000000355379--12-312023Q1falsehttp://fasb.org/us-gaap/2022#OtherAssetshttp://fasb.org/us-gaap/2022#OtherLiabilities000000MIDWEST HOLDING INC.37286013727976P3Y37286013727976http://fasb.org/us-gaap/2022#RealizedInvestmentGainsLosseshttp://fasb.org/us-gaap/2022#OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTaxhttp://fasb.org/us-gaap/2022#RealizedInvestmentGainsLosseshttp://fasb.org/us-gaap/2022#OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTaxhttp://midwestholdinginc.com/20230331#ValuationTechniqueYieldAnalysisMemberhttp://fasb.org/us-gaap/2022#MeasurementInputDiscountRateMemberhttp://midwestholdinginc.com/20230331#ValuationTechniqueYieldAnalysisMemberhttp://midwestholdinginc.com/20230331#MeasurementInputPrincipalFundedMemberhttp://fasb.org/us-gaap/2022#ValuationTechniqueOptionPricingModelMemberhttp://fasb.org/us-gaap/2022#MarketApproachValuationTechniqueMember2.63.12.8http://midwestholdinginc.com/20230331#ValuationTechniqueYieldAnalysisMemberhttp://fasb.org/us-gaap/2022#MeasurementInputDiscountRateMemberhttp://fasb.org/us-gaap/2022#MarketApproachValuationTechniqueMemberhttp://fasb.org/us-gaap/2022#MeasurementInputEbitdaMultipleMemberhttp://fasb.org/us-gaap/2022#MarketApproachValuationTechniqueMemberhttp://fasb.org/us-gaap/2022#MeasurementInputEbitdaMultipleMemberhttp://midwestholdinginc.com/20230331#ValuationTechniqueYieldAnalysisMemberhttp://fasb.org/us-gaap/2022#MeasurementInputDiscountRateMemberhttp://midwestholdinginc.com/20230331#ValuationTechniqueYieldAnalysisMemberhttp://midwestholdinginc.com/20230331#MeasurementInputPrincipalFundedMemberhttp://fasb.org/us-gaap/2022#ValuationTechniqueOptionPricingModelMemberhttp://fasb.org/us-gaap/2022#MarketApproachValuationTechniqueMember2.63.12.8http://midwestholdinginc.com/20230331#ValuationTechniqueYieldAnalysisMemberhttp://fasb.org/us-gaap/2022#MeasurementInputDiscountRateMemberhttp://fasb.org/us-gaap/2022#MarketApproachValuationTechniqueMemberhttp://fasb.org/us-gaap/2022#MeasurementInputEbitdaMultipleMemberhttp://fasb.org/us-gaap/2022#MarketApproachValuationTechniqueMemberhttp://fasb.org/us-gaap/2022#MeasurementInputEbitdaMultipleMemberhttp://fasb.org/us-gaap/2022#OtherAssetshttp://fasb.org/us-gaap/2022#OtherLiabilitiesP8Y6M37286013727976P2Y0.250000355379us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310000355379us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310000355379mdwt:CrestlineAssuranceHoldingsLlcMembermdwt:SecuritiesPurchaseAgreementMember2020-04-242020-04-240000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2023-03-310000355379us-gaap:TreasuryStockMember2023-03-310000355379us-gaap:RetainedEarningsMember2023-03-310000355379us-gaap:NoncontrollingInterestMember2023-03-310000355379us-gaap:CommonStockMember2023-03-310000355379us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2023-03-310000355379us-gaap:AdditionalPaidInCapitalMember2023-03-310000355379us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2023-03-310000355379us-gaap:TreasuryStockMember2022-12-310000355379us-gaap:RetainedEarningsMember2022-12-310000355379us-gaap:NoncontrollingInterestMember2022-12-310000355379us-gaap:CommonStockMember2022-12-310000355379us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-12-310000355379us-gaap:AdditionalPaidInCapitalMember2022-12-310000355379us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000355379us-gaap:TreasuryStockMember2022-03-310000355379us-gaap:RetainedEarningsMember2022-03-310000355379us-gaap:NoncontrollingInterestMember2022-03-310000355379us-gaap:CommonStockMember2022-03-310000355379us-gaap:AdditionalPaidInCapitalMember2022-03-310000355379us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000355379us-gaap:TreasuryStockMember2021-12-310000355379us-gaap:RetainedEarningsMember2021-12-310000355379us-gaap:NoncontrollingInterestMember2021-12-310000355379us-gaap:CommonStockMember2021-12-310000355379us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2021-12-310000355379us-gaap:AdditionalPaidInCapitalMember2021-12-310000355379us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000355379mdwt:SenecaReProtectedCellMember2023-01-012023-03-310000355379mdwt:SenecaReProtectedCellMember2022-01-012022-03-310000355379mdwt:SenecaReProtectedCellThreeMember2023-03-310000355379mdwt:SenecaReProtectedCellMember2023-03-310000355379mdwt:SenecaReProtectedCellThreeMember2022-12-310000355379mdwt:SenecaReProtectedCellMember2022-12-310000355379mdwt:AmericanLifeAndSecurityCorporationMember2022-12-310000355379mdwt:ExercisePriceLessThan10.00Member2023-01-012023-03-310000355379mdwt:ExercisePriceBetween30.00And39.99Member2023-01-012023-03-310000355379mdwt:ExercisePriceGreaterThan50.00Member2023-01-012023-03-310000355379mdwt:ExercisePriceBetween40.00And49.99Member2023-01-012023-03-310000355379mdwt:ExercisePriceBetween20.00And29.99Member2023-01-012023-03-310000355379mdwt:ExercisePriceBetween10.00And19.99Member2023-01-012023-03-310000355379mdwt:ExercisePriceGreaterThan50.00Member2023-03-310000355379mdwt:ExercisePriceBetween40.00And49.99Member2023-03-310000355379mdwt:ExercisePriceBetween20.00And29.99Member2023-03-310000355379mdwt:ExercisePriceBetween10.00And19.99Member2023-03-310000355379us-gaap:EmployeeStockOptionMember2023-03-310000355379mdwt:LongTermIncentivePlansMember2023-03-310000355379mdwt:LongTermIncentivePlansMember2022-12-310000355379mdwt:LongTermIncentivePlansMember2021-12-310000355379srt:MaximumMemberus-gaap:EmployeeStockOptionMembermdwt:LongTermIncentivePlan2020Member2020-12-310000355379srt:MaximumMemberus-gaap:EmployeeStockOptionMembermdwt:LongTermIncentivePlan2019Member2019-12-310000355379mdwt:LongTermIncentivePlan2020Member2022-01-012022-12-310000355379srt:MinimumMember2022-01-012022-12-310000355379srt:MaximumMember2022-01-012022-12-310000355379us-gaap:EmployeeStockOptionMember2023-01-012023-03-310000355379us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310000355379us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-12-310000355379us-gaap:RestrictedStockUnitsRSUMember2023-03-310000355379us-gaap:RestrictedStockUnitsRSUMember2022-12-310000355379us-gaap:RestrictedStockUnitsRSUMember2022-06-142022-06-140000355379us-gaap:RestrictedStockUnitsRSUMember2021-06-012021-06-300000355379us-gaap:RestrictedStockMember2022-01-012022-03-310000355379us-gaap:RestrictedStockMember2020-01-012020-12-310000355379srt:MinimumMemberus-gaap:EmployeeStockOptionMember2023-01-012023-03-310000355379srt:MaximumMemberus-gaap:EmployeeStockOptionMember2023-01-012023-03-310000355379srt:MinimumMemberus-gaap:FurnitureAndFixturesMember2023-01-012023-03-310000355379srt:MaximumMemberus-gaap:FurnitureAndFixturesMember2023-01-012023-03-310000355379us-gaap:ComputerSoftwareIntangibleAssetMember2023-01-012023-03-310000355379us-gaap:FederalHomeLoanBankAdvancesMember2023-01-012023-03-310000355379mdwt:SenecaReProtectedCellMember2020-04-242020-04-240000355379mdwt:AmericanLifeMember2020-04-242020-04-240000355379mdwt:SenecaReProtectedCellFourMember2022-09-302022-09-300000355379mdwt:SenecaReinsuranceCompanyLlcMember2020-05-122020-05-120000355379mdwt:PFCollinwoodHoldingsLLCMember2023-03-310000355379mdwt:PFCollinwoodHoldingsLLCMember2022-12-310000355379us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2023-01-012023-03-310000355379us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-01-012022-12-310000355379mdwt:AsconaGroupHoldingsLtdMember2023-01-012023-03-310000355379mdwt:AsconaGroupHoldingsLtdMember2022-01-012022-03-310000355379mdwt:AmericanLifeAndSecurityCorporationMembermdwt:UnfundedCommitmentsMember2023-03-310000355379mdwt:SenecaIncorporateCellLlc202001Member2021-12-3100003553792016-12-310000355379srt:FitchBBBPlusRatingMembermdwt:ChelseaHoldingsMidwestLlcMemberus-gaap:SeriesBPreferredStockMember2023-03-310000355379srt:FitchBBBPlusRatingMembermdwt:ChelseaHoldingsMidwestLlcMember2023-03-310000355379us-gaap:MortgagesMember2023-01-012023-03-310000355379us-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379mdwt:OtherInvestedAssetMember2023-01-012023-03-310000355379mdwt:OtherInterestIncomeMember2023-01-012023-03-310000355379us-gaap:MortgagesMember2022-01-012022-03-310000355379us-gaap:FixedMaturitiesMember2022-01-012022-03-310000355379mdwt:OtherInvestedAssetMember2022-01-012022-03-310000355379mdwt:OtherInterestIncomeMember2022-01-012022-03-310000355379us-gaap:RetainedEarningsMember2023-01-012023-03-310000355379us-gaap:RetainedEarningsMember2022-01-012022-03-310000355379mdwt:MortgageLoansOnRealEstateTwoMember2023-01-012023-03-310000355379mdwt:MortgageLoansOnRealEstateOneMember2023-01-012023-03-310000355379mdwt:DebtToValueRatioUpto59.99PercentMember2023-03-310000355379mdwt:DebtToValueRatioFrom70To79.99PercentMember2023-03-310000355379mdwt:DebtToValueRatioFrom60To69.99PercentMember2023-03-310000355379mdwt:DebtToValueRatio80PercentOrGreaterMember2023-03-310000355379mdwt:DebtToValueRatioUpto59.99PercentMember2022-12-310000355379mdwt:DebtToValueRatioFrom70To79.99PercentMember2022-12-310000355379mdwt:DebtToValueRatioFrom60To69.99PercentMember2022-12-310000355379mdwt:DebtToValueRatio80PercentOrGreaterMember2022-12-310000355379mdwt:SenecaReProtectedCellMembermdwt:SecuritiesPurchaseAgreementMember2023-03-310000355379mdwt:AmericanLifeMembermdwt:PFCollinwoodHoldingsLLCMember2023-03-310000355379mdwt:OrixCorporationUsaMembermdwt:SenecaReProtectedCellMember2021-12-300000355379mdwt:SenecaReProtectedCellMembermdwt:SenecaReProtectedCellMember2021-11-100000355379us-gaap:NoncontrollingInterestMember2023-01-012023-03-310000355379us-gaap:NoncontrollingInterestMember2022-01-012022-03-310000355379mdwt:SenecaReProtectedCellMember2022-01-012022-12-310000355379us-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMember2022-11-220000355379us-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMember2023-03-310000355379us-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMember2022-12-310000355379srt:FitchBBBPlusRatingMember2023-03-310000355379srt:FitchBBBPlusRatingMembermdwt:ChelseaHoldingsMidwestLlcMember2022-06-290000355379mdwt:PythonAssetHoldingLlcMember2023-01-012023-03-310000355379mdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMember2023-01-012023-03-310000355379mdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMember2022-01-012022-03-310000355379mdwt:MortgageLoansOnRealEstateOneMember2023-03-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2023-03-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2022-12-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2021-12-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2023-01-012023-03-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2022-01-012022-12-310000355379us-gaap:PreferredStockMemberus-gaap:FairValueInputsLevel3Member2023-03-310000355379us-gaap:PolicyLoansMemberus-gaap:FairValueInputsLevel3Member2023-03-310000355379us-gaap:FixedMaturitiesMemberus-gaap:FairValueInputsLevel3Member2023-03-310000355379mdwt:OtherInvestedAssetMemberus-gaap:FairValueInputsLevel3Member2023-03-310000355379mdwt:MortgageLoansOnRealEstateHeldForInvestmentMemberus-gaap:FairValueInputsLevel3Member2023-03-310000355379mdwt:DepositsAndNotesReceivableMemberus-gaap:FairValueInputsLevel3Member2023-03-310000355379us-gaap:PreferredStockMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379us-gaap:PolicyLoansMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379us-gaap:FixedMaturitiesMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379mdwt:OtherInvestedAssetMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379mdwt:MortgageLoansOnRealEstateHeldForInvestmentMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379mdwt:DepositsAndNotesReceivableMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379us-gaap:PreferredStockMemberus-gaap:FairValueInputsLevel3Member2021-12-310000355379us-gaap:PolicyLoansMemberus-gaap:FairValueInputsLevel3Member2021-12-310000355379us-gaap:FixedMaturitiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000355379mdwt:OtherInvestedAssetMemberus-gaap:FairValueInputsLevel3Member2021-12-310000355379mdwt:MortgageLoansOnRealEstateHeldForInvestmentMemberus-gaap:FairValueInputsLevel3Member2021-12-310000355379mdwt:DepositsAndNotesReceivableMemberus-gaap:FairValueInputsLevel3Member2021-12-310000355379us-gaap:FairValueInputsLevel3Member2021-12-310000355379us-gaap:PolicyLoansMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310000355379mdwt:MortgageLoansOnRealEstateHeldForInvestmentMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310000355379mdwt:DepositsAndNotesReceivableMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310000355379us-gaap:PolicyLoansMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000355379mdwt:MortgageLoansOnRealEstateHeldForInvestmentMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000355379mdwt:DepositsAndNotesReceivableMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000355379us-gaap:PreferredStockMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310000355379us-gaap:FixedMaturitiesMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310000355379mdwt:OtherInvestedAssetMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310000355379us-gaap:PreferredStockMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000355379us-gaap:FixedMaturitiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000355379mdwt:OtherInvestedAssetMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000355379us-gaap:ExchangeTradedFundsMember2023-03-310000355379us-gaap:ExchangeTradedFundsMember2022-12-310000355379mdwt:AsconaGroupHoldingsLtdMember2022-12-310000355379mdwt:AsconaGroupHoldingsLtdMembermdwt:CrestlineAssuranceHoldingsLlcMember2023-03-310000355379mdwt:AsconaGroupHoldingsLtdMembermdwt:AmericanLifeMember2023-03-310000355379mdwt:SenecaReProtectedCellThreeMember2021-11-300000355379srt:MaximumMembermdwt:BaseMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputLapseRateMember2023-03-310000355379srt:MaximumMembermdwt:AdditionalShockRateMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputLapseRateMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2023-03-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputOptionVolatilityMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputLapseRateMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputOptionVolatilityMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputLapseRateMember2023-03-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputOptionVolatilityMember2023-03-310000355379srt:MaximumMembermdwt:BaseMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputLapseRateMember2022-12-310000355379srt:MaximumMembermdwt:AdditionalShockRateMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputLapseRateMember2022-12-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2022-12-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2022-12-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputOptionVolatilityMember2022-12-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputLapseRateMember2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputOptionVolatilityMember2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputLapseRateMember2022-12-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputOptionVolatilityMember2022-12-310000355379mdwt:SenecaReProtectedCellMembermdwt:FundsWithHeldProvisionAgreementMember2023-01-012023-03-310000355379mdwt:IronboundMembermdwt:FundsWithHeldProvisionAgreementMember2023-01-012023-03-310000355379mdwt:CrestlineReSp1Membermdwt:FundsWithHeldProvisionAgreementMember2023-01-012023-03-310000355379mdwt:AscendentReMembermdwt:FundsWithHeldProvisionAgreementMember2023-01-012023-03-310000355379mdwt:AmericanRepublicInsuranceCompanyMembermdwt:FundsWithHeldProvisionAgreementMember2023-01-012023-03-310000355379mdwt:SenecaReProtectedCellMembermdwt:FundsWithHeldProvisionAgreementMember2022-01-012022-12-310000355379mdwt:IronboundMembermdwt:FundsWithHeldProvisionAgreementMember2022-01-012022-12-310000355379mdwt:CrestlineReSp1Membermdwt:FundsWithHeldProvisionAgreementMember2022-01-012022-12-310000355379mdwt:AscendentReMembermdwt:FundsWithHeldProvisionAgreementMember2022-01-012022-12-310000355379mdwt:AmericanRepublicInsuranceCompanyMembermdwt:FundsWithHeldProvisionAgreementMember2022-01-012022-12-310000355379us-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379us-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2023-03-310000355379us-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379us-gaap:FairValueInputsLevel3Membermdwt:PreferredEquityMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379us-gaap:FairValueInputsLevel3Membermdwt:InterestSensitiveContractLiabilitiesMemberus-gaap:MeasurementInputDefaultRateMember2022-12-310000355379us-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379mdwt:SenecaReAgreementMember2023-01-012023-03-310000355379us-gaap:StockOptionMemberus-gaap:NondesignatedMember2023-03-310000355379us-gaap:EmbeddedDerivativeFinancialInstrumentsMemberus-gaap:NondesignatedMember2023-03-310000355379us-gaap:StockOptionMemberus-gaap:NondesignatedMember2022-12-310000355379us-gaap:EmbeddedDerivativeFinancialInstrumentsMemberus-gaap:NondesignatedMember2022-12-310000355379srt:MaximumMember2022-01-012022-03-310000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2023-01-012023-01-010000355379us-gaap:CollateralizedDebtObligationsMember2023-01-012023-03-310000355379us-gaap:AssetBackedSecuritiesMember2023-01-012023-03-310000355379mdwt:TermLoansMember2023-01-012023-03-310000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:MortgageBackedSecuritiesMember2022-12-310000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CollateralizedDebtObligationsMember2022-12-310000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AssetBackedSecuritiesMember2022-12-310000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMembermdwt:TermLoansMember2022-12-310000355379us-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMember2022-11-222022-11-220000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379srt:MinimumMemberus-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-11-222022-11-220000355379srt:MinimumMemberus-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMemberus-gaap:BaseRateMember2022-11-222022-11-220000355379srt:MaximumMemberus-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-11-222022-11-220000355379srt:MaximumMemberus-gaap:RevolvingCreditFacilityMembermdwt:SecuredRevolvingCreditAgreementWithRoyalBankOfCanadaAndOtherLendersMemberus-gaap:BaseRateMember2022-11-222022-11-220000355379stpr:NYmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310000355379stpr:NJmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310000355379stpr:FLmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310000355379stpr:DEmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310000355379country:NZmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310000355379stpr:NYmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-12-310000355379stpr:FLmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-12-310000355379stpr:DEmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-12-310000355379stpr:CAmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-12-310000355379stpr:AZmdwt:MortgageLoansSecuredByPropertyMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-12-310000355379mdwt:VotingCommonSharesMember2023-03-310000355379mdwt:NonVotingCommonSharesMember2023-03-310000355379mdwt:VotingCommonSharesMember2022-12-310000355379mdwt:NonVotingCommonSharesMember2022-12-3100003553792022-03-3100003553792021-12-310000355379us-gaap:EstimateOfFairValueFairValueDisclosureMember2023-03-310000355379us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-310000355379mdwt:SenecaReinsuranceCompanyLlcMember2020-05-120000355379us-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:FitchBBBRatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-03-310000355379srt:FitchARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-03-310000355379srt:FitchAARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-03-310000355379mdwt:FitchBbRatingAndOtherMemberus-gaap:ExternalCreditRatingNonInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-03-310000355379mdwt:FitchAaaRatingAndUSGovernmentMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-03-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:FixedMaturitiesMember2023-03-310000355379us-gaap:FairValueInputsLevel3Membermdwt:TermLoansMember2023-03-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMember2023-03-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:MortgageBackedSecuritiesMember2023-03-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:FixedMaturitiesMember2023-03-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2023-03-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:CollateralizedDebtObligationsMember2023-03-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:AssetBackedSecuritiesMember2023-03-310000355379us-gaap:FairValueInputsLevel2Membermdwt:StatesAndPoliticalSubdivisionsGeneralObligationsMember2023-03-310000355379us-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-03-310000355379us-gaap:FairValueInputsLevel3Membermdwt:TermLoansMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310000355379srt:FitchBBBRatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-12-310000355379srt:FitchARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-12-310000355379srt:FitchAARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-12-310000355379mdwt:FitchBbRatingAndOtherMemberus-gaap:ExternalCreditRatingNonInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-12-310000355379mdwt:FitchAaaRatingAndUSGovernmentMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-12-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:FixedMaturitiesMember2022-12-310000355379us-gaap:FairValueInputsLevel3Membermdwt:TermLoansMember2022-12-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMember2022-12-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:MortgageBackedSecuritiesMember2022-12-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:FixedMaturitiesMember2022-12-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2022-12-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:CollateralizedDebtObligationsMember2022-12-310000355379us-gaap:FairValueInputsLevel2Memberus-gaap:AssetBackedSecuritiesMember2022-12-310000355379us-gaap:FairValueInputsLevel2Membermdwt:StatesAndPoliticalSubdivisionsSpecialRevenueMember2022-12-310000355379us-gaap:FairValueInputsLevel2Membermdwt:StatesAndPoliticalSubdivisionsGeneralObligationsMember2022-12-310000355379us-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-12-310000355379us-gaap:USTreasuryAndGovernmentMember2023-03-310000355379mdwt:StatesAndPoliticalSubdivisionsGeneralObligationsMember2023-03-310000355379us-gaap:USTreasuryAndGovernmentMember2022-12-310000355379mdwt:StatesAndPoliticalSubdivisionsSpecialRevenueMember2022-12-310000355379mdwt:StatesAndPoliticalSubdivisionsGeneralObligationsMember2022-12-310000355379us-gaap:MortgageBackedSecuritiesMember2023-03-310000355379us-gaap:FixedMaturitiesMember2023-03-310000355379us-gaap:CorporateDebtSecuritiesMember2023-03-310000355379us-gaap:CollateralizedDebtObligationsMember2023-03-310000355379us-gaap:AssetBackedSecuritiesMember2023-03-310000355379mdwt:TermLoansMember2023-03-310000355379us-gaap:MortgageBackedSecuritiesMember2022-12-310000355379us-gaap:FixedMaturitiesMember2022-12-310000355379us-gaap:CorporateDebtSecuritiesMember2022-12-310000355379us-gaap:CollateralizedDebtObligationsMember2022-12-310000355379us-gaap:AssetBackedSecuritiesMember2022-12-310000355379mdwt:TermLoansMember2022-12-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Member2022-12-310000355379us-gaap:FederalHomeLoanBankAdvancesMember2023-03-310000355379mdwt:FhlbSecondFundingAgreementsMaturedOnJanuary222025Member2023-03-310000355379mdwt:FhlbFundingAgreementsMaturedOnSeptember152027Member2023-03-310000355379mdwt:FhlbFundingAgreementsMaturedOnSeptember12027Member2023-03-310000355379mdwt:FhlbFundingAgreementsMaturedOnOctober12027Member2023-03-310000355379mdwt:FhlbFundingAgreementsMaturedOnMarch12024Member2023-03-310000355379mdwt:FhlbFundingAgreementsMaturedOnJanuary222025Member2023-03-310000355379mdwt:FhlbFundingAgreementsMaturedOnAugust162025Member2023-03-310000355379us-gaap:FederalHomeLoanBankAdvancesMember2022-12-310000355379us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310000355379mdwt:LongTermIncentivePlan2019Member2023-01-012023-03-310000355379us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310000355379mdwt:LongTermIncentivePlan2020Member2022-01-012022-03-310000355379mdwt:AsconaGroupHoldingsLtdMember2023-03-310000355379mdwt:AsconaGroupHoldingsLtdMember2022-03-310000355379mdwt:TPAMember2023-03-310000355379mdwt:SenecaReProtectedCellThreeMember2023-01-012023-03-310000355379mdwt:AmericanLifeAndSecurityCorporationMember2023-01-012023-03-310000355379mdwt:SenecaReProtectedCellThreeMember2022-01-012022-03-310000355379mdwt:AmericanLifeAndSecurityCorporationMember2022-01-012022-03-310000355379mdwt:LongTermIncentivePlansMember2022-01-012022-12-310000355379srt:MinimumMember2023-01-012023-03-310000355379srt:MaximumMember2023-01-012023-03-310000355379srt:MinimumMember2022-12-310000355379srt:MaximumMember2022-12-310000355379mdwt:LongTermIncentivePlansMember2023-01-012023-03-310000355379us-gaap:MortgageBackedSecuritiesMember2023-01-012023-03-310000355379mdwt:SagicorLifeInsuranceCompanyMember2023-03-310000355379mdwt:OptimumReinsuranceCompanyMember2023-03-310000355379mdwt:SagicorLifeInsuranceCompanyMember2022-12-310000355379mdwt:OptimumReinsuranceCompanyMember2022-12-310000355379mdwt:SenecaReAgreementMember2020-04-242020-04-240000355379mdwt:CrestlineReSp1Member2023-01-012023-03-310000355379mdwt:CrestlineReSp1Member2023-03-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379us-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2023-03-310000355379srt:WeightedAverageMemberus-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379srt:MinimumMemberus-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379srt:MaximumMemberus-gaap:FairValueInputsLevel3Membermdwt:DetachableWarrantsMemberus-gaap:MeasurementInputEbitdaMultipleMember2022-12-310000355379us-gaap:FairValueInputsLevel3Member2023-01-012023-03-310000355379us-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000355379mdwt:MidasMergerAcquisitionSubInc.Memberus-gaap:SubsequentEventMember2023-04-302023-04-300000355379mdwt:USAllianceLifeAndSecurityCompanyMembermdwt:MultiYearGuaranteedAnnuityBusinessMembermdwt:UsAllianceAgreementMember2023-01-012023-03-310000355379mdwt:AmericanLifeMembermdwt:MultiYearGuaranteedAnnuityBusinessMembermdwt:FundsWithheldCoinsuranceAndModifiedCoinsuranceAgreementMember2023-01-012023-03-310000355379mdwt:SenecaReProtectedCellMembermdwt:MultiYearGuaranteedAnnuityBusinessProductThreeMembermdwt:SenecaReAgreementMember2022-09-302022-09-300000355379mdwt:SenecaReProtectedCellFourMembermdwt:MultiYearGuaranteedAnnuityBusinessProductFiveMembermdwt:SenecaReAgreementMember2022-09-302022-09-300000355379mdwt:AmericanLifeAndSecurityNationalLifeInsuranceMembermdwt:MultiYearGuaranteedAnnuityBusinessMembermdwt:UsAllianceAgreementMember2021-06-262021-06-260000355379mdwt:AmericanLifeMembermdwt:FixedIndexedAnnuityBusinessMembermdwt:FundsWithheldCoinsuranceAndModifiedCoinsuranceAgreementMember2023-01-012023-03-310000355379mdwt:AmericanLifeAndSecurityNationalLifeInsuranceMembermdwt:FixedIndexedAnnuityBusinessMembermdwt:UsAllianceAgreementMember2023-01-012023-03-310000355379mdwt:AmericanLifeAndSecurityNationalLifeInsuranceMembermdwt:FixedIndexedAnnuityBusinessMembermdwt:UsAllianceAgreementMember2021-06-262021-06-260000355379mdwt:AmericanLifeAndSecurityNationalLifeInsuranceMember2023-02-282023-02-280000355379mdwt:UkLimitedMembermdwt:AmericanLifeMember2022-06-292022-06-290000355379mdwt:SenecaReProtectedCellFourMembermdwt:MultiYearGuaranteedAnnuityBusinessProductThreeMembermdwt:SenecaReAgreementMember2023-01-012023-03-310000355379mdwt:SenecaReProtectedCellFourMembermdwt:MultiYearGuaranteedAnnuityBusinessProductFiveMembermdwt:SenecaReAgreementMember2023-01-012023-03-310000355379mdwt:MultiYearGuaranteedAnnuityMembermdwt:SenecaReProtectedCellThreeMember2021-11-102021-11-100000355379mdwt:FixedIndexAnnuityMembermdwt:SenecaReProtectedCellThreeMember2021-11-102021-11-100000355379mdwt:CrestlineAssuranceHoldingsLlcMembermdwt:MultiYearGuaranteedAnnuityMembermdwt:MasterLetterAgreementMember2020-04-242020-04-240000355379mdwt:CrestlineAssuranceHoldingsLlcMembermdwt:FixedIndexAnnuityMembermdwt:MasterLetterAgreementMember2020-04-242020-04-240000355379mdwt:MultiYearGuaranteedAnnuityBusinessMembermdwt:SenecaReAgreementMember2020-04-242020-04-240000355379mdwt:FixedIndexedAnnuityBusinessMembermdwt:SenecaReAgreementMember2020-04-242020-04-240000355379srt:FitchBBBRatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379srt:FitchARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379srt:FitchAARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379mdwt:FitchBbRatingAndOtherMemberus-gaap:ExternalCreditRatingNonInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379mdwt:FitchAaaRatingAndUSGovernmentMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379us-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379us-gaap:FixedMaturitiesMember2023-01-012023-03-310000355379srt:FitchBBBRatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-01-012022-12-310000355379srt:FitchARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-01-012022-12-310000355379srt:FitchAARatingMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-01-012022-12-310000355379mdwt:FitchBbRatingAndOtherMemberus-gaap:ExternalCreditRatingNonInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-01-012022-12-310000355379mdwt:FitchAaaRatingAndUSGovernmentMemberus-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-01-012022-12-310000355379us-gaap:ExternalCreditRatingInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-01-012022-12-310000355379us-gaap:FixedMaturitiesMember2022-01-012022-12-310000355379srt:MaximumMember2023-03-310000355379us-gaap:FederalHomeLoanBankAdvancesMember2022-01-012022-12-310000355379mdwt:InvestmentManagerMember2023-03-310000355379mdwt:PythonAssetHoldingLlcMember2022-02-020000355379Reinsurance [Member]2022-12-310000355379mdwt:UnfundedCommitmentsMember2022-12-310000355379mdwt:FixedIndexAnnuityMembermdwt:SenecaReProtectedCellThreeMember2022-12-310000355379mdwt:MultiYearGuaranteedAnnuityMember2023-01-012023-03-310000355379mdwt:FixedIndexAnnuityMember2023-01-012023-03-310000355379mdwt:AmericanLifeAndSecurityCorporationMember2023-03-310000355379mdwt:MidasMergerAcquisitionSubInc.Memberus-gaap:SubsequentEventMember2023-04-300000355379mdwt:OrixCorporationUsaMembermdwt:SecuritiesPurchaseAgreementMember2023-01-012023-03-310000355379mdwt:OrixCorporationUsaMembermdwt:SenecaReProtectedCellMember2021-12-302021-12-300000355379us-gaap:FairValueInputsLevel3Membermdwt:MeasurementInputPrincipalFundedMember2023-03-310000355379us-gaap:FairValueInputsLevel3Membermdwt:MeasurementInputPrincipalFundedMember2022-12-310000355379us-gaap:MortgageBackedSecuritiesOtherMember2023-03-310000355379us-gaap:CommercialMortgageBackedSecuritiesMember2023-03-310000355379mdwt:RetailMortgageLoansMember2023-03-310000355379mdwt:OneToFourFamilyMortgageBackedSecuritiesMember2023-03-310000355379mdwt:LandMortgageBackedSecuritiesMember2023-03-310000355379mdwt:HospitalityMortgageBackedSecuritiesMember2023-03-310000355379us-gaap:MortgageBackedSecuritiesOtherMember2022-12-310000355379us-gaap:CommercialMortgageBackedSecuritiesMember2022-12-310000355379mdwt:RetailMortgageLoansMember2022-12-310000355379mdwt:OneToFourFamilyMortgageBackedSecuritiesMember2022-12-310000355379mdwt:LandMortgageBackedSecuritiesMember2022-12-310000355379mdwt:HospitalityMortgageBackedSecuritiesMember2022-12-310000355379srt:MinimumMember2023-03-310000355379us-gaap:CarryingReportedAmountFairValueDisclosureMember2023-03-310000355379us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-310000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2023-01-010000355379srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-310000355379mdwt:FundsWithHeldProvisionAgreementMember2023-01-012023-03-310000355379mdwt:FundsWithHeldProvisionAgreementMember2022-01-012022-12-310000355379mdwt:SenecaReProtectedCellMembermdwt:FundsWithHeldProvisionAgreementMember2023-03-310000355379mdwt:IronboundMembermdwt:FundsWithHeldProvisionAgreementMember2023-03-310000355379mdwt:CrestlineReSp1Membermdwt:FundsWithHeldProvisionAgreementMember2023-03-310000355379mdwt:AscendentReMembermdwt:FundsWithHeldProvisionAgreementMember2023-03-310000355379mdwt:AmericanRepublicInsuranceCompanyMembermdwt:FundsWithHeldProvisionAgreementMember2023-03-310000355379mdwt:FundsWithHeldProvisionAgreementMember2023-03-310000355379mdwt:SenecaReProtectedCellMembermdwt:FundsWithHeldProvisionAgreementMember2022-12-310000355379mdwt:IronboundMembermdwt:FundsWithHeldProvisionAgreementMember2022-12-310000355379mdwt:CrestlineReSp1Membermdwt:FundsWithHeldProvisionAgreementMember2022-12-310000355379mdwt:AscendentReMembermdwt:FundsWithHeldProvisionAgreementMember2022-12-310000355379mdwt:AmericanRepublicInsuranceCompanyMembermdwt:FundsWithHeldProvisionAgreementMember2022-12-310000355379mdwt:FundsWithHeldProvisionAgreementMember2022-12-310000355379mdwt:USAllianceLifeAndSecurityCompanyMember2022-01-012022-03-310000355379mdwt:UnifiedLifeInsuranceCompanyMember2022-01-012022-03-310000355379mdwt:IronboundReinsuranceCompanyLimitedMember2022-01-012022-03-310000355379mdwt:AscendantReMember2022-01-012022-03-310000355379mdwt:IronboundMember2023-01-012023-03-310000355379mdwt:IronboundMember2022-01-012022-12-310000355379us-gaap:FairValueInputsLevel3Member2023-03-310000355379us-gaap:FairValueInputsLevel2Member2023-03-310000355379us-gaap:FairValueInputsLevel3Member2022-12-310000355379us-gaap:FairValueInputsLevel2Member2022-12-310000355379mdwt:UsAllianceLifeAndSecurityCompanyOneMember2023-03-310000355379mdwt:USAllianceLifeAndSecurityCompanyMember2023-03-310000355379mdwt:UnifiedLifeInsuranceCompanyMember2023-03-310000355379mdwt:SenecaReProtectedCellFourMember2023-03-310000355379mdwt:IronboundReinsuranceCompanyLimitedMember2023-03-310000355379mdwt:CrestlineReSp1Member2023-03-310000355379Reinsurance [Member]2023-03-310000355379mdwt:AscendantReMember2023-03-310000355379mdwt:AmericanRepublicInsuranceCompanyMember2023-03-310000355379mdwt:UsAllianceLifeAndSecurityCompanyOneMember2022-12-310000355379mdwt:USAllianceLifeAndSecurityCompanyMember2022-12-310000355379mdwt:UnifiedLifeInsuranceCompanyMember2022-12-310000355379mdwt:SenecaReProtectedCellFourMember2022-12-310000355379mdwt:IronboundReinsuranceCompanyLimitedMember2022-12-310000355379mdwt:CrestlineReSp1Member2022-12-310000355379mdwt:AscendantReMember2022-12-310000355379mdwt:AmericanRepublicInsuranceCompanyMember2022-12-310000355379mdwt:UnfundedCommitmentsMember2023-03-310000355379mdwt:CrestlineReSp1Member2022-01-012022-03-310000355379mdwt:AmericanRepublicInsuranceCompanyMember2022-01-012022-03-3100003553792022-01-012022-12-310000355379mdwt:SenecaReProtectedCellFourMember2022-09-3000003553792022-01-012022-03-310000355379mdwt:USAllianceLifeAndSecurityCompanyMember2023-01-012023-03-310000355379mdwt:UnifiedLifeInsuranceCompanyMember2023-01-012023-03-310000355379mdwt:SenecaReProtectedCellFourMember2023-01-012023-03-310000355379mdwt:SagicorLifeInsuranceCompanyMember2023-01-012023-03-310000355379mdwt:OptimumReinsuranceCompanyMember2023-01-012023-03-310000355379mdwt:IronboundReinsuranceCompanyLimitedMember2023-01-012023-03-310000355379mdwt:CrestlineReSp1Member2023-01-012023-03-310000355379mdwt:AscendantReMember2023-01-012023-03-310000355379mdwt:AmericanRepublicInsuranceCompanyMember2023-01-012023-03-310000355379mdwt:USAllianceLifeAndSecurityCompanyMember2022-01-012022-12-310000355379mdwt:UnifiedLifeInsuranceCompanyMember2022-01-012022-12-310000355379mdwt:SenecaReProtectedCellFourMember2022-01-012022-12-310000355379mdwt:SagicorLifeInsuranceCompanyMember2022-01-012022-12-310000355379mdwt:OptimumReinsuranceCompanyMember2022-01-012022-12-310000355379mdwt:IronboundReinsuranceCompanyLimitedMember2022-01-012022-12-310000355379mdwt:CrestlineReSp1Member2022-01-012022-12-310000355379mdwt:AscendantReMember2022-01-012022-12-310000355379mdwt:AmericanRepublicInsuranceCompanyMember2022-01-012022-12-310000355379Retained [Member]2023-03-3100003553792023-03-310000355379Retained [Member]2022-12-3100003553792022-12-310000355379mdwt:CrestlineAssuranceHoldingsLlcMember2023-03-3100003553792023-05-1500003553792023-01-012023-03-31xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesmdwt:productmdwt:itemmdwt:securitymdwt:contractmdwt:segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2023
or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-39812

