24.0% 28.0% 26.0% Increase Detachable warrants $2.5 Market Approach GPCM EBITDA Multiples 10.0x 11.5x 100.0% Decrease Preferred stock $10.7 Market Approach EBITDA Multiples 2.55x 3.05x 2.8x Decrease * Weighted by account value 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 2.6x 3.1x 2.8x 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 2.55x 3.05x 2.8x Decrease * Weighted by account value |
Deposit-Type Contracts (Tables)
Deposit-Type Contracts (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Deposit-Type Contracts | |
Schedule of deposit-type contracts | (In thousands) September 30, 2023 December 31, 2022 Beginning balance $ 1,743,348 $ 1,075,439 US Alliance (452) (2,176) Unified Life Insurance Company (129) (10) Ironbound Reinsurance Company Limited 4,748 5,959 Ascendant Re 149 (3,185) Crestline SP1 4,402 (11,623) American Republic Insurance Company 2,523 (4,080) SRC4 5,475 613 Deposits received 755,213 745,083 Investment earnings (includes embedded derivative) 33,170 (10,193) Withdrawals (95,165) (51,659) Policy charges - (820) Ending balance $ 2,453,282 $ 1,743,348 |
Reinsurance (Tables)
Reinsurance (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Reinsurance | |
Summary of significant reinsurance amounts | A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of September 30, 2023 and December 31, 2022 is as follows: (In thousands) September 30, 2023 December 31, 2022 Assets: Reinsurance recoverables $ 27,870 $ 20,190 Liabilities: Deposit-type contracts Direct $ 2,453,282 $ 1,743,348 Reinsurance ceded (1,157,854) (912,982) Retained deposit-type contracts $ 1,295,428 $ 830,366 |
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 September 30, 2023: 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 $ - $ - $ 1,327 $ - $ 1,327 Optimum Re Insurance Company A - - 690 - 690 Sagicor Life Insurance Company A- - 299 10,006 (15) 10,290 Ascendant Re NR - - (4,724) - (4,724) Crestline SP1 NR - - (9,907) - (9,907) American Republic Insurance Company A - - 6,057 - 6,057 SRC4 NR - - (26,407) - (26,407) Unified Life Insurance Company NR - 25 772 (14) 783 US Alliance Life and Security Company NR - - 49,784 (23) 49,761 $ - $ 324 $ 27,598 $ (52) $ 27,870 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 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 $ - $ - $ (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 |
Schedule of ceding commissions from the reinsurers | The tables below shows the ceding commissions from the reinsurers, excluding SRC1 and SRC3, and what was earned on a GAAP basis for the three and nine months ended September 30, 2023 and 2022: Three months ended September 30, (In thousands) 2023 2022 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 $ — $ — $ — $ 2 $ - $ - $ - $ 6 Ironbound Reinsurance Company Limited — — 45 121 - - 48 123 Ascendant Re 43 42 25 101 - - 23 88 US Alliance Life and Security Company — — 12 93 - - 13 96 Crestline Re SP 1 492 475 146 846 1,972 2,794 103 604 American Republic Insurance Company — (132) 52 294 1,144 1,631 38 242 SRC4 849 822 78 (65) 878 784 5 80 $ 1,384 $ 1,207 $ 358 $ 1,392 $ 3,994 $ 5,209 $ 230 $ 1,239 Nine months ended September 30, (In thousands) 2023 2022 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 $ — $ — $ — $ 14 $ — $ — $ — $ 20 Ironbound Reinsurance Company Limited — — 138 374 — — 146 381 Ascendant Re 224 217 71 287 — — 70 250 US Alliance Life and Security Company — — 37 249 — — 41 259 Crestline SP1 2,298 2,106 418 2,486 4,497 7,026 271 1,669 American Republic Insurance Company 560 621 158 856 2,971 4,859 90 592 SRC4 4,730 4,436 164 197 878 783 5 80 $ 7,812 $ 7,380 $ 986 $ 4,463 $ 8,346 $ 12,668 $ 623 $ 3,251 (1) Includes: acquisition and administrative expenses, commission expense allowance and product development fees. |
Schedule of ceding commissions deferred on each reinsurance transaction | (In thousands) September 30, 2023 December 31, 2022 Reinsurer Deferred Gain on Reinsurance Transactions Deferred Gain on Reinsurance Transactions US Alliance Life and Security Company (1) $ - $ 152 Unified Life Insurance Company (1) 249 217 Ironbound Reinsurance Company Limited (2) 4,750 4,876 Ascendant Re 3,096 2,947 US Alliance Life and Security Company (2) 1,961 2,069 American Republic Insurance Company (2) 7,400 7,502 Crestline SP1 (2) 19,488 18,475 SRC4 (2) 7,196 1,825 $ 44,140 $ 38,063 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: September 30, 2023 December 31, 2022 (In thousands) Retained Reinsured Consolidated Retained Reinsured Consolidated Assets Total investments $ 1,212,973 $ 1,055,322 $ 2,268,295 $ 812,177 $ 802,780 $ 1,614,957 Cash and cash equivalents 111,119 86,685 197,804 127,291 64,123 191,414 Deferred acquisition costs, net 69,470 - 69,470 43,433 - 43,433 Premiums receivable - 63 63 - - - Accrued investment income 18,835 25,859 44,694 11,307 13,858 25,165 Reinsurance recoverables (8,944) 36,814 27,870 (6,853) 27,405 20,552 Property and equipment, net 1,721 - 1,721 1,897 - 1,897 Receivable for securities sold (9,650) 9,650 - 2,033 8,485 10,518 Other assets 12,760 1,575 14,335 12,259 236 12,495 Total assets $ 1,408,284 $ 1,215,968 $ 2,624,252 $ 1,003,544 $ 916,887 $ 1,920,431 Liabilities and Stockholders’ Equity Liabilities: Benefit reserves $ 526 $ 11,006 $ 11,532 $ 1,332 $ 11,613 $ 12,945 Deposit-type contracts 1,301,754 1,151,528 2,453,282 841,980 901,368 1,743,348 Other policy-holder funds 4,219 311 4,530 4,105 - 4,105 Notes payable 25,000 - 25,000 25,000 - 25,000 Deferred gain on coinsurance transactions 416 43,724 44,140 38,063 - 38,063 Payable for securities sold 27,029 - 27,029 8,872 - 8,872 Other liabilities 27,387 9,399 36,786 49,815 3,906 53,721 Total liabilities $ 1,386,331 $ 1,215,968 $ 2,602,299 $ 969,167 $ 916,887 $ 1,886,054 Stockholders’ Equity: Preferred stock $ - $ - $ - $ - $ - $ - Voting common stock 4 - 4 4 - 4 Additional paid-in capital 138,122 - 138,122 138,482 - 138,482 Treasury stock (175) - (175) (175) - (175) Accumulated deficit (67,361) - (67,361) (63,019) - (63,019) Accumulated other comprehensive loss (66,886) - (66,886) (51,386) - (51,386) Total Midwest Holding Inc.'s stockholders' equity $ 3,704 $ - $ 3,704 $ 23,906 $ - $ 23,906 Noncontrolling interest 18,249 - 18,249 10,471 - 10,471 Total stockholders' equity 21,953 - 21,953 34,377 - 34,377 Total liabilities and stockholders' equity $ 1,408,284 $ 1,215,968 $ 2,624,252 $ 1,003,544 $ 916,887 $ 1,920,431 |
Income Tax Matters (Tables)
Income Tax Matters (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Matters | |
Schedule of deferred tax assets and liabilities | Significant components of the Company’s deferred tax assets and liabilities as of September 30, 2023 and December 31, 2022 are as follows: (In thousands) September 30, 2023 December 31, 2022 Deferred tax assets: Loss carryforwards $ 4,146 $ 2,672 Capitalized costs 44 79 Stock option granted 1,190 1,066 Policy acquisition costs 9,803 6,489 General business credits 6 6 Derivative option allowance - - Sec 163(j) limitation 171 171 Benefit reserves 17,189 12,010 Impairments 535 403 Unrealized losses on investments 17,780 13,624 Other 1,928 1,928 Total deferred tax assets 52,792 38,448 Less valuation allowance (46,138) (35,305) Total deferred tax assets, net of valuation allowance 6,654 3,143 Deferred tax liabilities: Unrealized losses on investments - - Due premiums - - Intangible assets 147 147 Derivative option allowance 4,246 2,150 Bond Discount 2,400 936 Property and equipment (139) (90) Total deferred tax liabilities 6,654 3,143 Net deferred tax assets $ - $ - |
Schedule of effective tax rate reconciliation | There was income tax expense of $4.6 million and $1.3 million for the three months ended September 30, 2023 and 2022. and $10.5 million and $3.8 million of tax expense for the nine months ended September 30, 2023 and 2022. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following: Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 Computed expected income tax benefit (expense) $ (1,564) $ (796) $ (3,921) $ (2,305) Reduction (increase) in income taxes resulting from: Interest maintenance reserve and reinsurance (47) 176 4 158 Nondeductible expenses (3) (3) (9) (8) Change in valuation allowance (2,896) (641) (6,677) (1,693) Deferred tax adjustment - 14 - - AETR adjustment (19) - (19) - Prior year true-up (77) - 140 - Subtotal of (increases) decreases (3,042) (454) (6,561) (1,543) Tax (benefit) expense $ (4,606) $ (1,250) $ (10,482) $ (3,848) |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Leases | |
Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information for our leases as of September 30, 2023 and December 31, 2022 is as follows: (In thousands) Classification September 30, 2023 December 31, 2022 Assets Operating Operating lease right-of-use assets $ 1,997 $ 2,119 Liabilities Operating lease Operating lease liabilities $ 2,005 $ 2,135 |
Schedule of Components of Lease Expenses | Our operating lease expense for the three and nine months ended September 30, 2023 and 2022 is as follows: Three months ended September 30, Nine months ended September 30, (In thousands) Classification 2023 2022 2023 2022 Operating General and administrative expense $ 3 $ 3 $ 10 $ 10 |
Schedule of Operating Leases Minimum | Minimum contractual obligations for our leases as of September 30, 2023 are as follows: (In thousands) Operating Leases 2023 $ 112 2024 378 2025 342 2026 345 2027 353 2028 362 2029 and after 1,041 Total remaining lease payments $ 2,933 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
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, 2021 $ 2,634 Other comprehensive (loss) before reclassifications, net of tax (54,975) Less: Reclassification adjustments for losses realized in net income 955 Balance, December 31, 2022 (51,386) Other comprehensive (loss) before reclassifications, net of tax (16,167) Less: Reclassification adjustments for losses realized in net income, net of tax 667 Balance, September 30, 2023 $ (66,886) |
Long-Term Incentive Plans (Tabl
Long-Term Incentive Plans (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
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, Vested and December 31, 2022 $ 32.19 $ 11.20 - 55.02 319,121 271,517 47,604 Granted 17.12 17.20 5,750 5,750 - Prior year adjustment 39.16 16.37 - 55.02 - (7,390) 7,390 Vested - - - - - Exercised - - - - - Forfeited 46.92 25.00 - 55.02 (19,267) (19,267) - Expired - - - - - September 30, 2023 $ 30.90 $ 11.20 - 55.02 305,604 250,610 54,994 |
