A summary of significant reinsurance, including our 100% legacy life business reinsured, amounts affecting the accompanying consolidated financial statements as of June 30, 2022, and December 31, 2021, respectively, are as follows:

The table below is a summary of our 100% legacy life business reinsured for the three and six months ended June 30, 2022 and 2021:

The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third-party reinsurers as of June 30, 2022:

The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by reinsurer as of December 31, 2021:

Our securities positions resulted in changes in the unrealized gains position as of June 30, 2022, compared to December 31, 2021, that is reported in accumulated other comprehensive income on the Consolidated Balance Sheets. As discussed in Note 1, American Life has treaties with several third-party reinsurers that have FW and Modco provisions. Under those provisions, the assets backing the treaties are maintained by American Life as collateral but the assets and total returns or losses on the asset portfolios belong to the third-party reinsurers. Under GAAP this arrangement is considered an embedded derivative as discussed in Note 5. Assets carried as investments on American Life’s financial statements for the third-party reinsurers contained unrealized losses of approximately $2.9 million as of June 30, 2022, and unrealized gains of $0.2 million as of December 31, 2021, 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 gains on the assets held by American Life were offset by gains in the embedded derivative of $3.1 million and a loss in the embedded derivative of $0.4 million as of June 30, 2022, and 2021, respectively. We account for this unrealized gain (loss) pass-through by recording an equivalent realized gain or (loss) on our Consolidated Statements of Comprehensive Loss and in amounts payable to our third-party reinsurers on the Consolidated Balance Sheets.

On June 26, 2021, the NDOI issued its non-disapproval of the Modified Coinsurance Agreement (“Modco AEG Agreement”) with American Republic Insurance Company (“AEG”), an Iowa domiciled reinsurance company. The agreement 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 multi-year guaranteed annuity MYGA-5 business and an initial 20% quota share of certain liabilities with respect to its fixed indexed annuity FIA. American Life has established a Modco Deposit Account to hold the assets for the Modco Agreement. The initial settlement included net premium income of $37.5 million and net statutory reserves of $34.8 million for the modified coinsurance account. The amount paid to the Modified coinsurance deposit account from AEG was $2.4 million.

On November 10, 2021, the NDOI issued its non-disapproval of the Funds Withheld and Modified Coinsurance Agreement with SRC3, whereby, SRC3 agreed to provide reinsurance funding for a quota share percentage of 45% of the liabilities of American Life arising from its MYGA products and a quota share percentage of 45% of American Life’s FIA products. American Life has established a FW and Modco Deposit Account to hold the assets for the FW and Modco Agreement. The initial settlement included net premium income of $37.5 million and net statutory reserves of $43.6 million.

Under GAAP, ceding commissions are deferred on the Consolidated Balance Sheets and are amortized over the period of the policyholder contracts. The tables below show the ceding commissions from the reinsurers excluding SRC1 and what was earned on a GAAP basis for the three and six months ended June 30, 2022 and 2021:

(1) Includes acquisition and administrative expenses, commission expense allowance and product development fees.

The table below shows the ceding commissions deferred on each reinsurance transaction on a GAAP basis:

The use of reinsurance does not relieve American Life of its primary liability to pay the full amount of the insurance benefit in the event of the failure of a reinsurer to honor its contractual obligation for all blocks of business except what is included in the Unified transaction. The reinsurance agreement with Unified discharges American Life’s responsibilities once all the policies have changed from indemnity to assumptive reinsurance. No reinsurer of business ceded by American Life has failed to pay policy claims (individually or in the aggregate) with respect to our ceded business.

American Life monitors several factors that it considers relevant to satisfy itself as to the ongoing ability of a reinsurer to meet all obligations of the reinsurance agreements. These factors include the credit rating of the reinsurer, the financial strength of the reinsurer, significant changes or events of the reinsurer, and any other relevant factors. If American Life believes that any reinsurer would not be able to satisfy its obligations with American Life, separate contingency reserves may be established. As of June 30, 2022, and December 31, 2022, no contingency reserves were established.

American Life seeks to reinsure substantially all of its new insurance policies with a variety of reinsurers in exchange for upfront ceding commissions, expense reimbursements and administrative fees. American Life may retain some business with the intent to reinsure some or all at a future date.

Retained and Reinsured Balance Sheets

The table below shows the retained and reinsurance condensed balance sheets:


	June 30, 2022						December 31, 2021

(in thousands)	Retained		Reinsured		Consolidated		Retained		Reinsured		Consolidated
Assets
Total investments	$	561,709	$	647,145	$	1,208,854	$	414,418	$	561,109	$	975,527
Cash and cash equivalents		79,021		49,943		128,964		95,406		46,607		142,013
Accrued investment income		6,632		11,665		18,297		3,853		9,770		13,623
Deferred acquisition costs, net		33,164		—		33,164		24,530		—		24,530
Reinsurance recoverables		13,230		10,891		24,121		—		38,579		38,579
Other assets		20,883		1,692		22,575		27,834		(2,189)		25,645
Total assets	$	714,639	$	721,336	$	1,435,975	$	566,041	$	653,876	$	1,219,917
Liabilities and Stockholders’ Equity
Liabilities:
Policyholder liabilities	$	567,007	$	732,765	$	1,299,772	$	427,807	$	660,811	$	1,088,618
Deferred gain on coinsurance transactions		32,203		—		32,203		28,589		—		28,589
Other liabilities		50,933		(11,429)		39,504		23,889		(6,935)		16,954
Total liabilities	$	650,143	$	721,336	$	1,371,479	$	480,285	$	653,876	$	1,134,161
Stockholders’ Equity:
Voting common stock		4		—		4		4		—		4
Additional paid-in capital		138,663		—		138,663		138,277		—		138,277
Accumulated deficit		(60,707)		—		(60,707)		(70,159)		—		(70,159)
Accumulated other comprehensive income (loss)		(25,877)		—		(25,877)		2,634		—		2,634
Total Midwest Holding Inc.'s stockholders' equity	$	52,083	$	—	$	52,083	$	70,756	$	—	$	70,756
Noncontrolling interest		12,413		—		12,413		15,000		—		15,000
Total stockholders' equity		64,496		—		64,496		85,756		—		85,756
Total liabilities and stockholders' equity	$	714,639	$	721,336	$	1,435,975	$	566,041	$	653,876	$	1,219,917