Note 3. 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.

As of March 31, 2020, 81% of the indemnity policies were converted to assumptive policies thereby releasing American Life from its legal obligations related to those policies.

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.

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 March 31, 2020 and as of December 31, 2019:


	As of March 31,		As of December 31,
	2020		2019
Carrying amounts of major classes of assets included as part of discontinued operations:
Policy loans	$	45,491	$	50,387
Reinsurance recoverables		2,430,884		3,569,849
Premiums receivable		50,001		33,512
Total assets held for sale in the Consolidated Balance Sheet	$	2,526,376	$	3,653,748

Carrying amounts of major classes of liabilities included as part of discontinued operations:
Benefit reserves	$	1,021,284	$	1,403,953
Policy claims		35,431		28,203
Deposit-type contracts		1,457,536		2,209,195
Advance premiums		2,327		2,226
Accounts payable and accrued expenses		3,620		3,290
Total liabilities held for sale in the Consolidated Balance Sheets	$	2,520,198	$	3,646,867