Midwest Holding Inc.

(Exact name of registrant as specified in its charter)


Delaware		20-0362426
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

2900 S. 70^th Street, Suite 400, Lincoln, NE		68506
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (402) 817-5701

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:Trading Symbol(s):Name of Each Exchange on Which Registered

Voting Common Stock, $0.001 par valueMDWTThe NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405c of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or reviewed financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the shares of the registrant’s common stock held by non-affiliates as of the last day of the registrant’s most recently completed second fiscal quarter was $44.4 million calculated by reference to the average of the bid and ask price of such voting common stock on June 30, 2022.

As of May 15, 2023, there were 3,728,601 shares of voting common stock, par value $0.001 per share, issued and outstanding.

Table of Contents

MIDWEST HOLDING INC.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION



Item No.	Item Caption	Page
Item 1.	Financial Statements	3

	Consolidated Balance Sheets	3

	Consolidated Statements of Comprehensive Income (Loss)	4

	Consolidated Statements of Stockholders’ Equity	5

	Consolidated Statements of Cash Flows	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61

Item 4.	Controls and Procedures	61

PART II – OTHER INFORMATION



Item No.	Item Caption	Page
Item 1.	Legal Proceedings	61

Item 1A.	Risk Factors	61

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 3.	Defaults Upon Senior Securities	61

Item 4.	Mine Safety Disclosures	61

Item 5.	Other Information	61

Item 6.	Exhibits	61

	Signatures	43

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Midwest Holding Inc. and Subsidiaries

Consolidated Balance Sheets

March 31, 2023 and December 31, 2022


	March 31, 2023		December 31, 2022
(In thousands, except share information)	(Unaudited)
Assets
Fixed maturities, available for sale, at fair value (amortized cost: $1,417,548 in 2023, and $1,269,735 in 2022. Allowance for credit losses of $10,314 in 2023.) (See Note 2)	$	1,343,668	$	1,214,635
Mortgage loans on real estate, held for investment (Allowance for credit losses of $2,709 in 2023.)		333,466		227,047
Derivative instruments (See Note 3)		23,814		15,934
Equity securities, at fair value (cost: $5,592 in 2023 and $5,592 in 2022)		5,178		5,111
Other invested assets (Allowance for credit losses of $1,173 in 2023.)		83,580		112,431
Preferred stock		32,714		31,415
Deposits and notes receivable		10,447		8,359
Policy loans		23		25
Total investments		1,832,890		1,614,957
Cash and cash equivalents		170,073		191,414
Deferred acquisition costs, net		48,150		43,433
Premiums receivable		368		362
Accrued investment income		31,590		25,165
Reinsurance recoverables (See Note 7)		55,202		20,190
Property and equipment, net		1,805		1,897
Receivable for securities sold		-		10,518
Other assets		4,397		12,495
Total assets	$	2,144,475	$	1,920,431
Liabilities and Stockholders’ Equity
Liabilities:
Benefit reserves	$	12,739	$	12,945
Deposit-type contracts (See Note 5)		1,963,786		1,743,348
Other policy-holder funds		9,267		4,105
Notes payable (See Note 6)		25,000		25,000
Deferred gain on coinsurance transactions		39,952		38,063
Payable for securities purchased		22,677		8,872
Other liabilities		46,204		53,721
Total liabilities		2,119,625		1,886,054
Stockholders’ Equity:
Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and outstanding as of March 31, 2023 or December 31, 2022		—		—
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,728,601 shares issued and outstanding as of March 31, 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 March 31, 2023 and December 31, 2022, respectively		4		4
Additional paid-in capital		138,789		138,482
Treasury stock		(175)		(175)
Accumulated deficit		(63,863)		(63,019)
Accumulated other comprehensive (loss)		(61,928)		(51,386)
Total Midwest Holding Inc.'s stockholders' equity		12,827		23,906
Noncontrolling interests		12,023		10,471
Total stockholders' equity		24,850		34,377
Total liabilities and stockholders' equity	$	2,144,475	$	1,920,431

See Notes to Consolidated Financial Statements.

Midwest Holding Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

Three Months Ended March 31, 2023 and 2022

(Unaudited)


	Three months ended March 31,
(In thousands, except per share data)	2023		2022
Revenues
Investment income, net of expenses	$	19,193	$	6,242
Net realized gain (loss) on investments (See Note 2)		16,287		(6,175)
Amortization of deferred gain on reinsurance transactions		1,573		970
Policy administration fees		639		348
Service fee revenue, net of expenses		654		1,098
Other revenue		106		100
Total revenue		38,452		2,583
Expenses
Interest credited		7,689		(6,674)
Benefits		958		-
Amortization of deferred acquisition costs		1,703		851
Salaries and benefits		5,503		4,318
Other operating expenses		13,912		(1,822)
Total expenses		29,765		(3,327)
Net income before income tax expense		8,687		5,910
Income tax expense (See Note 8)		(2,907)		(4,722)
Net income after income tax expense		5,780		1,188
Less: Income attributable to noncontrolling interest		1,951		1,001
Net income attributable to Midwest Holding Inc.		3,829		187
Comprehensive loss:
Unrealized losses on investments arising during the three months ended March 31, 2023 and 2022, net of offsets, (tax ($10,300) and ($2,600), respectively)		(10,552)		(9,703)
Less: Reclassification adjustment for net realized losses on investments, net of offsets (net of tax ($2,700) and ($136), respectively)		10		(512)
Other comprehensive loss		(10,542)		(10,215)
Comprehensive loss:	$	(6,713)	$	(10,028)


Income per common share
Basic	$	1.03	$	0.05
Diluted	$	1.01	$	0.05

See Notes to Consolidated Financial Statements.

Midwest Holding Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2023 and 2022

(Unaudited)


	Three months ended March 31, 2023 and 2022
					Additional
	Treasury		Common		Paid-In		Accumulated				Noncontrolling		Total
(In thousands)	Stock		Stock		Capital		Deficit		AOCI*		Interest		Equity
Balance at December 31, 2021	$	(175)	$	4	$	138,452	$	(70,159)	$	2,634	$	15,000	$	85,756
Net income		-		-		-		187		-		-		187
Employee stock options		-		-		31		-		-		-		31
Unrealized losses on investments, net of taxes		-		-		-		-		(10,215)		-		(10,215)
Noncontrolling interest		-		-		-		-		-		3,432		3,432
Balance, March 31, 2022	$	(175)	$	4	$	138,483	$	(69,972)	$	(7,581)	$	18,432	$	79,191

Balance at December 31, 2022	$	(175)	$	4	$	138,482	$	(63,019)	$	(51,386)	$	10,471	$	34,377
Net income		-		-		-		3,829		-		-		3,829
Employee stock options		-		-		307		-		-		-		307
Unrealized losses on investments, net of taxes		-		-		-		-		(10,542)		-		(10,542)
Cumulative effect of change in accounting estimate		-		-		-		(4,673)		-		-		(4,673)
Noncontrolling interest		-		-		-		-		-		1,552		1,552
Balance, March 31, 2023	$	(175)	$	4	$	138,789	$	(63,863)	$	(61,928)	$	12,023	$	24,850

* Accumulated other comprehensive income (loss)

See Notes to Consolidated Financial Statements.

Midwest Holding Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2023 and 2022

(Unaudited)


	Three months ended March 31,
(In thousands)	2023		2022
Cash Flows from Operating Activities:
Income attributable to Midwest Holding Inc.	$	3,829	$	187
Adjustments to arrive at cash provided by operating activities:
Net premium and discount on investments		9,253		(639)
Depreciation and amortization		95		11
Stock options		307		32
Amortization of deferred acquisition costs		4,788		851
Deferred acquisition costs capitalized		(9,912)		(4,464)
Net realized (loss) gain on investments		(16,287)		6,175
Deferred gain on coinsurance transactions		1,889		1,460
Changes in operating assets and liabilities:
Reinsurance recoverable		(27,809)		5,316
Interest and dividends due and accrued		(6,425)		418
Premiums receivable		(6)		(10)
Deposit-type liabilities		56,963		(16,151)
Policy liabilities		4,955		897
Receivable and payable for securities		24,323		11,702
Other assets and liabilities		437		4,522
Net cash provided by operating activities		46,400		10,307
Cash Flows from Investing Activities:
Fixed maturities available for sale:
Purchases		(193,329)		(226,416)
Proceeds from sale or maturity		50,382		140,758
Mortgage loans on real estate, held for investment
Purchases		(131,820)		(19,699)
Proceeds from sale		22,108		30,835
Derivatives
Purchases		(3,716)		(4,691)
Proceeds from sale		4,197		1,388
Equity securities
Purchases		(68)		-
Proceeds from sale		-		142
Other invested assets
Purchases		-		(23,768)
Proceeds from sale		22,202		3,334
Purchase of restricted common stock		(1,425)		-
Preferred stock
Purchases		(1,299)		(1,549)
Net change in policy loans		2		(3)
Net purchases of property and equipment		-		(195)
Net cash used in investing activities		(232,766)		(99,864)
Cash Flows from Financing Activities:
Net transfer to noncontrolling interest		1,552		3,432
Receipts on deposit-type contracts		194,551		98,111
Withdrawals on deposit-type contracts		(31,078)		(9,315)
Net cash provided by financing activities		165,025		92,228
Net (decrease) increase in cash and cash equivalents		(21,341)		2,671
Cash and cash equivalents:
Beginning		191,414		142,013
Ending	$	170,073	$	144,684

Supplementary information
Cash paid for taxes	$	-	$	250

See Notes to Consolidated Financial Statements.

MIDWEST HOLDING INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 24 states and the District of Columbia as of March 31, 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 Certification of Authority to transact the business of a captive insurance company. On May 12, 2020, Midwest contributed $0.3 million to Seneca Re for a 100% ownership interest. On April 15, 2020, Midwest entered into an operating agreement with Seneca Re and as of March 31, 2023, Seneca Re has three incorporated cells, Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Re Incorporated Cell 2021-03 (“SRC3”), which are consolidated in our financial statements. Additionally, Seneca Re Incorporated Cell 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”), a significant shareholder of Midwest via a Crestline subsidiary, Crestline Re SPC1. The Reinsurance Agreement, which was effective as of April 24, 2020, was entered into pursuant to a Master Letter Agreement (the “Master Agreement”) dated and effective as of April 24, 2020, among American Life, Seneca Re and Crestline. The Reinsurance Agreement supports American Life’s new business production by providing reinsurance capacity for American Life to write certain kinds of fixed and multi-year guaranteed annuity products. Concurrently with the Reinsurance Agreement:

●

American Life and SRC2 each entered into investment management agreements with Crestline, pursuant to which Crestline manages the assets that support the reinsured business; and

●

American Life and SRC2 entered into a trust agreement whereby SRC2 maintains for American Life’s benefit a trust account that supports the reinsured business.

Under the Master Agreement, Crestline agreed to provide reinsurance funding for a quota share percentage of 25% of the liabilities of American Life arising from its multi-year guaranteed annuities (“MYGA”) and a quota share percentage of 40% of the liabilities of American Life arising from its fixed indexed annuity (“FIA”) products. The Master Agreement expires on April 24, 2023.

In addition, pursuant to the Master Agreement, the parties thereto have agreed to enter into one or more separate agreements whereby, among other things and subject to certain conditions, American Life will agree to reinsure additional new business production to one or more reinsurers formed and/or capitalized by Crestline, Midwest or an appropriate affiliate will be compensated for providing administrative services to certain advisory clients of Crestline, and American Life will consider investing in certain assets originated or sourced by Crestline.