Schedule of Option information segregated by ranges of exercise prices | September 30, 2023 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 35,853 $ 55.02 7.60 6,390 $ 55.02 7.33 $40.00 - $49.99 127,751 41.25 7.69 36,042 41.25 7.33 $30.00 - $39.99 - - - - - - $20.00 - $29.99 23,600 23.36 7.54 5,877 25.00 7.04 $10.00 - $19.99 115,000 13.43 9.00 4,285 16.37 7.33 < $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, 2022 17,207 $ 13.84 1,163 $ 50.00 Granted 6,984 25.76 - - Vested - - - - Forfeited - - - - Released (16,044) 11.22 - - September 30, 2023 8,147 $ 22.08 1,163 $ 50.00 |
Schedule of assumptions used to calculate compensation expense | September 30, December 31, 2023 2022 Volatility 287.3% 4.16% - 4.26% Weighted-average volatility 287.3% 3.7% Expected term (in years) 6.54 yrs 2 - 7 Risk-free rate 3.57% 0.02% - 2.15% |
Schedule of outstanding remaining non-vested shares | September 30, 2023 Awards Outstanding Weighted Average Grant-Date Fair Value Weighted Average Exercise Price Nonvested stock options and restricted Stock unit awards at December 31, 2022 287,561 $ 16.96 $ 32.29 Options granted 5,750 16.56 17.12 Restricted stock units granted 6,984 16.56 - Vested (23,434) 13.59 55.02 Forfeited or expired (20,517) 27.99 46.92 Ending Balance at September 30, 2023 256,344 $ 16.92 $ 30.90 December 31, 2022 Stock Options 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 or expired (109,063) 23.82 38.87 Ending Balance at December 31, 2022 287,561 $ 16.96 $ 32.29 |
Statutory Net Income and Surp_2
Statutory Net Income and Surplus (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
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: Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 American Life $ 38,395 $ (1,836) $ 3,279 $ 16,055 SRC1 $ (458) $ 1,129 $ 6,853 $ 181 SRC3 $ 745 $ 1,951 $ 1,662 $ 960 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) September 30, 2023 December 31, 2022 American Life $ 67,018 $ 69,936 SRC1 $ 14,968 $ 9,615 SRC3 $ 7,983 $ 6,088 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: Three months ended September 30, Nine months ended September 30, (In thousands) 2023 2022 2023 2022 American Life $ 207,689 $ 141,602 $ 438,896 $ 272,218 SRC1 $ - $ - $ - $ - SRC3 $ - $ 174 $ 123 $ 23,931 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies. | |
Schedule of other commitments | (In thousands) September 30, 2023 December 31, 2022 Due in one year or less $ 83,137 $ 52,951 Due in two years 41,058 43,604 Due in three years 20,329 7,731 Due in four years 24,947 13,277 Due in five years and after 53,569 61,432 $ 223,040 $ 178,995 |
Nature of Operations and Basis
Nature of Operations and Basis of Presentation - (Narrative) (Details) $ / shares in Units, $ in Thousands, £ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Feb. 28, 2023 | Jan. 01, 2023 USD ($) | Nov. 22, 2022 USD ($) | Sep. 30, 2022 USD ($) | Dec. 30, 2021 | Dec. 20, 2021 USD ($) | Nov. 10, 2021 | Jun. 26, 2021 | Sep. 28, 2020 GBP (£) | May 12, 2020 USD ($) | Apr. 24, 2020 | Apr. 30, 2023 USD ($) | Sep. 30, 2023 USD ($) $ / shares | Sep. 30, 2022 USD ($) $ / shares | Sep. 30, 2023 USD ($) product segment $ / shares | Sep. 30, 2022 USD ($) $ / shares | Dec. 31, 2022 USD ($) | Jun. 30, 2023 USD ($) | Feb. 02, 2022 USD ($) | Dec. 31, 2020 | |
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 | $ 7,700 | $ 7,700 | |||||||||||||||||
Mortgage servicing rights MSR impairment recovery | 1,400 | $ 1,400 | 1,400 | |||||||||||||||||
Equity securities, fair value | 5,112 | 5,112 | 5,111 | |||||||||||||||||
Investment escrow | 1,300 | 1,300 | 800 | |||||||||||||||||
Fund investments | 88,825 | 48,302 | ||||||||||||||||||
Other investments in fund | 19,000 | 19,000 | ||||||||||||||||||
Investment income (loss) | 20,796 | $ 12,938 | 64,237 | 29,721 | ||||||||||||||||
Other investments in private credit and equipment leases | 13,100 | 13,100 | ||||||||||||||||||
Pledged assets, market value | 233,500 | 233,500 | 121,100 | |||||||||||||||||
Premiums receivable | 63 | 63 | 362 | |||||||||||||||||
FHLB borrowing capacity | 212,000 | 212,000 | 109,800 | |||||||||||||||||
Other invested assets | 126,777 | 126,777 | 112,431 | |||||||||||||||||
Impairment allowance on investment | 0 | |||||||||||||||||||
Perpetual preferred stock | 33,900 | 33,900 | 31,400 | |||||||||||||||||
Impairment on preferred stock | 346 | 880 | ||||||||||||||||||
Notes receivable | 6,500 | 6,500 | 6,300 | |||||||||||||||||
Valuation allowance on policy loans | 0 | 0 | ||||||||||||||||||
Depreciation | 100 | 100 | 300 | 100 | ||||||||||||||||
Accumulated depreciation | 1,700 | 1,700 | 1,400 | |||||||||||||||||
Unrealized gains (losses) | (12,300) | (10,500) | ||||||||||||||||||
Embedded derivatives gain (loss) | $ (2,100) | $ 100 | $ 1,800 | $ 14,600 | ||||||||||||||||
Basic Income (loss) per common share | $ / shares | $ 0.10 | $ 1.99 | $ 0.09 | $ 4.52 | ||||||||||||||||
Preferred stock dividend | $ 1,051 | |||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 68,000 | 68,000 | ||||||||||||||||||
Accumulated deficit | (67,361) | (67,361) | (63,019) | |||||||||||||||||
Allowance for credit losses on investments | 10,714 | 10,714 | $ 11,752 | |||||||||||||||||
Fixed maturities, Allowance for credit losses | $ 8,917 | $ 8,917 | ||||||||||||||||||
Cumulative effect of change in accounting estimate | ||||||||||||||||||||
Allowance for credit losses on investments | 16,670 | |||||||||||||||||||
2016-13 | Cumulative effect of change in accounting estimate | ||||||||||||||||||||
Accumulated deficit | $ (4,700) | |||||||||||||||||||
Allowance for credit losses on investments | (16,500) | |||||||||||||||||||
Reinsurance recoverables | (11,800) | |||||||||||||||||||
Change in allowance for expected credit losses | 200 | |||||||||||||||||||
Fixed maturities, Allowance for credit losses | $ 4,500 | |||||||||||||||||||
BBB+ | ||||||||||||||||||||
Interest rate | 5% | 5% | ||||||||||||||||||
Ascona Group Holdings Ltd | ||||||||||||||||||||
Investment income (loss) | $ (700) | $ 200 | $ 2,100 | $ 1,800 | ||||||||||||||||
Market value | $ 200 | 12,300 | 200 | 12,300 | 200 | 10,500 | ||||||||||||||
Fair value of preferred stock | 12,300 | 12,300 | 10,500 | |||||||||||||||||
Investment income, non-controlling interest | (200) | 100 | 600 | $ 500 | ||||||||||||||||
SRC3 | ||||||||||||||||||||
Ownership interest | 100% | |||||||||||||||||||
Ascona Asset Holding LLC | ||||||||||||||||||||
Preferred equity | £ | £ 3.6 | |||||||||||||||||||
PF Collinwood Holdings LLC | ||||||||||||||||||||
Other invested assets | 11,200 | 11,200 | 13,700 | |||||||||||||||||
SRC1 | ||||||||||||||||||||
Sale of non controlling interest | $ 15,000 | |||||||||||||||||||
Python Asset Holding LLC | ||||||||||||||||||||
Other investments in fund | $ 7,400 | |||||||||||||||||||
Investment income (loss) | $ 700 | |||||||||||||||||||
Ownership (as a percent) | 100% | |||||||||||||||||||
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% | |||||||||||||||||||
Percentage of net aggregate admitted retained assets equals the maximum amount of borrowing | 5% | |||||||||||||||||||
Advances received from FHLB under funding agreements | $ 39,000 | $ 29,000 | ||||||||||||||||||
Repayments on FHLB funding agreements | 0 | |||||||||||||||||||
Outstanding advances under FHLB funding agreements | 68,000 | 68,000 | 29,000 | |||||||||||||||||
FHLB funding agreements, matured on March 1, 2024 Member | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 16,000 | $ 16,000 | ||||||||||||||||||
Interest Rate | 5.54% | 5.54% | ||||||||||||||||||
FHLB funding agreements, matured on January 22, 2025 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 13,000 | $ 13,000 | ||||||||||||||||||
Interest Rate | 5.69% | 5.69% | ||||||||||||||||||
FHLB Second Funding Agreements, Matured On January 22, 2025 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 2,000 | $ 2,000 | ||||||||||||||||||
Interest Rate | 5.655% | 5.655% | ||||||||||||||||||
FHLB funding agreements, matured on August 16, 2025 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 8,000 | $ 8,000 | ||||||||||||||||||
Interest Rate | 5.955% | 5.955% | ||||||||||||||||||
FHLB Funding Agreements, Matured On September 1, 2027 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 4,000 | $ 4,000 | ||||||||||||||||||
Interest Rate | 5.885% | 5.885% | ||||||||||||||||||
FHLB funding agreements, matured on September 15, 2027 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 8,000 | $ 8,000 | ||||||||||||||||||
Interest Rate | 5.965% | 5.965% | ||||||||||||||||||
FHLB Funding Agreements, Matured On October 1, 2027 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 9,000 | $ 9,000 | ||||||||||||||||||
Interest Rate | 5.895% | 5.895% | ||||||||||||||||||
FHLB Funding Agreements, Matured On December 1, 2027 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 6,000 | $ 6,000 | ||||||||||||||||||
Interest Rate | 5.875% | 5.875% | ||||||||||||||||||
FHLB Funding Agreements, Matured On December 1, 2027 | ||||||||||||||||||||
Outstanding advances under FHLB funding agreements | $ 2,000 | $ 2,000 | ||||||||||||||||||
Interest Rate | 5.86% | 5.86% | ||||||||||||||||||
Securities Purchase Agreement | SRC1 | ||||||||||||||||||||
Ownership (as a percent) | 30% | 30% | ||||||||||||||||||
Seneca Re Agreement | ||||||||||||||||||||
Basic Income (loss) per common share | $ / shares | $ (0.10) | $ 0.09 | $ 4.52 | |||||||||||||||||
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% | |||||||||||||||||||
Master Letter Agreement | ||||||||||||||||||||
Reinsurance payable | $ 550,000 | |||||||||||||||||||
Credit Agreement | Revolving Credit Facility | ||||||||||||||||||||
Loan term | 3 years | |||||||||||||||||||
Maximum borrowing capacity | $ 30,000 | |||||||||||||||||||
Outstanding balance | $ 25,000 | $ 25,000 | 25,000 | |||||||||||||||||
Unutilized credit | 5,000 | $ 5,000 | ||||||||||||||||||
American Life and Security National Life Insurance | ||||||||||||||||||||
Percentage of quota share of liabilities | 0% | |||||||||||||||||||
American Life and Security National Life Insurance | US Alliance Agreement | MYGA | ||||||||||||||||||||
Percentage of multi year guaranteed annuity | 20% | |||||||||||||||||||
American Life and Security National Life Insurance | US Alliance Agreement | FIA | ||||||||||||||||||||
Percentage of fixed indexed annuity | 20% | 20% | ||||||||||||||||||
SRC4 | ||||||||||||||||||||
Net premium income | $ 21,400 | $ 21,400 | ||||||||||||||||||
Net statutory reserves | 21,500 | 21,500 | ||||||||||||||||||
Amount owed deposit account | $ 21,500 | $ 21,500 | $ 21,500 | |||||||||||||||||
Reinsurance payable | 26,407 | $ 26,407 | 44,442 | |||||||||||||||||
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 | |||||||||||||||||||
Fixed Index Annuity | Crestline Assurance Holdings LLC | Master Letter Agreement | ||||||||||||||||||||
