Related Party

9 Months Ended

Sep. 30, 2022

Third-Party Administration

Related Party

Note 18. Related Parties

Crestline

On April 24, 2020, we entered into a securities purchase agreement with Crestline Assurance Holdings LLC (“Crestline”) an institutional alternative investment management firm under which we issued 444,444 shares of our voting common stock to Crestline. We contributed $5.0 million of the net proceeds to American Life and used $3.3 million of the proceeds to capitalize Seneca Re and its first protected cell. We also entered into a Stockholders Agreement along with Xenith and Vespoint that grants Crestline certain rights. Also, Douglas K. Bratton, a principal of Crestline, was appointed as a director of both our board of directors and the American Life board of directors.

In addition, on April 24, 2020, American Life entered into a three-year master letter agreement and related reinsurance, trust and asset management agreement with Seneca Re and a Crestline affiliate regarding the flow of annuity reinsurance and related asset management, whereby Crestline agreed to provide reinsurance funding for a quota share percentage of 25% of the

liabilities of American Life arising from its MYGA and quota share percentage of 40% of American Life’s FIA products. From inception through September 30, 2022, American Life had ceded $393.0 million face amount of annuity premiums to Crestline SP1. American Life received total ceding commissions, inception-to-date, of $17.4 million and expense reimbursements of $31.4 million in connection with these transactions as of September 30, 2022.

The Reinsurance Agreement also contains the following agreements:

● American Life and Crestline SP1 each entered into investment management agreements with Crestline, pursuant to which Crestline manages the assets that support the reinsured business; and

● American Life and Crestline SP1 entered into a trust agreement whereby Crestline maintains for American Life’s benefit a trust account that supports the reinsured business.

On September 16, 2022, Midwest Holding and Crestline executed a Letter of Understanding (the “Understanding”) relating to the Stockholders Agreement. The Company and Crestline agreed that Mr. Bratton would resign from the boards of directors of the Company and ALSC. Notwithstanding the foregoing, the parties agreed that Mr. Bratton’s resignation and Crestline’s decision to no longer appoint a director does not constitute a permanent waiver of Crestline’s rights under the Agreement to appoint a Crestline Designated Director. The Company and Crestline agreed that the foregoing described agreement will remain in place until the earlier to occur of the date (i) the parties reach written agreement otherwise, (ii) that Crestline is no longer an affiliate of a life insurance entity it recently acquired and (iii) on which Crestline no longer has the right to elect or appoint a member and Observer to the board of directors of the Company.

Currently, Crestline has approximately $373.5 million assets under management and is a subadvisor on approximately $174.2 million of additional investments.

Chelsea  

On June 29, 2020 Midwest’s subsidiary, American Life, purchased a 17% interest in Financial Guaranty UK Limited through an economic interest in Chelsea Holdings Midwest LLC.  American Life has a note receivable from Chelsea Holdings Midwest LLC with an interest rate of 5% per annum that was rated BBB+ by a nationally recognized statistical rating organization (“NRSRO”) and Class B preferred shares in Chelsea Holdings Midwest LLC.  The note is being carried at cost plus PIK of $6.2 million and the preferred shares are carried at a fair market value of $2.3 million, based upon valuations received from an independent third-party, as of September 30, 2022.