A summary of significant reinsurance, including our 100% legacy life business reinsured, amounts affecting the accompanying Consolidated Balance Sheets as of September 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 nine months ended September 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 September 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 September 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 cumulative unrealized losses of approximately $14.4 million as of September 30, 2022, and cumulative unrealized gains of $0.2 million at December 31, 2021, respectively. The terms of the contracts with the third-party reinsurers provide that the changes in unrealized gains and losses on the portfolios accrue to the third-party reinsurers. To recognize changes in the third-party unrealized gain (loss), American Life records the year-to-date change in the Consolidated Statements of Comprehensive Loss and in amounts recoverable from third-party reinsurers on the Consolidated Balance Sheets. As of September 30, 2022, American Life recognized a current year gain in the embedded derivative of $14.6 million and a loss in the embedded derivative of $0.9 million for the comparable period in 2021.

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 September 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.

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 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% for 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.

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 nine months ended September 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 September 30, 2022, and December 31, 2021, no contingency reserves were established.

American Life seeks to reinsure a significant amount 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:


	September 30, 2022						December 31, 2021

(In thousands)	Retained		Reinsured		Consolidated		Retained		Reinsured		Consolidated
Assets
Total investments	$	693,180	$	687,692	$	1,380,872	$	414,418	$	561,109	$	975,527
Cash and cash equivalents		112,859		95,805		208,664		95,406		46,607		142,013
Accrued investment income		8,790		15,125		23,915		3,853		9,770		13,623
Deferred acquisition costs, net		39,377		—		39,377		24,530		—		24,530
Reinsurance recoverables		49,264		(43,109)		6,155		—		38,579		38,579
Other assets		43,796		(16,711)		27,085		27,834		(2,189)		25,645
Total assets	$	947,266	$	738,802	$	1,686,068	$	566,041	$	653,876	$	1,219,917
Liabilities and Stockholders’ Equity
Liabilities:
Policyholder liabilities	$	815,958	$	737,544	$	1,553,502	$	427,807	$	660,811	$	1,088,618
Deferred gain on coinsurance transactions		35,464		—		35,464		28,589		—		28,589
Other liabilities		55,974		1,258		57,232		23,889		(6,935)		16,954
Total liabilities	$	907,396	$	738,802	$	1,646,198	$	480,285	$	653,876	$	1,134,161
Stockholders’ Equity:
Voting common stock		4		—		4		4		—		4
Additional paid-in capital		137,991		—		137,991		138,277		—		138,277
Accumulated deficit		(53,276)		—		(53,276)		(70,159)		—		(70,159)
Accumulated other comprehensive income (loss)		(52,943)		—		(52,943)		2,634		—		2,634
Total Midwest Holding Inc.'s stockholders' equity	$	31,776	$	—	$	31,776	$	70,756	$	—	$	70,756
Noncontrolling interest		8,094		—		8,094		15,000		—		15,000
Total stockholders' equity		39,870		—		39,870		85,756		—		85,756
Total liabilities and stockholders' equity	$	947,266	$	738,802	$	1,686,068	$	566,041	$	653,876	$	1,219,917