Percentage of indemnity coinsurance | 40% | |||||||||||||||||||
Collateralized loan obligation | ||||||||||||||||||||
Fixed maturities, Allowance for credit losses | 613 | $ 613 | $ 480 | |||||||||||||||||
Collateralized loan obligation | Cumulative effect of change in accounting estimate | ||||||||||||||||||||
Fixed maturities, Allowance for credit losses | 588 | |||||||||||||||||||
Exchange Traded Funds | ||||||||||||||||||||
Equity securities, fair value | 5,100 | 5,100 | $ 5,100 | |||||||||||||||||
Mortgage loans on real estate one | ||||||||||||||||||||
Mortgage backed and asset backed securities at fair value | $ 7,700 | 7,700 | ||||||||||||||||||
Mortgage servicing rights MSR impairment recovery | 1,400 | |||||||||||||||||||
Mortgage loans on real estate two | ||||||||||||||||||||
Mortgage servicing rights MSR impairment recovery | 600 | |||||||||||||||||||
ORIX USA | SRC1 | ||||||||||||||||||||
Ownership (as a percent) | 30% | 30% | ||||||||||||||||||
Sale of non controlling interest | $ 15,000 | $ 15,000 | ||||||||||||||||||
Percentage of ownership interest sold | 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% | ||||||||||||||||||
Investment Manager | ||||||||||||||||||||
Other investments in fund | $ 113,700 | $ 113,700 | ||||||||||||||||||
Other invested assets | $ 126,800 | $ 126,800 | ||||||||||||||||||
American Life | Ascona Group Holdings Ltd | ||||||||||||||||||||
Ownership interest | 74% | 74% | 74% | |||||||||||||||||
American Life | Multi Year Guaranteed Annuity | Crestline Assurance Holdings LLC | Master Letter Agreement | ||||||||||||||||||||
Percentage of indemnity coinsurance | 20% | |||||||||||||||||||
American Life | Five Year Multi-Year Guaranteed Annuity | Crestline Assurance Holdings LLC | Master Letter Agreement | ||||||||||||||||||||
Percentage of indemnity coinsurance | 10% | |||||||||||||||||||
American Life | Fixed Index Annuity | Master Letter Agreement | ||||||||||||||||||||
Percentage of indemnity coinsurance | 0% | |||||||||||||||||||
Seneca Reinsurance Company, LLC | ||||||||||||||||||||
Contributions made | $ 300 | |||||||||||||||||||
Ownership percentage acquired | 100% | |||||||||||||||||||
Crestline Assurance Holdings LLC | Ascona Group Holdings Ltd | ||||||||||||||||||||
Ownership interest | 26% | 26% | 26% |
Nature of Operations and Basi_2
Nature of Operations and Basis of Presentation - Deferred acquisition costs (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Deferred Acquisition Costs | ||
Deferred Policy Acquisition Cost, Beginning Balance | $ 43,433 | $ 24,530 |
Additions | 32,425 | 23,857 |
Amortization | (4,369) | (3,905) |
Interest | (1,463) | (883) |
Impact of unrealized investment losses | (556) | (166) |
Deferred Policy Acquisition Cost, Ending Balance | $ 69,470 | $ 43,433 |
Nature of Operations and Basi_3
Nature of Operations and Basis of Presentation - Earnings (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Nature of Operations and Summary of Significant Accounting Policies | |||||
Net income (loss) attributable to Midwest Holding Inc. | $ 385 | $ 7,431 | $ 332 | $ 16,883 | |
Weighted average common shares outstanding | 3,738,070 | 3,736,933 | 3,734,946 | 3,791,082 | |
Stock options and deferred compensation agreements | 138,600 | 52,000 | 138,600 | 52,000 | |
Denominator for earnings (loss) per common share | 3,876,670 | 3,788,933 | 3,873,546 | 3,843,082 | |
Basic Income (loss) per common share | $ 0.10 | $ 1.99 | $ 0.09 | $ 4.52 | |
Diluted Income (loss) per common share | $ 0.10 | $ 1.96 | $ 0.09 | $ 4.45 | |
Common stock, shares issued | 3,744,645 | 3,744,645 | 3,727,976 | ||
Common stock, shares outstanding | 3,744,645 | 3,744,645 | 3,727,976 | ||
Non-voting common shares authorized | 2,000,000 | 2,000,000 | 2,000,000 | ||
Common stock, shares authorized | 20,000,000 | 20,000,000 | 20,000,000 | ||
Preferred stock, shares authorized | 2,000,000 | 2,000,000 | 2,000,000 |
Non-controlling Interest (Detai
Non-controlling Interest (Details) $ in Thousands, £ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Dec. 30, 2021 | Dec. 20, 2021 USD ($) | Sep. 28, 2020 GBP (£) | Sep. 30, 2023 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2020 | |
Investment income (loss) | $ 20,796 | $ 12,938 | $ 64,237 | $ 29,721 | ||||||
Dividends Paid | (1,051) | |||||||||
SRC1 | ||||||||||
Sale of non controlling interest | $ 15,000 | |||||||||
Dividends received | $ 500 | |||||||||
Ascona Asset Holding LLC | ||||||||||
Preferred equity | £ | £ 3.6 | |||||||||
Ascona Group Holdings Ltd | ||||||||||
Market value | 12,300 | 12,300 | 200 | 12,300 | 200 | 10,500 | ||||
Investment income (loss) | (700) | 200 | 2,100 | 1,800 | ||||||
Investment income, non-controlling interest | (200) | $ 100 | 600 | $ 500 | ||||||
Fair value of preferred stock | $ 12,300 | $ 12,300 | $ 12,300 | 10,500 | ||||||
American Life | Ascona Group Holdings Ltd | ||||||||||
Ownership interest | 74% | 74% | 74% | 74% | ||||||
Crestline Assurance Holdings LLC | Ascona Group Holdings Ltd | ||||||||||
Ownership interest | 26% | 26% | 26% | 26% | ||||||
ORIX USA | SRC1 | ||||||||||
Percentage of ownership interest sold | 70% | 70% | ||||||||
Sale of non controlling interest | $ 15,000 | $ 15,000 | ||||||||
Ownership (as a percent) | 30% | 30% | ||||||||
Cumulative income (loss) | $ 500 | $ 500 | $ 500 | $ (5,500) | ||||||
Dividends received | 1,000 | |||||||||
SRC1 | ||||||||||
Dividends Paid | $ (1,500) |
Investments (Schedule of Amorti
Investments (Schedule of Amortized Cost and Estimated Fair Value of Investments) (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2023 | Dec. 31, 2022 | Jun. 30, 2023 | |
Amortized Cost | $ 1,717,921 | $ 1,269,735 | |
Fixed maturities, Allowance for credit losses | (8,917) | ||
Total fixed maturities | 1,643,832 | 1,214,635 | |
Mortgage loans on real estate, held for investment amortized cost | 422,809 | ||
Mortgage loans on real estate, held for investment | 421,232 | 227,047 | |
Mortgage loan on real estate, Allowance for credit losses | (1,577) | $ (1,493) | |
Derivatives, Cost | 37,829 | 30,239 | |
Derivatives, Gross Unrealized Gains | 5,296 | 2,694 | |
Derivatives, Gross Unrealized Losses | (16,566) | (16,999) | |
Estimated Fair Value | 26,559 | 15,934 | |
Equity Securities, Amortized Cost | 5,592 | 5,592 | |
Equity securities, Gross Unrealized Losses | (480) | (481) | |
Equity securities, fair value | 5,112 | 5,111 | |
Other invested assets, Cost | 126,696 | 108,979 | |
Other invested assets, Allowance for credit losses | (1,600) | (1,343) | |
Other invested assets, Gross Unrealized Gains | 2,154 | 3,667 | |
Other invested assets, Gross Unrealized Losses | (473) | (215) | |
Other invested assets (Allowance for credit losses of $1,600 in 2023.) | 126,777 | 112,431 | |
Investment escrow | 1,300 | 800 | |
Preferred stock , Amortized cost | 38,801 | 35,644 | |
Preferred stock, Gross Unrealized Gains | 177 | 1,757 | |
Preferred stock, Gross Unrealized Losses | (5,052) | (5,986) | |
Preferred stock, Fair value | 33,926 | 31,415 | |
Deposits and notes receivable, Amortized Cost | 10,774 | 8,359 | |
Deposits and notes receivable, Estimated Fair Value | 10,774 | 8,359 | |
Notes receivable | 6,500 | 6,300 | |
Policy Loans | 83 | 25 | |
Total investments, Amortized Cost | 2,360,505 | 1,685,620 | |
Allowance for credit losses on investments | (10,714) | (11,752) | |
Investments, Gross Unrealized Gains | 15,719 | 11,668 | |
Investments, Gross Unrealized Losses | (97,215) | (82,331) | |
Investments, Fair Value Disclosure | 2,268,295 | 1,614,957 | |
Fixed maturities | |||
Amortized Cost | 1,717,921 | 1,269,735 | |
Fixed maturities, Allowance for credit losses | (7,537) | ||
Gross Unrealized Gains | 8,092 | 3,550 | |
Gross Unrealized Losses | (74,644) | (58,650) | |
Total fixed maturities | 1,643,832 | 1,214,635 | |
U.S. government obligations | |||
Amortized Cost | 1,448 | 1,343 | |
Gross Unrealized Gains | 521 | ||
Gross Unrealized Losses | (64) | (81) | |
Total fixed maturities | 1,905 | 1,262 | |
Mortgage-back securities | |||
Amortized Cost | 522,767 | 316,105 | |
Fixed maturities, Allowance for credit losses | (386) | (1,035) | |
Gross Unrealized Gains | 1,988 | 469 | |
Gross Unrealized Losses | (42,045) | (22,508) | |
Total fixed maturities | 482,324 | 294,066 | |
Asset-backed securities | |||
Amortized Cost | 39,121 | 34,728 | |
Gross Unrealized Gains | 84 | 17 | |
Gross Unrealized Losses | (2,831) | (3,989) | |
Total fixed maturities | 36,374 | 30,756 | |
Collateralized loan obligation | |||
Amortized Cost | 385,942 | 308,871 | |
Fixed maturities, Allowance for credit losses | (613) | (480) | |
Gross Unrealized Gains | 3,758 | 726 | |
Gross Unrealized Losses | (12,363) | (21,924) | |
Total fixed maturities | 376,724 | 287,673 | |
States and Political Subdivisions - general obligations | |||
Amortized Cost | 128 | 104 | |
Gross Unrealized Losses | (4) | (3) | |
Total fixed maturities | 124 | 101 | |
States and Political Subdivisions - special revenue | |||
Amortized Cost | 228 | ||
Gross Unrealized Losses | (23) | ||
Total fixed maturities | 205 | ||
Corporate | |||
Amortized Cost | 68,242 | 46,700 | |
Fixed maturities, Allowance for credit losses | (1,206) | (1,297) | |
Gross Unrealized Gains | 31 | 415 | |
Gross Unrealized Losses | (5,283) | (5,515) | |
Total fixed maturities | 61,784 | 41,600 | |
Term loans | |||
Amortized Cost | 700,273 | 561,656 | |
Fixed maturities, Allowance for credit losses | (5,332) | $ (6,104) | |
Gross Unrealized Gains | 1,710 | 1,923 | |
Gross Unrealized Losses | (12,054) | (4,607) | |
Total fixed maturities | $ 684,597 | $ 558,972 |
Investments (Schedule of Inform
Investments (Schedule of Information Related to Allowance for Credit Losses) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2023 | Sep. 30, 2023 | |
Fixed Maturities | ||
Ending balance | $ 8,917 | $ 8,917 |
Mortgage loans on real estate, held for investment | ||
Beginning balance | 1,493 | |
Credit Loss Expense for the Current Period | 84 | (447) |
Ending balance | 1,577 | 1,577 |
Other invested asset | ||
Beginning balance | 1,343 | |
Credit Loss Expense for the Current Period | 257 | (103) |
Ending balance | 1,600 | 1,600 |
Total allowance | ||
Beginning balance | 11,752 | |
Credit Loss Expense for the Current Period | (1,038) | (5,956) |
Ending balance | 10,714 | 10,714 |
Cumulative effect of change in accounting estimate | ||
Mortgage loans on real estate, held for investment | ||
Beginning balance | 2,024 | |
Other invested asset | ||
Beginning balance | 1,703 | |
Total allowance | ||
Beginning balance | 16,670 | |
Fixed maturities | ||
Fixed Maturities | ||