On June 26, 2021, the Nebraska Department of Insurance (‘NDOI”) issued its non-disapproval of the Modified Coinsurance Agreement (“Modco AEG Agreement”) of American Life with American Republic Insurance Company (“AEG”), an Iowa domiciled reinsurance company. The agreement closed on June 30, 2021. Under the Modco AEG Agreement, American Life cedes to AEG, on a modified coinsurance basis, 20% quota share of certain liabilities with respect to its MYGA-5 business and an initial 20% quota share of certain liabilities with respect to its FIA products. American Life has established a Modco Deposit Account to hold the assets for the Modco

AEG Agreement. Effective February 28, 2023, AEG elected not to extend its commitment period for reinsuring liabilities under its Modco AEG Agreement. As a result, AEG’s current quota share with respect to MYGA and FIA policies is 0%. The AEG Coinsurance Agreement remains in place, and AEG remains responsible for previously ceded liabilities.

In November 2021, Midwest purchased 100% ownership of an intermediary holding company which immediately purchased 100% of SRC3 Class A and B capital stock. Also, on November 10, 2021, American Life and SRC3 entered into a Funds Withheld and Modified Coinsurance Agreement, whereby, SRC3 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA products and quota share percentage of 45% of the liabilities of American Life arising from its FIA products. In the fourth quarter of 2022, the agreement with SRC3 was amended to provide a one time reinsurance funding for a quota share of $10.0 million of the liabilities of American Life arising from its FIA products.

On September 30, 2022, American Life entered into a reinsurance agreement (the “Reinsurance Agreement”) with a new protected cell formed by Seneca Re (Seneca Incorporated Cell, LLC 2022-04 (“SRC4”)). SRC4 was capitalized by loans from Embrace Software, Inc (“Embrace”) and Tillman Networks LLC (“Tillman”). The Reinsurance Agreement was effective as of July 1, 2022, among American Life and Seneca Re. The Reinsurance Agreement supports American Life’s new business production by providing reinsurance capacity for American Life to write certain kinds of fixed indexed and multi-year guaranteed annuity products. Under the Reinsurance Agreement, SRC4 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA-5 products and a quota share percentage of 10% of the liabilities of American Life arising from its MYGA-3 products. American Life has established a Modco Deposit Account, a Funds Withheld custody account, and a Trust Account pursuant to the Reinsurance Agreement. The initial settlement included net premium of $21.4 million and net reserves of $21.5 million for the modified coinsurance account.

Also on September 30, 2022, American Life entered into an Investment Management Agreement (“IMA”) with CoVenture Management, LLC (“CoVenture”) naming CoVenture as the manager of certain assets held by American Life on behalf of SRC4.

Management evaluates the Company as one reporting segment in the life insurance industry. The Company is primarily engaged in the underwriting and marketing of annuity products through American Life, and then reinsuring such products with third-party reinsurers, and since May 13, 2020, with Seneca Re protected cells. American Life’s legacy product offerings consisted of a multi-benefit life insurance policy that combined cash value life insurance with a tax deferred annuity and a single premium term life product. American Life presently offers six annuity products: two MYGAs, two FIAs, and two bonus plans associated with the FIA product. It is not presently offering any traditional life insurance products.

Basis of Presentation

These consolidated financial statements for the three months ended March 31, 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. For fixed maturities, the difference between amortized cost, net of credit loss allowance, (amortized cost, net) and fair value is reported as a component of accumulated other comprehensive income (“AOCI”) on the consolidated balance sheet and is not reflected in the operating results of any period until reclassified to net income upon consummation of a transaction with an unrelated third party or when a credit loss allowance is recorded. The Company has a comprehensive portfolio monitoring process to evaluateall our fixed maturities 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, financial condition of the insurer, 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 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 a FW agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurers to reduce the potential credit risk. The unrealized gains/losses on those investments are passed through to the third-party reinsurers as either a realized gain or loss on the Consolidated Statements of Comprehensive Loss.

Mortgage Loans on Real Estate

Mortgage loans on real estate, held for investment are carried at unpaid principal balances, 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 March 31, 2023, the Company held one asset valued at $7.7 million with a total 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.

Derivative Instruments

Derivatives are used to hedge the risks experienced in our ongoing operations, such as equity, interest rate and cash flow risks, or for other risk management purposes, which primarily involve managing liability risks associated with our indexed annuity products and reinsurance agreements. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or other underlying notional amounts. Derivative assets and liabilities are carried at fair value on the consolidated balance sheets.

To qualify for hedge accounting, at the inception of the hedging relationship, the Company must formally document our designation of the hedge as a cash flow or fair value hedge and our risk management objective and strategy for undertaking the hedging transaction. In this documentation, we would identify how the hedging instrument is expected to hedge the designated risks related to the hedged item, the method that would be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method which would be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness would be formally assessed at inception and periodically throughout the life of the designated hedging relationship.

During the last quarter of 2020, the Company began investing in futures to hedge the fluctuations in various aspects of our business. The formal documentation and hedge effectiveness was not completed at the date we entered into those futures contracts; therefore, they do not qualify for hedge accounting. The futures change in fair market values were recorded on our Consolidated Statements of Comprehensive Loss as realized gains or (losses).

Additionally, reinsurance agreements written on a FW or Modco basis contain embedded derivatives on our annuity products. Gains or (losses) associated with the performance of assets maintained in the modified coinsurance deposit and funds withheld accounts are reflected as realized (losses) or gains in the Consolidated Statements of Comprehensive Loss.

Equity Securities

Equity securities at March 31, 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 March 31, 2023, we held $5.2 million of ETFs and $5.1 million of ETFs as of December 31, 2022.

Preferred Stock

The company holds investments in preferred stock of $32.7 million as of March 31, 2023. 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”) aquiring preferred equity and warrants, and later created a special purpose vehicle, Ascona Asset Holding LLC (“AAH”), to hold the preferred equity and warrants, and later created Ascona Collinwood HoldCo LLC (“ACH”) to be the sole member of AAH. American Life and Crestline Re SP1 own 74% and 26%, respectively, of ACH. American Life is carrying the preferred equity and warrants at a market value in USD of $11.3 million as of March 31, 2023 and $10.5 million of December 31, 2022. For the three months ended March 31, 2023, $2.3 million of investment income related to ACH was recognized, and $0.6 million was attributed to the noncontrolling interest held by Crestline Re SP1. For the three months ended March 31, 2022, $1.7 million of investment income was recognized, and $0.4 million was attributed to Crestline Re SP1.

Other Invested Assets

Other invested assets consists of approximately $83.6 million of various investments. Of this total, approximately $73.3 million are primarily collateral loans, and $11.5 million of private credit and equipment leases. The collateral loanes, private credit and equipment leases are carried at fair market value, net of allowance for expectd 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 March 31, 2023, was $13.7 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 March 31, 2023, our investment in Python was carried at the net asset value (“NAV”) plus approximately $0.4 million of investment income.

Deposits and notes receivable

Investment escrow

The Company held in escrow $1.4 million and $0.8 million as of March 31, 2023 and December 31, 2022, respectively. The cash held at year end was used to purchased mortgages in April 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 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 March 31, 2023, the Company had pledged assets with a market value of $145.7 million to FHLB to allow a borrowing capacity of $131.1 million and $121.1 million pledged as of December 31, 2022. As of March 31, 2023 we had $60.0 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 $6.3 million and $6.3 million as of March 31, 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 15 – Related Party – Chelsea for details regarding this note.

Policy Loans

Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value.

Cash and Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents.

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)	March 31, 2023		December 31, 2022
Beginning balance	$	43,433	$	24,530
Additions		7,200		23,857
Amortization		(1,703)		(3,905)
Interest		(374)		(883)
Impact of unrealized investment losses		(406)		(166)
Ending Balance	$	48,150	$	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 first quarter of 2023 and determined that all DAC balances were recoverable as of March 31, 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 consistent at $0.4 million and $0.4 million in 2023 and 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 to seven years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $0.3 million and $0.3 million for three months ended March 31, 2023 and 2022, respectively. The accumulated depreciation net of disposals totaled $1.4 million and $1.1 million as of March 31, 2023 and December 31, 2022, respectively.

Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. 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 7 below for further discussion of our reinsurance activities.

There are two main categories of reinsurance transactions: 1) “indemnity,” where we cede a portion of our risk but retain the legal responsibility to our policyholders should our reinsurers not meet their financial obligations; and 2) “assumption,” where we transfer the risk and legal responsibilities to the reinsurers. The reinsurers are required to acquire the appropriate regulatory and policyholder approvals to convert indemnity policies to assumption policies.

Our reinsurers may be domestic or foreign capital markets investors or traditional reinsurance companies seeking to assume U.S. insurance business. We plan to mitigate the credit risk relating to reinsurers generally by requiring other financial commitments from the reinsurers to secure the reinsured risks (such as posting substantial collateral). It should be noted that under indemnity reinsurance agreements American Life remains exposed to the credit risk of its reinsurers. If one or more reinsurers become insolvent or are otherwise unable or unwilling to pay claims under the terms of the applicable reinsurance agreement, American Life retains legal responsibility to pay policyholder claims, which in such event would likely materially and adversely affect the capital and surplus of American Life.

Midwest formed Seneca Re in early 2020, followed by Seneca Incorporated Cell, LLC 2020-01 (“SRC1”) and Seneca Incorporated Cell, LLC 2021-03 (“SRC3”) which are consolidated in these financial statements. Midwest sold 70% ownership of SRC1 to an ORIX Corporation USA subsidiary on December 30, 2021, and retained 30% ownership. Midwest maintains control over SRC1 and we continue to consolidate SRC1, in these financial statements. Additionally, Seneca Re has established Seneca Incorporated Cell, LLC 2022-04; however, management has determined that Midwest does not control the entity and thus it is not consolidated into these financial statements. American Life entered into a novation agreement with SRC2 and Crestline Re SPC, for and on behalf of Crestline Re SP1, under which the above-described reinsurance, trust and related asset management agreements were novated and replaced with substantially similar agreements entered into by American Life and Crestline Re SP1.

