Note 4. Assets and Liabilities Held for Sale

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

After the closing of the Reinsurance Agreement, Unified began the process of preparing and delivering certificates of assumption and other materials to policyholders of American Life in order to effect an assumption of the Policies by Unified such that all of American Life’s rights and obligations under the policies arising on and after July 1, 2018 would be completely assumed by Unified without further indemnification or other obligations, except for liabilities, claims and obligations incurred before July 1, 2018. Unified is obligated to indemnify American Life against all liabilities and claims and all of its policy obligations from and after the July 1, 2018.

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

The Ceding Commission is being amortized on a straight-line basis over the life of the policies. When the policies are converted to assumptive, meaning American Life has no liability exposure for those policies, the remaining Ceding Commission will be recognized in our income statement.

As of September 30, 2019, 73% of the indemnity policies were converted to assumptive policies thereby releasing American Life from its legal obligations related to those policies.

Our balance sheet was required to be restated for all periods shown with the assets and liabilities which were ceded by American Life to Unified into separate line items as assets and liabilities held for sale. The table below summarizes the assets and liabilities that are included in discontinued operations as of September 30, 2019 and as of December 31, 2018:


	As of September 30,		As of December 31,
	2019		2018
Carrying amounts of major classes of assets included as part of discontinued operations:
Policy loans	$	79,057	$	366,849
Reinsurance recoverables		7,986,308		20,359,326
Premiums receivable		52,690		210,896
Total assets held for sale in the Consolidated Balance Sheet	$	8,118,055	$	20,937,071

Carrying amounts of major classes of liabilities included as part of discontinued operations:
Benefit reserves	$	2,956,701	$	9,799,834
Policy claims		133,203		127,666
Deposit-type contracts		5,004,273		11,050,139
Advance premiums		10,076		21,699
Accounts payable and accrued expenses		12,072		53,395
Total liabilities held for sale in the Consolidated Balance Sheet	$	8,116,325	$	21,052,733

Our income statement was also required to be restated for all periods shown breaking out the net income between continuing operations and discontinued operations. There were no items in 2019 that were reclassified as discontinued operations, therefore, the table below summarizes only the losses that are included in discontinued operations for the three and nine months ended September 30, 2018:


	Three months ended September 30,		Nine months ended September 30,
	2018		2018
Major line items constituting pretax loss of discontinued operations:
Premiums	$	440,891	$	1,375,419
Death and other benefits		(74,538)		(485,651)
Interest credited		(106,728)		(311,847)
Increase in benefit reserves		(164,724)		(234,246)
Amortization of deferred acquisition costs		(58,822)		(261,735)
Other operating expenses		(25,585)		(97,436)
Loss on discontinued operations	$	10,494	$	(15,496)