Ending balance | 7,537 | 7,537 |
Mortgage-back securities | ||
Fixed Maturities | ||
Beginning balance | 1,035 | |
Credit Loss Expense for the Current Period | (649) | (3,178) |
Ending balance | 386 | 386 |
Mortgage-back securities | Cumulative effect of change in accounting estimate | ||
Fixed Maturities | ||
Beginning balance | 3,564 | |
Corporate | ||
Fixed Maturities | ||
Beginning balance | 1,297 | |
Credit Loss Expense for the Current Period | (91) | 1,206 |
Ending balance | 1,206 | 1,206 |
Asset-backed securities | ||
Fixed Maturities | ||
Credit Loss Expense for the Current Period | (273) | |
Asset-backed securities | Cumulative effect of change in accounting estimate | ||
Fixed Maturities | ||
Beginning balance | 273 | |
Collateralized loan obligation | ||
Fixed Maturities | ||
Beginning balance | 480 | |
Credit Loss Expense for the Current Period | 133 | 25 |
Ending balance | 613 | 613 |
Collateralized loan obligation | Cumulative effect of change in accounting estimate | ||
Fixed Maturities | ||
Beginning balance | 588 | |
Term loans | ||
Fixed Maturities | ||
Beginning balance | 6,104 | |
Credit Loss Expense for the Current Period | (772) | (3,186) |
Ending balance | $ 5,332 | 5,332 |
Term loans | Cumulative effect of change in accounting estimate | ||
Fixed Maturities | ||
Beginning balance | $ 8,518 |
Investments (Schedule of Credit
Investments (Schedule of Credit Ratings of Fixed Maturity Securities) (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 1,643,832 | $ 1,214,635 |
Fixed maturities | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 1,643,832 | $ 1,214,635 |
Percent | 100% | 100% |
Fixed maturities | Investment grade | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 1,475,832 | $ 1,115,885 |
Percent | 89.80% | 91.90% |
Fixed maturities | Investment grade | AAA and U.S. Government | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 230,903 | $ 124,183 |
Percent | 14% | 10.20% |
Fixed maturities | Investment grade | AA | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 19,363 | $ 815 |
Percent | 1.20% | 0.10% |
Fixed maturities | Investment grade | A | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 411,517 | $ 371,371 |
Percent | 25% | 30.60% |
Fixed maturities | Investment grade | BBB | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 814,049 | $ 619,516 |
Percent | 49.60% | 51% |
Fixed maturities | Non investment grade | BB and other | ||
Marketable Securities [Line Items] | ||
Total fixed maturities | $ 168,000 | $ 98,750 |
Percent | 10.20% | 8.10% |
Investments (Schedule of Unreal
Investments (Schedule of Unrealized Loss of Securities) (Details) $ in Thousands | Sep. 30, 2023 USD ($) security | Dec. 31, 2022 USD ($) security |
Fixed maturities | ||
Estimated Fair Value, Total | $ 1,380,671 | $ 1,120,411 |
Gross Unrealized Loss, Total | $ (74,644) | $ (58,650) |
Number of Securities, Total | security | 553 | 568 |
U.S. government obligations | ||
Estimated Fair Value, Less than 12 months | $ 1,135 | |
Gross Unrealized Loss, Less than 12 months | $ (70) | |
Number of Securities, Less than 12 months | security | 13 | |
Estimated Fair value, Greater than 12 months | $ 1,149 | $ 126 |
Gross Unrealized Loss, Greater than 12 months | $ (64) | $ (11) |
Number of Securities, Greater than 12 months | security | 9 | 5 |
Mortgage-back securities | ||
Estimated Fair Value, Less than 12 months | $ 250,705 | $ 233,624 |
Gross Unrealized Loss, Less than 12 months | $ (8,878) | $ (18,464) |
Number of Securities, Less than 12 months | security | 82 | 89 |
Estimated Fair value, Greater than 12 months | $ 143,544 | $ 17,985 |
Gross Unrealized Loss, Greater than 12 months | $ (33,168) | $ (4,044) |
Number of Securities, Greater than 12 months | security | 91 | 14 |
Asset-backed securities | ||
Estimated Fair Value, Less than 12 months | $ 7,576 | $ 24,552 |
Gross Unrealized Loss, Less than 12 months | $ (311) | $ (3,278) |
Number of Securities, Less than 12 months | security | 6 | 23 |
Estimated Fair value, Greater than 12 months | $ 25,030 | $ 5,321 |
Gross Unrealized Loss, Greater than 12 months | $ (2,520) | $ (711) |
Number of Securities, Greater than 12 months | security | 25 | 7 |
Collateralized loan obligation | ||
Estimated Fair Value, Less than 12 months | $ 35,221 | $ 203,549 |
Gross Unrealized Loss, Less than 12 months | $ (740) | $ (16,730) |
Number of Securities, Less than 12 months | security | 24 | 252 |
Estimated Fair value, Greater than 12 months | $ 175,805 | $ 37,814 |
Gross Unrealized Loss, Greater than 12 months | $ (11,621) | $ (5,194) |
Number of Securities, Greater than 12 months | security | 246 | 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 | |
Gross Unrealized Loss, Less than 12 months | $ (2) | |
Number of Securities, Less than 12 months | security | 3 | |
Estimated Fair value, Greater than 12 months | $ 124 | $ 158 |
Gross Unrealized Loss, Greater than 12 months | $ (4) | $ (21) |
Number of Securities, Greater than 12 months | security | 2 | 7 |
Corporate | ||
Estimated Fair Value, Less than 12 months | $ 30,732 | $ 37,286 |
Gross Unrealized Loss, Less than 12 months | $ (419) | $ (5,426) |
Number of Securities, Less than 12 months | security | 16 | 64 |
Estimated Fair value, Greater than 12 months | $ 20,952 | $ 376 |
Gross Unrealized Loss, Greater than 12 months | $ (4,867) | $ (89) |
Number of Securities, Greater than 12 months | security | 52 | 7 |
Term loans | ||
Estimated Fair Value, Less than 12 months | $ 689,833 | $ 558,337 |
Gross Unrealized Loss, Less than 12 months | $ (12,052) | $ (4,607) |
Number of Securities, Less than 12 months | security | 36 |
Investments (Schedule of Fixed
Investments (Schedule of Fixed Maturities) (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Investments. | ||
Amortized Cost, Due in one year or less | $ 199,892 | |
Amortized Cost, Due after one year through five years | 879,623 | |
Amortized Cost, Due after five years through ten years | 433,369 | |
Amortized Cost, Due after ten years through twenty years | 162,978 | |
Amortized Cost, Due after twenty years | 42,059 | |
Amortized Cost | 1,717,921 | $ 1,269,735 |
Estimated Fair Value, Due in one year or less | 195,433 | |
Estimated Fair Value, Due after one year through five years | 860,178 | |
Estimated Fair Value, Due after five years through ten years | 401,992 | |
Estimated Fair Value, Due after ten years through twenty years | 152,915 | |
Estimated Fair Value, Due after twenty years | 33,314 | |
Estimated Fair Value | $ 1,643,832 | $ 1,214,635 |
Investments (Schedule of Invest
Investments (Schedule of Investments Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Jun. 30, 2023 | Dec. 31, 2022 |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Mortgage loan on real estate, Allowance for credit losses | $ (1,577) | $ (1,493) | |
Mortgage loans on real estate, held for investment | 421,232 | $ 227,047 | |
1-4 Family | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Mortgage loans on real estate, before allowance for credit losses | 59,820 | 59,579 | |
Hospitality | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Mortgage loans on real estate, before allowance for credit losses | 6,385 | 12,902 | |
Land | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Mortgage loans on real estate, before allowance for credit losses | 66,743 | 62,119 | |
Multifamily(5+) | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Mortgage loans on real estate, before allowance for credit losses | 107,330 | 34,072 | |
Retail Mortgage Loans | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Mortgage loans on real estate, before allowance for credit losses | 48,182 | 22,119 | |
Other. | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Mortgage loans on real estate, before allowance for credit losses | $ 134,349 | $ 36,256 |
Investments (Schedule of Mortga
Investments (Schedule of Mortgage Loan Investments) (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Mortgage loans on real estate, held for investment | $ 421,232 | $ 227,047 |
0%-59.99% | ||
Mortgage loans on real estate, held for investment | 285,205 | 108,281 |
60%-69.99% | ||
Mortgage loans on real estate, held for investment | 85,990 | 79,968 |
70%-79.99% | ||
Mortgage loans on real estate, held for investment | 35,536 | 33,268 |
80% or greater | ||
Mortgage loans on real estate, held for investment | $ 14,501 | $ 5,530 |
Investments (Components of Net
Investments (Components of Net Investment Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Gross investment income | $ 68,021 | $ 34,585 | $ 172,636 | $ 114,343 |
Less: investment expenses | (9,447) | (3,911) | (20,711) | (25,273) |
Less: amounts charged to reinsurers | (37,778) | (17,736) | (87,688) | (59,349) |
Investment income, net of expenses | 20,796 | 12,938 | 64,237 | 29,721 |
Fixed maturities | ||||
Gross investment income | 47,552 | 21,466 | 115,452 | 69,699 |
Mortgage loans | ||||
Gross investment income | 7,636 | 1,627 | 20,610 | 11,265 |
Other invested assets | ||||
Gross investment income | 4,654 | 334 | 10,117 | 6,157 |
Other interest income | ||||
Gross investment income | $ 8,179 | $ 11,158 | $ 26,457 | $ 27,222 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Impairment on fixed maturities | $ 0 | ||||
Amortized cost | $ 1,700 | 1,700 | $ 1,200 | ||
Fair value | 1,700 | 1,700 | 1,000 | ||
Mortgage backed and asset backed securities at fair value | 7,700 | 7,700 | 7,700 | ||
Mortgage servicing rights MSR impairment recovery | 1,400 | $ 1,400 | $ 1,400 | ||
Proceeds from sales of available-for-sale investments | 15,000 | $ 94,000 | 28,000 | 187,600 | |
Gross realized gain | 600 | 100 | 900 | 1,500 | |
Unrealized gains (losses) associated with assets of third party reinsurers that are retained by American Life | (14,200) | 10,500 | 16,600 | 16,800 | |
Mortgage loans on real estate one | |||||
Mortgage backed and asset backed securities at fair value | 7,700 | 7,700 | |||
Mortgage servicing rights MSR impairment recovery | 1,400 | ||||
Mortgage loans on real estate two | |||||
Mortgage servicing rights MSR impairment recovery | 600 | ||||
Maximum | |||||
Gross realized losses | $ 100 | $ 1,200 | $ 100 | $ 1,700 | |
Mortgage Loans Secured by Property | New York | Geographic Concentration Risk | |||||
Concentration risk percentage | 22% | 24% | |||
Mortgage Loans Secured by Property | New Jersey | Geographic Concentration Risk | |||||
Concentration risk percentage | 16% | ||||
Mortgage Loans Secured by Property | New Zealand | Geographic Concentration Risk | |||||
Concentration risk percentage | 14% | ||||
Mortgage Loans Secured by Property | Florida | Geographic Concentration Risk | |||||
Concentration risk percentage | 8% | 15% | |||
Mortgage Loans Secured by Property | TEXAS | Geographic Concentration Risk | |||||
Concentration risk percentage | 5% | ||||
Mortgage Loans Secured by Property | Delaware | Geographic Concentration Risk | |||||
Concentration risk percentage | 10% | ||||
Mortgage Loans Secured by Property | California | Geographic Concentration Risk | |||||
Concentration risk percentage | 6% | ||||
Mortgage Loans Secured by Property | Arizona | Geographic Concentration Risk | |||||
Concentration risk percentage | 5% |
Derivative Instruments (Details
Derivative Instruments (Details) $ in Thousands | Sep. 30, 2023 USD ($) contract | Dec. 31, 2022 USD ($) contract |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Estimated Fair Value | $ 26,559 | $ 15,934 |
Derivatives not designated as hedge | Equity-indexed options | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 984,622 | $ 831,657 |
Number of Contracts | contract | 705 | 595 |
Estimated Fair Value | $ 26,954 | $ 15,592 |
Derivatives not designated as hedge | Equity-indexed embedded derivative | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Amount | $ 936,754 | $ 782,997 |
Number of Contracts | contract | 7,807 | 6,131 |
Estimated Fair Value | $ 146,143 | $ 111,618 |
Derivative Instruments - Funds
Derivative Instruments - Funds Withheld Provision (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Total return swap value | $ (2,100) | $ 100 | $ 1,800 | $ 14,600 | |
Unrealized losses | 12,300 | $ 10,500 | |||
Unrealized gain/(loss) in value | 9,453 | $ 27,066 | 15,500 | $ 55,577 | |
Funds With held Provision Agreement | |||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Book value of assets | 1,057,443 | 1,057,443 | 782,573 | ||
Market value of assets | 1,045,158 | 1,045,158 | 772,109 | ||
Total return swap value | 12,285 | 10,464 | |||
Unrealized loss on embedded derivatives | 12,300 | 10,500 | |||
Funds With held Provision Agreement | American Republic Insurance Company | |||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Book value of assets | 169,677 | 169,677 | 150,413 | ||
Market value of assets | 161,920 | 161,920 | 143,952 | ||
Total return swap value | 7,757 | 6,461 | |||
Funds With held Provision Agreement | Crestline SP 1 | |||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Book value of assets | 448,450 | 448,450 | 354,806 | ||
Market value of assets | 450,908 | 450,908 | 356,374 | ||
Total return swap value | (2,458) | (1,568) | |||
Funds With held Provision Agreement | Ironbound Reinsurance Company Limited | |||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Book value of assets | 160,688 | 160,688 | 159,644 | ||
Market value of assets | 154,966 | 154,966 | 154,477 | ||
Total return swap value | 5,722 | 5,167 | |||
Funds With held Provision Agreement | Ascendent Re | |||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Book value of assets | 65,615 | 65,615 | 56,064 | ||
Market value of assets | 63,998 | 63,998 | 54,790 | ||
Total return swap value | 1,617 | 1,274 | |||
Funds With held Provision Agreement | SRC 4 | |||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Book value of assets | 213,013 | 213,013 | 61,646 | ||
Market value of assets | $ 213,366 | 213,366 | 62,516 | ||
Total return swap value | $ (353) | $ (870) |
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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 1,643,832 | $ 1,214,635 |
Mortgage loans on real estate, held for investment | 421,232 | 227,047 |
Derivative instruments (See Note 4) | 26,559 | 15,934 |
Equity securities, fair value | 5,112 | 5,111 |
Other Invested assets | 126,777 | 112,431 |
Investment escrow | 1,300 | 800 |
Preferred stock | 33,926 | 31,415 |
Deposits and notes receivable | 10,774 | 8,359 |
Notes receivable | 6,500 | 6,300 |
Policy Loans | 83 | 25 |
Total Investments | 2,268,295 | 1,614,957 |
Embedded derivative for equity-indexed contracts | 146,143 | 111,618 |
Transfers between levels | 0 | 0 |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Other Invested assets | 12,764 | 12,434 |
Total Investments | 12,764 | 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) | 26,559 | 15,934 |
Equity securities, fair value | 5,112 | 5,111 |
Preferred stock | 10,940 | 9,544 |
Deposits and notes receivable | 7,768 | 7,053 |
Total Investments | 1,009,614 | 693,305 |
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 | 421,232 | 227,047 |
Other Invested assets | 114,013 | 99,997 |
Preferred stock | 22,986 | 21,871 |
Deposits and notes receivable | 3,006 | 1,306 |
Policy Loans | 83 | 25 |
Total Investments | 1,245,917 | 909,218 |
Embedded derivative for equity-indexed contracts | 146,143 | 111,618 |
Fixed maturities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 1,643,832 | 1,214,635 |
Fixed maturities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 959,235 | 655,663 |
Fixed maturities | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 684,597 | 558,972 |
U.S. government obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 1,905 | 1,262 |
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 | 1,905 | 1,262 |
Mortgage-back securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 482,324 | 294,066 |
Mortgage-back securities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 482,324 | 294,066 |
Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 36,374 | 30,756 |
Asset-backed securities | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 36,374 | 30,756 |
Collateralized loan obligation | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 376,724 | 287,673 |
Collateralized loan obligation | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 376,724 | 287,673 |
States and Political Subdivisions - general obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 124 | 101 |
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 | 124 | 101 |
States and Political Subdivisions - special revenue | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 205 | |
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 | |
Corporate | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 61,784 | 41,600 |
Corporate | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 61,784 | 41,600 |
Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 684,597 | 558,972 |
Term loans | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 684,597 | $ 558,972 |
Fair Values of Financial Inst_4
Fair Values of Financial Instruments (Schedule of Financial Assets and Liabilities at Fair Value) (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Assets | ||
Cash | $ 197,804 | $ 191,414 |
Liabilities: | ||
Notes payable | 25,000 | 25,000 |
Fair Value, Inputs, Level 1 | ||
Assets | ||
Cash | 197,804 | 191,414 |
Fair Value, Inputs, Level 3 | ||
Assets | ||
Policy loans | 83 | 25 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 2,453,282 | 1,743,348 |
Carrying Amount | ||
Assets | ||
Policy loans | 83 | 25 |
Cash | 197,804 | 191,414 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | 2,453,282 | 1,743,348 |
Fair Value | ||
Assets | ||
Policy loans | 83 | 25 |
Cash | 197,804 | 191,414 |
Liabilities: | ||
Policyholder deposits (Deposit-type contracts) | $ 2,453,282 | $ 1,743,348 |
Fair Values of Financial Inst_5
Fair Values of Financial Instruments (Recurring Basis Level 3) (Details) - Fair Value, Inputs, Level 3 - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Assets | ||
Beginning Balance | $ 909,218 | $ 505,237 |
Total realized and unrealized gains (losses) Included In Income | (4,874) | |
Total realized and unrealized gains (losses) Included In AOCI | $ (10,373) | $ (3,460) |
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 | $ 351,946 | $ 407,441 |
Ending Balance | 1,245,917 | 909,218 |
Liabilities | ||
Beginning Balance | (111,618) | (123,692) |
Total realized and unrealized gains (losses) Included In Income | $ 33,170 | $ (10,193) |
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 | $ (67,695) | $ 22,267 |
Ending Balance | (146,143) | (111,618) |
Equity-indexed embedded derivative | ||
Liabilities | ||
Beginning Balance | (111,618) | (123,692) |
Total realized and unrealized gains (losses) Included In Income | 33,170 | (10,193) |
Net Purchases, Issuances, Sales, and Settlements | (67,695) | 22,267 |
Ending Balance | (146,143) | (111,618) |
Term loans | ||
Assets | ||
Beginning Balance | 558,972 | 267,468 |
Total realized and unrealized gains (losses) Included In AOCI | (12,054) | (2,683) |
Net Purchases, Issuances, Sales, and Settlements | 137,679 | 294,187 |
Ending Balance | 684,597 | 558,972 |
Policy loans | ||
Assets | ||
Beginning Balance | 25 | 87 |
Net Purchases, Issuances, Sales, and Settlements | 58 | (62) |
Ending Balance | 83 | 25 |
Mortgage loans on real estate, held for investment | ||
Assets | ||
Beginning Balance | 227,047 | 183,203 |
Net Purchases, Issuances, Sales, and Settlements | 194,185 | 43,844 |
Ending Balance | 421,232 | 227,047 |
Deposits and notes receivable | ||
Assets | ||
Beginning Balance | 1,306 | 500 |
Net Purchases, Issuances, Sales, and Settlements | 1,700 | 806 |
Ending Balance | 3,006 | 1,306 |
Other invested assets | ||
Assets | ||
Beginning Balance | 99,997 | 35,293 |
Total realized and unrealized gains (losses) Included In AOCI | 1,681 | 3,452 |
Net Purchases, Issuances, Sales, and Settlements | 12,335 | 61,252 |
Ending Balance | 114,013 | 99,997 |
Preferred Stock | ||
Assets | ||
Beginning Balance | 21,871 | 18,686 |
Total realized and unrealized gains (losses) Included In Income | (4,874) | |
Total realized and unrealized gains (losses) Included In AOCI | (4,229) | |
Net Purchases, Issuances, Sales, and Settlements | 5,989 | 7,414 |
Ending Balance | $ 22,986 | $ 21,871 |
Fair Values of Financial Inst_6
Fair Values of Financial Instruments (Summary of unobservable inputs) (Details) | Sep. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 1,643,832,000 | $ 1,214,635,000 |
Mortgage loans on real estate, held for investment (Allowance for credit losses of $1,577 in 2023.) | 421,232,000 | 227,047,000 |
Other Invested assets | 126,777,000 | 112,431,000 |
Preferred stock | 33,926,000 | 31,415,000 |
Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | 684,597,000 | 558,972,000 |
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 (Allowance for credit losses of $1,577 in 2023.) | 421,232,000 | 227,047,000 |
Other Invested assets | 114,013,000 | 99,997,000 |
Preferred stock | 22,986,000 | $ 21,871,000 |
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 | 684,597,000 | $ 558,972,000 |