Some reinsurers are not and may not be “accredited” or qualified as reinsurers under Nebraska law and regulations. In order to enter into reinsurance agreements with such reinsurers and to reduce potential credit risk, American Life holds a deposit or withholds funds

from the reinsurer or requires the reinsurer to maintain a trust that holds assets backing up the reinsurer’s obligation to pay claims on the business it assumes. The reinsurer may also appoint an investment manager for such funds, which in some cases may be our investment adviser subsidiary, 1505 Capital, to manage these assets pursuant to guidelines adopted by us that are consistent with Nebraska investment statutes and reinsurance regulations.

American Life currently has treaties with several third-party reinsurers and one related party reinsurer. In a Modco agreement, the ceding entity retains the assets equal to the modified coinsurance reserves retained. In a FW agreement, assets that would normally be paid over to a reinsurer are withheld by the ceding company to permit statutory credit for unauthorized reinsurers, to reduce the potential credit risk. Under those provisions with third-party reinsurers, the assets backing the treaties are maintained by American Life as investments but the assets and total returns or losses on the investments are owned by the reinsurers. Under GAAP, this arrangement is considered an embedded derivative as discussed in Comprehensive Loss and Note 4 below.

Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained cumulative unrealized gains and (losses) as of March 31, 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 Income and in amounts recoverable from third-party reinsurers on the Consolidated Balance Sheets. For further discussion see Note 4 below.

Benefit Reserves

The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables.

Policy Claims

Policy claims are based on reported claims plus estimated incurred but not reported claims developed from trends of historical data applied to current exposure.

Deposit-type Contracts

Deposit-type contracts consist of amounts on deposit associated with deferred annuity riders, premium deposit funds and supplemental contracts without life contingencies.

Deposit-type contracts also include balances outstanding under funding agreements with the Federal Home Loan Bank of Topeka (“FHLB”). The funding agreements are carried at cost. Amounts received and repaid under FHLB funding agreements are classified as financing activities in the Company's Consolidated Statements of Cash Flows.

In 2021, the Company became a member of FHLB, which provides access to collateralized borrowings and other FHLB products. Any borrowing from FHLB requires the purchase of FHLB activity-based common stock in an amount equal to 4.5% of the borrowing. In 2022, the Board authorized a maximum amount equal to 5% of net aggregate admitted retained assets of American Life for FHLB advances and funding agreements combined. In 2023 and 2022, American Life received advances of $31.0 million and $60.0 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 $60.0 million as of March 31, 2023, and $29.0 million as of December 31, 2022. Interest on the funding agreements accrues at their effective interest rates.

As of March 31, 2023, scheduled maturity dates for outstanding FHLB funding agreements were as follows:


(Dollar amounts in thousands)	Interest
Maturity Date	Rate		Amount
March 1, 2024		5.10%	$	16,000
January 22, 2025		5.47%		13,000
January 22, 2025		5.17%		2,000
August 16, 2025		5.48%		8,000
September 1, 2027		5.40%		4,000
September 15, 2027		5.20%		8,000
October 1, 2027		5.41%		9,000
			$	60,000

Note Payable

On November 22, 2022, the Company entered into a three-year senior secured revolving credit agreement (“Credit Agreement”) with Royal Bank of Canada and other lenders with a capacity of $30.0 million (the “Revolving Credit Facility”). The maturity date of the Credit Agreement is November 22, 2025. The obligations under the Credit Agreement are secured by a first priority lien on a variety of our assets. The balance of the revolving credit was $25.0 million at March 31, 2023, and December 31, 2022, with $5.0 million unutilized credit.

Deferred Gain on Coinsurance Transactions

American Life entered 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

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

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 realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense.

Comprehensive Loss

Comprehensive Loss is comprised of net income (loss) and other comprehensive loss. Other comprehensive loss includes unrealized gains and losses from fixed maturities classified as available for sale and unrealized gains and losses from other invested assets, 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 7 below.

Earnings Per Share

Basic income per share for the three months ended March 31, 2023 and 2022 was $1.03 and $0.05 respectively, which includes a gain of $7.2 million and loss of $2.8 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 3,728,601 voting common shares issued and outstanding as of March 31, 2023 and 3,727,976 as of December 31, 2022.


	Three months ended March 31,
	2023		2022
(In thousands, except per share amounts)
Numerator:
Net income attributable to Midwest Holding Inc.	$	3,829	$	187

Denominator:
Weighted average common shares outstanding		3,728,594		3,737,564
Effect of dilutive securities:
Stock options and deferred compensation agreements		80,000		—
Denominator for earnings (loss) per common share		3,808,594		3,737,564

Income (loss) per common share	$	1.03	$	0.05

Income (loss) per common share, diluted	$	1.01	$	0.05

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. Additionally, the Company recognized an incremental change in the allowance for expected credit losses of $0.2 million in the current period, to bring the retained allowance to approximately $4.5 million. The Company will apply the provisions of the guidance to investments that have 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.

Note 2. 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 March 31, 2023 and December 31, 2022:


			Allowance		Gross		Gross
	Amortized		for Credit		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Losses		Gains		Losses		Fair Value
March 31, 2023:
Fixed maturities:
Bonds:
U.S. government obligations	$	1,215	$	-	$	-	$	(58)	$	1,157
Mortgage-backed securities		383,960		(3,592)		569		(29,080)		351,857
Asset-backed securities		40,743		(245)		58		(3,653)		36,903
Collateralized loan obligations		349,151		(610)		798		(23,706)		325,633
States and political subdivisions-general obligations		129		-		-		(2)		127
States and political subdivisions-special revenue		-		-		-		-		-
Corporate		49,403		-		304		(4,520)		45,187
Term loans		592,947		(5,867)		2,199		(6,475)		582,804
Total fixed maturities	$	1,417,548	$	(10,314)	$	3,928	$	(67,494)	$	1,343,668
Mortgage loans on real estate, held for investment		336,175		(2,709)		-		-		333,466
Derivatives		31,665		-		5,257		(13,108)		23,814
Equity securities		5,592		-		-		(414)		5,178
Other invested assets		82,004		(1,173)		3,026		(277)		83,580
Preferred stock		36,798		-		2,070		(6,154)		32,714
Deposits and notes receivable		10,447		-		-		-		10,447
Policy loans		23		-		-		-		23
Total investments	$	1,920,252	$	(14,196)	$	14,281	$	(87,447)	$	1,832,890

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 March 31, 2023:


(In Thousands)		Balance December 31, 2022	Additional Allowance Recognized Due to Adoption of Accounting Guidance		Credit Loss Expense for the Current Period		Balance March 31, 2023

Fixed Maturities
Bonds:
Mortgage-backed securities	$	-	$	3,564	$	28	$	3,592
Asset-backed securities		-		273		(28)		245
Collateralized loan obligations		-		588		22		610
Term loans		-		8,518		(2,651)		5,867
Mortgage loans on real estate, held for investment		-		2,024		685		2,709
Other invested asset		-		1,703		(530)		1,173
Total Allowance	$	-	$	16,670	$	(2,474)	$	14,196

The following table shows the distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of March 31, 2023 and December 31, 2022.


	March 31, 2023				December 31, 2022
	Carrying				Carrying
(In thousands)	Value		Percent		Value		Percent
AAA and U.S. Government	$	153,851	11.5	%	$	124,183	10.2	%
AA		15,699	1.2			815	0.1
A		424,789	31.6			371,371	30.6
BBB		667,491	49.7			619,516	51.0
Total investment grade		1,261,830	94.0			1,115,885	91.9
BB and below		81,838	6.0			98,750	8.1
Total	$	1,343,668	100.0	%	$	1,214,635	100.0	%

Reflecting the quality of fixed maturities maintained by us, as of March 31, 2023 and December 31, 2022, 94.0% 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 March 31, 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.


	March 31, 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	$	197	$	(3)		1	$	1,135	$	(70)		13
Mortgage-backed securities		251,760		(13,127)		100		233,624		(18,464)		89
Asset-backed securities		17,842		(2,014)		11		24,552		(3,278)		23
Collateralized loan obligations		187,146		(10,812)		162		203,549		(16,730)		252
States and political subdivisions-general obligations		127		(2)		2		101		(3)		1
States and political subdivisions-special revenue		-		-		-		47		(2)		3
Corporate		30,511		(1,638)		33		37,286		(5,426)		64
Term loans		588,624		(6,475)		-		558,337		(4,607)		36
Greater than 12 months:
U.S. government obligations		960		(55)		8		126		(11)		5
Asset-backed securities		15,941		(1,639)		19		5,321		(711)		7
Collateralized loan obligations		95,673		(12,894)		157		37,814		(5,194)		47
States and political subdivisions-special revenue		-		-		-		158		(21)		7
Mortgage-backed securities		67,003		(15,953)		47		17,985		(4,044)		14
Corporate		10,906		(2,882)		33		376		(89)		7
Total fixed maturities	$	1,266,690	$	(67,494)		573	$	1,120,411	$	(58,650)		568

(1)We may reflect a fixed maturity in more than one aging category based on various purchase dates.

Our securities positions resulted in a gross unrealized loss position as of March 31, 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 March 31, 2023, which are driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility, as temporary. As of March 31, 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 March 31, 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 7 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 March 31, 2023, the Company owned several leases, all of which were performing. No impairment was required as of March 31, 2023.

The amortized cost and estimated fair value of fixed maturities as of March 31, 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	$	89,688	$	87,010
Due after one year through five years		728,295		706,224
Due after five years through ten years		513,865		473,994
Due after ten years through twenty years		54,106		51,108
Due after twenty years		31,594		25,332
	$	1,417,548	$	1,343,668

The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At March 31, 2023 and December 31, 2022, these required deposits had a total amortized cost of $1.5 million and $1.2 million, respectively, and fair values of $1.3 million and $1 million, respectively.

