Note 3. Assets and Liabilities Held for Sale

On November 30, 2018, American Life entered into an Assumption and Indemnity Reinsurance Agreement (“Agreement”) with Unified Life Insurance Company (“Unified”), a Texas domiciled stock insurance company. The Agreement provides that American Life ceded and the Unified agreed to reinsure, on an indemnity reinsurance basis, 100% of the liabilities and obligations under substantially all of American Life’s life, annuity and health policies (“Policies”). The Agreement closed on December 10, 2018, as previously disclosed in Midwest’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on December 12, 2018. The effective date of the Agreement was July 1, 2018.

As soon as possible following Closing, Unified will prepare and deliver a certificate of assumption and other materials to policy holders of American Life in order to effect an assumption of the Policies by Unified such that all of American Life’s rights and obligations under the Policies arising on and after July 1, 2018 are completely assumed by Unified without further indemnification or other obligations of American Life, except for liabilities, claims and obligations incurred before July 1, 2018. Unified is obligated to indemnify American Life against all liabilities and claims and all of its Policy obligations from and after the July 1, 2018.

American Life provided administrative services with respect to the Policies during a transaction period that ended on February 1, 2019, at which time Unified will assume all administrative functions with respect to the Policies.

The consideration paid by Unified to American Life under the Agreement upon Closing was $3,500,000 (“Ceding Commission”), subject to minor settlement adjustments. At Closing, American Life transferred the Statutory Reserves and Liabilities, as defined in the Agreement, directly related to the Policies, to Unified.

The Ceding Commission will be amortized on a straight-line basis over the life of the Policies. When the Policies are converted to assumptive, the remaining Ceding Commission will be released into the income statement.

The balance sheet was required to be restated for all periods shown with the assets and liabilities which were ceded by American Life to Unified into separate line items as assets and liabilities held for sale. The table below summarizes the assets and liabilities that are included in discontinued operations for the years ended December 31, 2018 and 2017:

	Year Ended December 31,
	2018		2017
Carrying amounts of major classes of assets included as part of discontinued operations
Policy loans	$	366,849	$	348,705
Amounts recoverable from reinsurers		20,359,326		108,368
Premium recoverable		210,896		263,223
Deferred acquisition costs, net		-		2,045,808
Value of business acquired, net		-		427,454
Other assets		-		9,825
Total assets on the disposal group classified as held for sale in the Consolidated Balance Sheet	$	20,937,071	$	3,203,383

Carrying amounts of major classes of liabilities included as part of discontinued operations
Benefit reserves	$	9,799,834	$	9,490,810
Policy claims		127,666		151,422
Deposit-type contracts		11,050,139		10,106,758
Advance premiums		21,699		36,429
Accounts payable and accrued expenses		53,395		51,828
Total liabilities on the disposal group classified as held for sale in the Consolidated Balance Sheet	$	21,052,733	$	19,837,247

The income statement was also required to be restated for all periods shown breaking out the net income between continuing operations and discontinued operations. The table below summarizes the losses/gains that are included in discontinued operations for the years ended December 31, 2018 and 2017:

	Year Ended December 31,
	2018			2017
Major line items constituting pretax (loss) profit of discontinued operations
Premiums	$	933,980		$	2,060,172
Miscellaneous income		-			10,555
Death and other benefits		(421,448	)		(694,375	)
Interest credited		(192,008	)		(395,362	)
Increase in benefit reserves		(41,790	)		(424,692	)
Amortization of deferred acquisition costs		(202,913	)		(384,589	)
Other operating expenses		(104,105	)		(22,067	)
(Loss) gain on discontinued operations	$	(28,284	)	$	149,642