Fair Value, Inputs, Level 3 | 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 | 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 | 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 | Non performance risk | Interest sensitive contract liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total fixed maturities | $ 146,100,000 | $ 111,600,000 |
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 | 0.006 |
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 | 0.015 |
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 | 0.011 |
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 | 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) | 0.059 | 0.057 |
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) | 0.029 | 0.027 |
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 | $ 9,800,000 | $ 6,100,000 |
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 | $ 684,600,000 | $ 559,000,000 |
Debt Securities, Available-for-sale, Valuation Technique [Extensible List] | mdwt:ValuationTechniqueYieldAnalysisMember | mdwt:ValuationTechniqueYieldAnalysisMember |
Debt Securities, Available-for-Sale, Measurement Input [Extensible Enumeration] | Discount rates | 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 | 0.240 |
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 | 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 | 0.280 |
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 | 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 | 0.260 |
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 | 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 | $ 114,000,000 | $ 100,000,000 |
Alternative Investment, Valuation Technique [Extensible Enumeration] | us-gaap:MarketApproachValuationTechniqueMember | us-gaap:MarketApproachValuationTechniqueMember |
Preferred stock | $ 10,700,000 | $ 31,400,000 |
Preferred Stock, Valuation Technique [Extensible Enumeration] | us-gaap:MarketApproachValuationTechniqueMember | |
Preferred Stock, Measurement Input [Extensible Enumeration] | EBITDA Multiple | |
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 | $ 2,500,000 | $ 2,200,000 |
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) | 2.6 | 2.6 |
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 | 10 |
Interest sensitive contract liabilities, preferred stock (as a percent) | 2.55 | 2.55 |
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) | 3.1 | 3.1 |
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 | 11.5 |
Interest sensitive contract liabilities, preferred stock (as a percent) | 3.05 | 3.05 |
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) | 2.8 | 2.8 |
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 |
Interest sensitive contract liabilities, preferred stock (as a percent) | 2.8 | 2.8 |
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 | 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) | 0.125 | 0.105 |
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 (Allowance for credit losses of $1,577 in 2023.) | $ 421,200,000 | $ 227,000,000 |
Mortgage Loans on Real Estate, Valuation Technique [Extensible Enumeration] | mdwt:ValuationTechniqueYieldAnalysisMember | mdwt:ValuationTechniqueYieldAnalysisMember |
Mortgage Loans on Real Estate, Measurement Input [Extensible Enumeration] | Principal funded | Principal funded |
Fair Values of Financial Inst_7
Fair Values of Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Investment escrow | $ 1,300 | $ 800 | |
Equity securities, fair value | 5,112 | 5,111 | |
Notes receivable | 6,500 | 6,300 | |
Mortgage backed and asset backed securities at fair value | 7,700 | 7,700 | |
Mortgage servicing rights MSR impairment recovery | 1,400 | $ 1,400 | 1,400 |
Perpetual preferred stock | 33,900 | 31,400 | |
Preferred stock | 33,926 | 31,415 | |
Other Invested assets | 126,777 | 112,431 | |
Transfers between levels | 0 | 0 | |
Fair Value, Inputs, Level 2 | |||
Equity securities, fair value | 5,112 | 5,111 | |
Preferred stock | 10,940 | 9,544 | |
Fair Value, Inputs, Level 3 | |||
Preferred stock | 22,986 | 21,871 | |
Other Invested assets | $ 114,013 | 99,997 | |
BBB+ | |||
Interest rate | 5% | ||
Exchange Traded Funds | |||
Equity securities, fair value | $ 5,100 | $ 5,100 | |
Mortgage loans on real estate one | |||
Mortgage backed and asset backed securities at fair value | 7,700 | ||
Mortgage servicing rights MSR impairment recovery | 1,400 | ||
Mortgage loans on real estate two | |||
Mortgage servicing rights MSR impairment recovery | $ 600 |
Deposit-Type Contracts (Details
Deposit-Type Contracts (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Beginning balance | $ 1,743,348 | $ 1,075,439 |
US Alliance | (452) | (2,176) |
Unified Life Insurance Company | (129) | (10) |
Deposits received | 755,213 | 745,083 |
Investment earnings (includes embedded derivative) | 33,170 | (10,193) |
Withdrawals | (95,165) | (51,659) |
Policy charges | (820) | |
Ending balance | 2,453,282 | 1,743,348 |
Outstanding advances under FHLB funding agreements | 68,000 | |
FHLB advances | ||
Outstanding advances under FHLB funding agreements | 68,000 | 29,000 |
Ironbound Reinsurance Company Limited | ||
Ironbound Reinsurance Company Limited | 4,748 | 5,959 |
Ascendant Re | ||
Deposit contract | 149 | (3,185) |
Crestline SP 1 | ||
Deposit contract | 4,402 | (11,623) |
American Republic Insurance Company | ||
Deposit contract | 2,523 | (4,080) |
SRC4 | ||
Deposit contract | $ 5,475 | $ 613 |
Debt (Details)
Debt (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Nov. 22, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Minimum | ||||||
Line of Credit Facility [Line Items] | ||||||
Percentage of risk based capital percent | 300% | 300% | ||||
Minimum consolidated liquidity requirement | $ 3 | $ 3 | ||||
Maximum | ||||||
Line of Credit Facility [Line Items] | ||||||
Percentage of consolidated debt to capitalization | 35% | 35% | ||||
Credit Agreement | ||||||
Line of Credit Facility [Line Items] | ||||||
Interest paid | $ 0.7 | $ 0 | $ 1.7 | $ 0 | ||
Revolving Credit Facility | Credit Agreement | ||||||
Line of Credit Facility [Line Items] | ||||||
Loan term | 3 years | |||||
Maximum borrowing capacity | $ 30 | |||||
Outstanding balance | 25 | 25 | $ 25 | |||
Unutilized credit | $ 5 | $ 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 | Sep. 30, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Reinsurance | |||
Reinsurance recoverables | $ 27,870 | $ 20,190 | |
Deposit-type contracts Direct | 2,453,282 | 1,743,348 | $ 1,075,439 |
Deposit-type contracts Reinsurance ceded | (1,157,854) | (912,982) | |
Retained deposit-type contracts | $ 1,295,428 | $ 830,366 |
Reinsurance (Schedule of Signif
Reinsurance (Schedule of Significant Reinsurance Balances) (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Recoverable on Unpaid Losses | $ 324 | $ 195 |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | 27,598 | 20,337 |
Ceded Due Premiums | (52) | (342) |
Reinsurance recoverables | $ 27,870 | $ 20,190 |
Ironbound Reinsurance Company Limited [Member] | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ 1,327 | $ (344) |
Reinsurance payable | $ (344) | |
Reinsurance recoverables | $ 1,327 | |
Optimum Reinsurance Company [Member] | ||
AM Best Rating | A | A |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ 690 | $ 601 |
Reinsurance recoverables | $ 690 | $ 601 |
Sagicor Life Insurance Company [Member] | ||
AM Best Rating | A- | A- |
Recoverable on Unpaid Losses | $ 299 | $ 154 |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | 10,006 | 10,744 |
Ceded Due Premiums | (15) | (303) |
Reinsurance recoverables | $ 10,290 | $ 10,595 |
Ascendant Re | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ (4,724) | $ (2,130) |
Reinsurance payable | $ (4,724) | $ (2,130) |
Crestline SP 1 | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ (9,907) | $ (3,357) |
Reinsurance payable | $ (9,907) | $ (3,357) |
American Republic Insurance Company | ||
AM Best Rating | A | A |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ 6,057 | $ 5,879 |
Reinsurance recoverables | $ 6,057 | $ 5,879 |
SRC4 | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ (26,407) | $ (44,442) |
Reinsurance payable | $ (26,407) | $ (44,442) |
Unified Life Insurance Company | ||
AM Best Rating | NR | NR |
Recoverable on Unpaid Losses | $ 25 | $ 41 |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | 772 | 986 |
Ceded Due Premiums | (14) | (17) |
Reinsurance recoverables | $ 783 | $ 1,010 |
US Alliance Life and Security Company | ||
AM Best Rating | NR | NR |
Recoverable/(Payable) on Benefit Reserves/Deposit-type Contracts | $ 49,784 | $ 52,400 |
Ceded Due Premiums | (23) | (22) |
Reinsurance recoverables | $ 49,761 | $ 52,378 |
Reinsurance (Ceding commissions
Reinsurance (Ceding commissions deferred) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Gross Ceding Commission | $ 1,384 | $ 3,994 | $ 7,812 | $ 8,346 | |
Expense Allowances | 1,207 | 5,209 | 7,380 | 12,668 | |
Interest On Ceding Commissions | 358 | 230 | 986 | 623 | |
Earned Ceding Commission | 1,392 | 1,239 | 4,463 | 3,251 | |
Deferred gain on coinsurance transactions | 44,140 | 44,140 | $ 38,063 | ||
Unified Life Insurance Company | |||||
Earned Ceding Commission | 2 | 6 | 14 | 20 | |
Deferred gain on coinsurance transactions | 249 | 249 | 217 | ||
Ironbound Reinsurance Company Limited [Member] | |||||
Interest On Ceding Commissions | 45 | 48 | 138 | 146 | |
Earned Ceding Commission | 121 | 123 | 374 | 381 | |
Deferred gain on coinsurance transactions | 4,750 | 4,750 | 4,876 | ||
Ascendant Re | |||||
Gross Ceding Commission | 43 | 224 | |||
Expense Allowances | 42 | 217 | |||
Interest On Ceding Commissions | 25 | 23 | 71 | 70 | |
Earned Ceding Commission | 101 | 88 | 287 | 250 | |
Deferred gain on coinsurance transactions | 3,096 | 3,096 | 2,947 | ||
US Alliance Life and Security Company | |||||
Interest On Ceding Commissions | 12 | 13 | 37 | 41 | |
Earned Ceding Commission | 93 | 96 | 249 | 259 | |
Deferred gain on coinsurance transactions | 152 | ||||
Crestline SP 1 | |||||
Gross Ceding Commission | 492 | 1,972 | 2,298 | 4,497 | |
Expense Allowances | 475 | 2,794 | 2,106 | 7,026 | |
Interest On Ceding Commissions | 146 | 103 | 418 | 271 | |
Earned Ceding Commission | 846 | 604 | 2,486 | 1,669 | |
Deferred gain on coinsurance transactions | 19,488 | 19,488 | 18,475 | ||
American Republic Insurance Company | |||||
Gross Ceding Commission | 1,144 | 560 | 2,971 | ||
Expense Allowances | (132) | 1,631 | 621 | 4,859 | |
Interest On Ceding Commissions | 52 | 38 | 158 | 90 | |
Earned Ceding Commission | 294 | 242 | 856 | 592 | |
Deferred gain on coinsurance transactions | 7,400 | 7,400 | 7,502 | ||
US Alliance Life and Security Company(3) | |||||
Deferred gain on coinsurance transactions | 1,961 | 1,961 | 2,069 | ||