Mortgage loans consist of the following:


(In thousands)	March 31, 2023			December 31, 2022

1-4 Family	$	59,767	$	59,579
Hospitality		22,071		12,902
Land		101,621		62,119
Multifamily (5+)		43,138		34,072
Retail		89,721		22,119
Other		19,857		36,256
Allowance for credit loss		(2,709)		-
Total mortgage loans	$	333,466	$	227,047

Geographic Location:

As of March 31, 2023, the commercial mortgages loans were secured by properties geographically dispersed (with the largest concentrations in loans secured by properties in New York (20%), New Jersey (17%), Florida (10%), New Zealand (9%), and Delaware (8%)). 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 March 31, 2023, the Company held one asset valued at $7.7 million with an impairment of $1.4 million. As of March 31, 2023, the Company held one asset valued at $7.7 million with a total 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)	March 31, 2023		December 31, 2022
Loan-to-Value Ratio:
0%-59.99%	$	202,472	$	108,281
60%-69.99%		77,868		79,968
70%-79.99%		47,874		33,268
80% or greater		5,252		5,530
Total mortgage loans	$	333,466	$	227,047

The components of net investment income for the three months ended March 31, 2023 and 2022 are as follows:


	Three months ended March 31,
(In thousands)	2023		2022
Fixed maturities	$	31,430	$	12,664
Mortgage loans		7,360		2,420
Other invested assets		2,792		1,395
Other interest income		8,030		5,544
Gross investment income		49,612		22,023
Less: investment expenses		(5,896)		(2,212)
Less: amounts charged to reinsurers		(26,997)		(13,569)
Less: allowance for credit losses		2,474
Investment income, net of expenses	$	19,193	$	6,242

Proceeds for the three months ended March 31, 2023 and 2022 from sales of investments classified as available-for-sale were $2.2 million, and $93.5 million, respectively. Gross gains of less than $0.1 million and $0.1 million and gross losses of $1.5 million and $0.5 million were realized on sales and the realized losses on sales during the three months ended March 31, 2023 and 2022, respectively.

The proceeds included those assets associated with the third-party reinsurers. The gains and losses relate only to the assets retained by American Life. Unrealized gain/loss included as part of net investment income were gains of $19.2 million and $6.2 million for the the three months ended March 31, 2023 and 2022.

Note 3. Derivative Instruments

The Company enters into derivative instruments to manage risk, primarily equity, interest rate, credit, foreign currency and market volatility. Some of these derivative instruments are to hedge fixed indexed annuity products that guarantee the return of principal to the policyholders and credit interest based on a percentage of the gain in a specified market index. To hedge against adverse changes in equity indices, the Company entered into contracts to buy equity indexed options.

The following is a summary of the asset derivatives not designated as hedges embedded derivatives in our FIA product as of March 31, 2023 and December 31, 2022:


		March 31, 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	$	870,515	622	$	23,814	$	831,657	595	$	15,592
Equity-indexed embedded derivatives	Deposit-type contracts		811,940	6,444		124,915		782,997	6,131		111,618

At March 31, 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 March 31, 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 March 31, 2023 were $17.7 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:


	March 31, 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	$	172,166	$	164,423	$	7,743	$	150,413	$	143,952	$	6,461
Crestline Re SP1		404,318		401,030		3,288		354,806		356,374		(1,568)
Ironbound		164,951		159,509		5,442		159,644		154,477		5,167
Ascendent Re		56,942		55,243		1,699		56,064		54,790		1,274
SRC4		97,830		98,336		(506)		61,646		62,516		(870)
Total	$	896,207	$	878,541	$	17,666	$	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 $17.7 million as of March 31, 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 $7.2 million and a gain in the embedded derivative of $2.8 million for the three months ended March 31, 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.

Note 4. Fair Values of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

●

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

●

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

●

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the period in which the reclassifications occur.

A description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Level 1 measurements

Cash equivalents: Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. These are included within cash equivalents as Level 1 measurements in the table below.

Level 2 measurements

Fixed maturity securities: Fixed maturity securities are recorded at fair value on a recurring basis utilizing a third-party pricing source such as the Clearwater Automated Valuation Service (“AVS”) Securities Valuation Office (“SVO”) pricing. The valuations are reviewed and validated quarterly through random testing by comparisons to separate pricing models or other third-party pricing services. For the three months ended March 31, 2023 and year ended December 31, 2022, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.

Derivatives: Derivatives are reported at fair market value utilizing a third-party pricing source such as the Standard & Poor’s (“S&P”) 500 index and the S&P Multi-Asset Risk Control (“MARC”) 5% index.

Equity securities: Equity securities at March 31, 2023 consist of exchange traded funds (“ETFs”). The ETFs are considered equity securities and recorded at fair value on a recurring basis utilizing a third-party pricing source with the change in fair value recorded through realized gains and losses on the statement of operations. As of March 31, 2023 we had purchased $5.2 million of ETFs and $5.1 million as of December 31, 2022.

Preferred stock: The Company’s preferred stock investments classified as Level 2 were valued at $9.4 million as of March 31, 2023, and $9.5 million as of December 31, 2022. This investment is carried at fair market value with the change in fair market value is recorded in net investment income on the Consolidated Statements of Comprehensive Loss.

Deposits and notes receivable: The Company had escrow funds of as of March 31, 2023 and December 31, 2022, of $1.4 million and $0.8 million, respectively. These escrow funds were used to settle mortgage loans that did not close until April and January 2023. The money held in escrow at March 31, 2023 and December 31, 2022 was carried at cost. The Company held in notes receivable as of March 31, 2023 and December 31, 2022, a note of $6.3 million and $6.3 million, respectively, that includes paid-in-kind (“PIK”) interest. The note receivable is between American Life and Chelsea Holdings Midwest LLC with an interest rate of 5% per annum that was rated BBB+ by a nationally recognized statistical rating organization (“NRSRO”). This note is being carried at cost plus PIK interest.

Level 3 measurements

Term Loans – The assets classified as term loans are carried at unpaid principal net of amortization of discount or accretion, which ap-proximates fair value or carried at fair market value based on a valuation using market standard valuation methodologies. The inputs used to measure the fair value of these assets are classified as Level 3 within the fair value hierarchy.

Mortgage Loans – Mortgage loans are generally stated at principal amounts outstanding, net of deferred expenses and allowance for loan loss. Interest on loans is recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Loan origination fees and direct costs, as well as premiums and discounts, are amortized as level yield adjustments over the respective loan terms. Unamortized net fees or costs are recognized upon early repayment of the loans. Loan commitment fees are generally deferred and amortized on an effective yield basis over the term of the loan. Impaired loans are generally carried on a non-accrual status. Loans are ordinarily placed on non-accrual status when, in management’s opinion, the collection of principal or interest is unlikely, or when the collection of principal or interest is 90 days or more past due. As of March 31, 2023, the Company held one asset valued at $7.7 million with a total 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.

Other Invested Assets – Other invested assets include collateral loans, private credit investments, equipment leases, and a private fund investment. The collateral loans, private credit investments, and equipment leases are carried at amortized cost which approximates fair value. The private fund investment is carried at fair value based on market accepted valuation models. The inputs used to measure these assets are classified as Level 3 within the fair value hierarchy.

Deposits and notes receivable: The carrying value of FHLB stock approximates fair value based on market accepted valuation models, since the Company can redeem such 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.

Preferred Stock – The Company’s preferred stock investment classified as Level 3 was valued at $23.3 million as of March 31, 2023 and $21.9 million as of December 31, 2022. This investment is carried at fair market value. The change in fair market value is recorded in net investment income on the Consolidated Statements of Comprehensive Loss.

Policy loans: Policy loans are stated at unpaid principal balances. As these loans are fully collateralized by the cash surrender value of the underlying insurance policies, the carrying value of the policy loans approximates their fair value.

Deposit-type contracts: The fair value for direct and assumed liabilities under deposit-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and nonperformance risk of the liabilities. The fair values for insurance contracts other than deposit-type contracts are not required to be disclosed.

Embedded derivative for equity-indexed contracts: The Company has embedded derivatives in its FIA policyholder obligations. These embedded derivatives are carried at the fair market value as of March 31, 2023 and December 31, 2022. The fair value of the embedded derivative component of our FIA obligation is estimated at each valuation date by projecting policy contract values and minimum guaranteed contract values over the expected lives of the contracts and discounting the excess of projected contract value amounts at the applicable risk-free interest rates adjusted for our nonperformance risk related to those obligations. The projections of FIA policy contract values are based on best estimate assumptions for future policy growth and decrements including lapse, partial withdrawal and mortality rates. The best estimate assumptions for future policy growth include assumptions for expected index credits on the next policy anniversary date which are derived from fair values of the underlying equity call options purchased to fund such index credits and the present value of expected costs of annual call options purchased in the future by us to fund index credits beyond the next policy anniversary. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as assumptions used to project policy contract values.

The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of March 31, 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
March 31, 2023
Financial assets
Fixed maturity securities:
Bonds
U.S. government obligations	$	-	$	1,157	$	-	$	-	$	1,157
Mortgage-backed securities		-		351,857		-		-		351,857
Asset-backed securities		-		36,903		-		-		36,903
Collateralized loan obligations		-		325,633		-		-		325,633
States and political subdivisions-general obligations		-		127		-		-		127
States and political subdivisions-special revenue		-		-		-		-		-
Corporate		-		45,187		-		-		45,187
Term loans		-		-		582,804		-		582,804
Total fixed maturity securities		-		760,864		582,804		-		1,343,668
Mortgage loans on real estate, held for investment		-		-		333,466		-		333,466
Derivatives		-		23,814		-		-		23,814
Equity securities		-		5,178		-		-		5,178
Other invested assets		-		-		69,881		13,699		83,580
Preferred stock		-		9,376		23,338		-		32,714
Deposits and notes receivable		-		7,716		2,731		-		10,447
Policy loans		-		-		23		-		23
Total investments	$	-	$	806,948	$	1,012,243	$	13,699	$	1,832,890
Financial liabilities
Embedded derivative for equity-indexed contracts	$	—	$	—	$	124,915	$	—		124,915

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
Investment escrow		—		784		—		—		784
Federal Home Loan Bank stock		—		—		1,306		—		1,306
Notes receivable		—		6,269		—		—		6,269
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

MIDWEST HOLDING INC. 10-Q