SRC4 | |||||
Gross Ceding Commission | 849 | 878 | 4,730 | 878 | |
Expense Allowances | 822 | 784 | 4,436 | 783 | |
Interest On Ceding Commissions | 78 | 5 | 164 | 5 | |
Earned Ceding Commission | (65) | $ 80 | 197 | $ 80 | |
Deferred gain on coinsurance transactions | $ 7,196 | $ 7,196 | $ 1,825 |
Reinsurance (Narrative) (Detail
Reinsurance (Narrative) (Details) - USD ($) $ in Thousands | 9 Months Ended | ||||||
Feb. 28, 2023 | Sep. 30, 2022 | Nov. 10, 2021 | Jun. 26, 2021 | Apr. 24, 2020 | Sep. 30, 2023 | Dec. 31, 2022 | |
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 | |||||||
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 | FW, Modco Agreement | MYGA | |||||||
Percentage of multi year guaranteed annuity | 45% | ||||||
American Life | FW, Modco Agreement | FIA | |||||||
Percentage of fixed indexed annuity | 45% | ||||||
American Life and Security National Life Insurance [Member] | |||||||
Percentage of quota share of liabilities | 0% | ||||||
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% | |||||
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 (Retained and Reins
Reinsurance (Retained and Reinsured Balance Sheets) (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Jun. 30, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 |
Assets [Abstract] | ||||||
Total investments | $ 2,268,295 | $ 1,614,957 | ||||
Cash and cash equivalents | 197,804 | 191,414 | ||||
Deferred acquisition costs, net | 69,470 | 43,433 | $ 24,530 | |||
Premiums receivable | 63 | 362 | ||||
Accrued investment income | 44,694 | 25,165 | ||||
Reinsurance recoverables | 27,870 | 20,552 | ||||
Property and equipment, net | 1,721 | 1,897 | ||||
Receivable for securities sold | 10,518 | |||||
Other assets | 14,335 | 12,495 | ||||
Total assets | 2,624,252 | 1,920,431 | ||||
Liabilities: | ||||||
Benefit reserves | 11,532 | 12,945 | ||||
Deposit-type contracts Direct | 2,453,282 | 1,743,348 | 1,075,439 | |||
Other policy-holder funds | 4,530 | 4,105 | ||||
Notes payable | 25,000 | 25,000 | ||||
Deferred gain on coinsurance transactions | 44,140 | 38,063 | ||||
Payable for securities purchased | 27,029 | 8,872 | ||||
Other liabilities | 36,786 | 53,721 | ||||
Total liabilities | 2,602,299 | 1,886,054 | ||||
Stockholders' Equity: | ||||||
Preferred stock | ||||||
Voting common stock | 4 | 4 | ||||
Additional paid-in capital | 138,122 | 138,482 | ||||
Treasury stock | (175) | (175) | ||||
Accumulated deficit | (67,361) | (63,019) | ||||
Accumulated other comprehensive loss | (66,886) | (51,386) | ||||
Total Midwest Holding Inc.'s stockholders' equity | 3,704 | 23,906 | ||||
Noncontrolling interests | 18,249 | 10,471 | ||||
Total stockholders' equity | 21,953 | $ 29,300 | 34,377 | $ 39,870 | $ 64,496 | $ 85,756 |
Total liabilities and stockholders' equity | 2,624,252 | 1,920,431 | ||||
Reinsurance Contract [Axis]: Reinsurance [Member] | ||||||
Assets [Abstract] | ||||||
Total investments | 1,055,322 | 802,780 | ||||
Cash and cash equivalents | 86,685 | 64,123 | ||||
Premiums receivable | 63 | |||||
Accrued investment income | 25,859 | 13,858 | ||||
Reinsurance recoverables | 36,814 | 27,405 | ||||
Receivable for securities sold | 9,650 | 8,485 | ||||
Other assets | 1,575 | 236 | ||||
Total assets | 1,215,968 | 916,887 | ||||
Liabilities: | ||||||
Benefit reserves | 11,006 | 11,613 | ||||
Deposit-type contracts Direct | 1,151,528 | 901,368 | ||||
Other policy-holder funds | 311 | |||||
Deferred gain on coinsurance transactions | 43,724 | |||||
Other liabilities | 9,399 | 3,906 | ||||
Total liabilities | 1,215,968 | 916,887 | ||||
Stockholders' Equity: | ||||||
Total liabilities and stockholders' equity | 1,215,968 | 916,887 | ||||
Reinsurance Contract [Axis]: Retained [Member] | ||||||
Assets [Abstract] | ||||||
Total investments | 1,212,973 | 812,177 | ||||
Cash and cash equivalents | 111,119 | 127,291 | ||||
Deferred acquisition costs, net | 69,470 | 43,433 | ||||
Accrued investment income | 18,835 | 11,307 | ||||
Reinsurance recoverables | (8,944) | (6,853) | ||||
Property and equipment, net | 1,721 | 1,897 | ||||
Receivable for securities sold | (9,650) | 2,033 | ||||
Other assets | 12,760 | 12,259 | ||||
Total assets | 1,408,284 | 1,003,544 | ||||
Liabilities: | ||||||
Benefit reserves | 526 | 1,332 | ||||
Deposit-type contracts Direct | 1,301,754 | 841,980 | ||||
Other policy-holder funds | 4,219 | 4,105 | ||||
Notes payable | 25,000 | 25,000 | ||||
Deferred gain on coinsurance transactions | 416 | 38,063 | ||||
Payable for securities purchased | 27,029 | 8,872 | ||||
Other liabilities | 27,387 | 49,815 | ||||
Total liabilities | 1,386,331 | 969,167 | ||||
Stockholders' Equity: | ||||||
Voting common stock | 4 | 4 | ||||
Additional paid-in capital | 138,122 | 138,482 | ||||
Treasury stock | (175) | (175) | ||||
Accumulated deficit | (67,361) | (63,019) | ||||
Accumulated other comprehensive loss | (66,886) | (51,386) | ||||
Total Midwest Holding Inc.'s stockholders' equity | 3,704 | 23,906 | ||||
Noncontrolling interests | 18,249 | 10,471 | ||||
Total stockholders' equity | 21,953 | 34,377 | ||||
Total liabilities and stockholders' equity | $ 1,408,284 | $ 1,003,544 |
Income Tax Matters (Schedule of
Income Tax Matters (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Deferred tax assets: | ||
Loss carryforwards | $ 4,146 | $ 2,672 |
Capitalized costs | 44 | 79 |
Stock option granted | 1,190 | 1,066 |
Policy acquisition costs | 9,803 | 6,489 |
General business credits | 6 | 6 |
Sec 163(j) limitation | 171 | 171 |
Benefit reserves | 17,189 | 12,010 |
Impairments | 535 | 403 |
Unrealized losses on investments | 17,780 | 13,624 |
Other | 1,928 | 1,928 |
Total deferred tax assets | 52,792 | 38,448 |
Less valuation allowance | (46,138) | (35,305) |
Total deferred tax assets, net of valuation allowance | 6,654 | 3,143 |
Deferred tax liabilities: | ||
Intangible assets | 147 | 147 |
Derivative option allowance | 4,246 | 2,150 |
Bond Discount | 2,400 | 936 |
Property and equipment | (139) | (90) |
Total deferred tax liabilities | 6,654 | 3,143 |
Net deferred tax assets |
Income Tax Matters (Schedule _2
Income Tax Matters (Schedule of Effective Tax Rate Reconciliation) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Tax Matters | ||||
Computed expected income tax benefit (expense) | $ (1,564) | $ (796) | $ (3,921) | $ (2,305) |
Reduction (increase) in income taxes resulting from: | ||||
Interest maintenance reserve and reinsurance | (47) | 176 | 4 | 158 |
Non deductible expenses | (3) | (3) | (9) | (8) |
Change in valuation allowance | (2,896) | (641) | (6,677) | (1,693) |
Deferred tax adjustment | 14 | |||
AETR adjustment | (19) | (19) | ||
Prior year true-up | (77) | 140 | ||
Subtotal of (increases) decreases | (3,042) | (454) | (6,561) | (1,543) |
Tax benefit (expense) | $ (4,606) | $ (1,250) | $ (10,482) | $ (3,848) |
Income Tax Matters (Narratives)
Income Tax Matters (Narratives) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2016 | |
Deferred Tax Assets, Valuation Allowance | $ 46,138 | $ 46,138 | $ 35,305 | ||||
U.S. federal income tax rate | 21% | ||||||
Net operating loss ("NOL") carryforwards | 10,600 | $ 10,600 | $ 900 | ||||
Percentage of carry forward year limited taxable income | 80% | ||||||
NOLs carryforwards, valuation allowance | 2,200 | $ 2,200 | |||||
Income tax expense (benefit) | $ 4,606 | $ 1,250 | $ 10,482 | $ 3,848 | |||
SRC1 | |||||||
Net operating loss ("NOL") carryforwards | $ 3,600 |
Leases (Schedule of Supplementa
Leases (Schedule of Supplemental Balance Sheet Information Related to Leases) (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Noncurrent: | ||
Operating lease right of use assets | $ 1,997 | $ 2,119 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other assets | Other assets |
Liabilities | ||
Operating lease | $ 2,005 | $ 2,135 |
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 | Sep. 30, 2023 USD ($) |
Operating Leases | |
2023 | $ 112 |
2024 | 378 |
2025 | 342 |
2026 | 345 |
2027 | 353 |
2028 | 362 |
2029 and after | 1,041 |
Total remaining lease payments | $ 2,933 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Leases | |||||
Operating cash flows from operating leases | $ 100 | $ 100 | $ 100 | $ 100 | |
Weighted Average Remaining Term - Operating lease | 8 years 6 months | 8 years 6 months | 10 years | ||
Weighted Average Discount Rate - Operating lease | 8% | 8% | 8% | ||
Operating lease cost (General and administrative expense) | $ 3 | $ 3 | $ 10 | $ 10 |
Equity (Narrative) (Details)
Equity (Narrative) (Details) - shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
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 | 3,744,645 | 3,727,976 |
Common stock, shares outstanding | 3,744,645 | 3,727,976 |
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 | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Balance | $ 29,300 | $ 64,496 | $ 34,377 | $ 85,756 | $ 85,756 |
Other comprehensive (loss) before reclassifications, net of tax | (9,937) | (26,114) | (16,167) | (55,483) | |
Less: Reclassification adjustments for losses realized in net income, net of tax | 484 | (952) | 667 | (94) | |
Balance | 21,953 | $ 39,870 | 21,953 | 39,870 | 34,377 |
Unrealized investment gains (losses) on fixed maturities, net of offsets | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Balance | (51,386) | $ 2,634 | 2,634 | ||
Other comprehensive (loss) before reclassifications, net of tax | (16,167) | (54,975) | |||
Less: Reclassification adjustments for losses realized in net income, net of tax | 667 | 955 | |||
Balance | $ (66,886) | $ (66,886) | $ (51,386) |
Long-Term Incentive Plans (Deta
Long-Term Incentive Plans (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
Jun. 06, 2023 | Jun. 14, 2022 | Sep. 30, 2022 | Jun. 30, 2021 | Sep. 30, 2023 | Sep. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | Dec. 31, 2020 | Dec. 31, 2019 | |
Employee stock options | $ 88 | $ (672) | $ 691 | $ (286) | ||||||||
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) | $ 39.16 | 39.16 | ||||||||||
Share price | $ 26.15 | $ 26.15 | ||||||||||
Vested options | $ 100 | |||||||||||
Options outstanding | $ 1,600 | $ 1,600 | ||||||||||
Restricted Stock | ||||||||||||
Restricted stock granted (in shares) | 18,597 | |||||||||||
Vesting percentage | 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) | 6,984 | 18,718 | 5,089 | 6,984 | ||||||||
Restricted stock granted (in dollars per share) | $ 25.70 | $ 11.22 | $ 24.34 | $ 25.76 | ||||||||
Vested (in shares) | 16,044 | 1,163 | 1,163 | |||||||||
Forfeited (in shares) | 2,674 | |||||||||||
Minimum | Stock Options | ||||||||||||
Vesting period | 2 years | |||||||||||
Maximum | Stock Options | ||||||||||||
Vesting period | 4 years | |||||||||||
Long-Term Incentive Plans. | ||||||||||||
Restricted stock granted (in shares) | 6,984 | 18,718 | ||||||||||
Restricted stock granted (in dollars per share) | $ 16.56 | |||||||||||
2019 LTIP | ||||||||||||
Employee stock options | 100 | 100 | $ 700 | 700 | ||||||||
2019 LTIP | Maximum | Stock Options | ||||||||||||
Shares authorized | 102,000 | |||||||||||
2020 LTIP | ||||||||||||
Additional shares authorized | 150,000 | |||||||||||
Employee stock options | $ (700) | $ (700) | $ (300) | $ (300) | ||||||||
2020 LTIP | Maximum | Stock Options | ||||||||||||
Shares authorized | 350,000 |
Long-Term Incentive Plans (Opti
Long-Term Incentive Plans (Options Outstanding) (Details) | 9 Months Ended |
Sep. 30, 2023 $ / shares shares | |
Weighted Average Exercise Price Per Share | |
Balance at the beginning, weighted average exercise price (in dollars per share) | $ 32.19 |
Granted (in dollars per share) | 17.12 |
Prior year adjustment (in dollars per share) | 39.16 |
Forfeited (in dollars per share) | 46.92 |
Balance at the end, weighted average exercise price (in dollars per share) | 30.90 |
Range of Option Exercise Prices Per Share | |
Granted (in dollars per share) | $ 17.20 |
Total Outstanding | |
Outstanding at the beginning (in shares) | shares | 319,121 |
Granted (in shares) | shares | 5,750 |
Prior year adjustment (in shares) | shares | (7,390) |
Forfeited (in shares) | shares | (19,267) |
Outstanding at the end (in shares) | shares | 305,604 |
Outstanding, Non-vested | |
Outstanding, Non-vested Options at beginning (in shares) | shares | 271,517 |
Granted (in shares) | shares | 5,750 |
Prior year adjustment (in shares) | shares | (7,390) |
Forfeited (in shares) | shares | (19,267) |
Outstanding, Non-vested Options at ending (in shares) | shares | 250,610 |
Vested and Exercisable | |
Vested and Exercisable Balance at the beginning (in shares) | shares | 47,604 |
Vested and Exercisable Prior year adjustment (in shares) | shares | 7,390 |
Vested and Exercisable Balance at the end (in shares) | shares | 54,994 |
Minimum | |
Range of Option Exercise Prices Per Share | |
Balance at the beginning (in dollars per share) | $ 11.20 |
Prior year adjustment (in dollars per share) | 16.37 |
Forfeited (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 |
Prior year adjustment (in dollars per share) | 55.02 |
Forfeited (in dollars per share) | 55.02 |
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) | 9 Months Ended |
Sep. 30, 2023 $ / 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 | 35,853 |
Outstanding, Exercise price (in dollars per share) | $ 55.02 |
Outstanding, Remaining term | 7 years 7 months 6 days |
Vested and exercisable options | shares | 6,390 |
Vested and exercisable, Exercise price (in dollars per share) | $ 55.02 |
Share-Based Payment Arrangement, Option, Exercise Price Range, Exercisable, Weighted Average Remaining Contractual Term | 7 years 3 months 29 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 | 7 years 8 months 8 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 3 months 29 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 | 23,600 |
Outstanding, Exercise price (in dollars per share) | $ 23.36 |
Outstanding, Remaining term | 7 years 6 months 14 days |
Vested and exercisable options | shares | 5,877 |
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 14 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 | 115,000 |
Outstanding, Exercise price (in dollars per share) | $ 13.43 |
Outstanding, Remaining term | 9 years |
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 | 7 years 3 months 29 days |
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 | 1 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 06, 2023 | Jun. 14, 2022 | Sep. 30, 2022 | Jun. 30, 2021 | Sep. 30, 2023 | Dec. 31, 2022 | |
Restricted Stock and Restricted Stock Units (RSUs) | ||||||
Outstanding at beginning (in shares) | 17,207 | |||||
Granted (in shares) | 6,984 | 18,718 | 5,089 | 6,984 | ||
Vested (in shares) | (16,044) | (1,163) | (1,163) | |||
Forfeited (in shares) | (2,674) | |||||
Released (in shares) | (16,044) | |||||
Outstanding at ending (in shares) | 8,147 | 17,207 | ||||
Weighted Average Grant-Date Fair Value | ||||||
Weighted average grant-date fair value, at the beginning (in dollars per share) | $ 13.84 | |||||
Weighted average grant-date fair value, Granted (in dollars per share) | $ 25.70 | $ 11.22 | $ 24.34 | 25.76 | ||
Weighted average grant-date fair value, Vested (in dollars per share) | 50 | $ 50 | ||||
Weighted average grant-date fair value, Awards released (in dollars per share) | 11.22 | |||||
Weighted average grant-date fair value, at the ending (in dollars per share) | $ 22.08 | $ 13.84 | ||||
Vested (in shares) | 16,044 | 1,163 | 1,163 | |||
Weighted average grant-date fair value, Vested (in dollars per share) | $ 50 | $ 50 |
Long-Term Incentive Plans (Assu
Long-Term Incentive Plans (Assumptions) (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Fair value assumptions | ||
Expected volatility (as a percent) | 287.30% | |
Expected volatility, minimum (as a percent) | 4.16% | |
Expected volatility, maximum (as a percent) | 4.26% | |
Weighted-average volatility (as a percent) | 287.30% | 3.70% |
Expected term (in years) | 6 years 6 months 14 days | |
Risk free rate (as a percent) | 3.57% | |
Risk free rate, minimum (as a percent) | 3.57% | 0.02% |
Risk free rate, maximum (as a percent) | 2.15% | |
Minimum | ||
Fair value assumptions | ||
Expected term (in years) | 2 years | |
Maximum | ||
Fair value assumptions | ||
Expected term (in years) | 7 years |
Long-Term Incentive Plans (Non-
Long-Term Incentive Plans (Non-vested shares) (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Outstanding, Non-vested Options at beginning (in shares) | 271,517 | |
Granted (in shares) | 5,750 | |
Forfeited (in shares) | (19,267) | |
Outstanding, Non-vested Options at ending (in shares) | 250,610 | 271,517 |
Balance at the beginning, weighted average exercise price (in dollars per share) | $ 32.19 | |
Granted (in dollars per share) | 17.12 | |
Prior year adjustment (in dollars per share) | 39.16 | |
Balance at the end, weighted average exercise price (in dollars per share) | $ 30.90 | $ 32.19 |
Long-Term Incentive Plans. | ||
Outstanding, Non-vested Options at beginning (in shares) | 287,561 | 317,217 |
Granted (in shares) | 5,750 | 117,367 |
Restricted stock granted (in shares) | 6,984 | 18,718 |
Vested (in shares) | (23,434) | (56,678) |
Forfeited (in shares) | (20,517) | (109,063) |
Outstanding, Non-vested Options at ending (in shares) | 256,344 | 287,561 |
Outstanding at beginning (in dollars per share) | $ 16.96 | $ 25.80 |
Options granted (in dollars per share) | 16.56 | 9.57 |
Restricted stock granted (in dollars per share) | 16.56 | |
Vested (in dollars per share) | 13.59 | 21.12 |
Forfeited (in dollars per share) | 27.99 | 23.82 |
Outstanding at ending (in dollars per share) | 16.92 | 16.96 |
Balance at the beginning, weighted average exercise price (in dollars per share) | 32.29 | 40.13 |
Granted (in dollars per share) | 17.12 | 14.92 |
Vested, weighted average exercise price (in dollars per share) | 55.02 | 36.53 |
Forfeited, weighted average exercise price (in dollars per share) | 46.92 | 38.87 |
Balance at the end, weighted average exercise price (in dollars per share) | $ 30.90 | $ 32.29 |
Statutory Net Income and Surp_3
Statutory Net Income and Surplus (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
SRC1 | |||||
Statutory net income (loss) | $ (458) | $ 1,129 | $ 6,853 | $ 181 | |
Statutory Capital and Surplus | 14,968 | 14,968 | $ 9,615 | ||
SRC3 | |||||
Statutory net income (loss) | 745 | 1,951 | 1,662 | 960 | |
Statutory Capital and Surplus | 7,983 | 7,983 | 6,088 | ||
Premiums Sales | 174 | 123 | 23,931 | ||
American Life and Security Corporation | |||||
Statutory net income (loss) | 38,395 | (1,836) | 3,279 | 16,055 | |
Statutory Capital and Surplus | 67,018 | 67,018 | $ 69,936 | ||
Premiums Sales | $ 207,689 | $ 141,602 | $ 438,896 | $ 272,218 |
Third-party Administration (Det
Third-party Administration (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
TPA | ||
Related Party Transaction [Line Items] | ||
Third party assets under management | $ 531.6 | $ 501.9 |
Policy Administration Fees (Det
Policy Administration Fees (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Policy Administration Fees | ||||
Policy administration fees | $ 874 | $ 536 | $ 1,992 | $ 1,398 |
Related Party (Details)
Related Party (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Jun. 29, 2022 | Apr. 24, 2020 | Sep. 30, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | |
BBB+ | |||||
Related Party Transaction [Line Items] | |||||
Interest rate | 5% | 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] | |||||
Reinsurance ceded commissions | $ 0.5 | $ 2.3 | |||
Reinsurance ceded expense reimbursements | 0.5 | 2.1 | |||
Assets under management | 504.4 | 504.4 | $ 423.6 | ||
Additional investments | 151.6 | 151.6 | 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 | 6.5 | 6.5 | |||
Chelsea Holdings Midwest LLC | Series B Preferred Stock | BBB+ | |||||
Related Party Transaction [Line Items] | |||||
Fair market value | 1.9 | 1.9 | $ 2.3 | ||
Crestline SP 1 | |||||
Related Party Transaction [Line Items] | |||||
Reinsurance ceded amount | $ 534.6 | $ 534.6 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) $ in Thousands | Sep. 30, 2023 USD ($) item | Dec. 31, 2022 USD ($) |
American Life and Security Corporation | ||
Other Commitments [Line Items] | ||
Number of jurisdiction licensed | item | 25 | |
Unfunded Commitments | ||
Other Commitments [Line Items] | ||
Commitments | $ 223,040 | $ 178,995 |
Commitments reinsurance | 158,800 | |
Unfunded Commitment | ||
Due in one year or less | 83,137 | 52,951 |
Due in two years | 41,058 | 43,604 |
Due in three years | 20,329 | 7,731 |
Due in four years | 24,947 | 13,277 |
Due in five years and after | 53,569 | 61,432 |
Total | 223,040 | $ 178,995 |
Unfunded Commitments | American Life and Security Corporation | ||
Other Commitments [Line Items] | ||
Commitments | 64,200 | |
Unfunded Commitment | ||
Total | $ 64,200 |
Pending Merger (Details)
Pending Merger (Details) - $ / shares | Sep. 30, 2023 | Apr. 30, 2023 | Dec. 31, 2022 |
Business Acquisition [Line Items] | |||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |
Midas Merger Acquisition Sub, Inc | |||
Business Acquisition [Line Items] | |||
Common stock, par value (in dollars per share) | $ 0.001 | ||
Right to receive per share in cash | $ 27 |