Reinsurance (Tables)

6 Months Ended

Jun. 30, 2023

Reinsurance

Summary of significant reinsurance amounts

A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of June 30, 2023 and December 31, 2022 is as follows:

(In thousands)	June 30, 2023		December 31, 2022
Assets:
Reinsurance recoverables	$	39,899	$	20,190
Liabilities:
Deposit-type contracts
Direct	$	2,218,725	$	1,743,348
Reinsurance ceded		(1,123,475)		(912,982)
Retained deposit-type contracts	$	1,095,250	$	830,366

Schedule of significant reinsurance balances

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, 2023:

							Recoverable/				Total Amount
			Recoverable		Recoverable		(Payable) on Benefit		Ceded		Recoverable/
(In thousands)	AM Best		on Paid		on Unpaid		Reserves/Deposit-		Due		(Payable) to/from
Reinsurer	Rating		Losses		Losses		type Contracts		Premiums		Reinsurer
Ironbound Reinsurance Company Limited		NR	$	-	$	-	$	5,338	$	-	$	5,338
Optimum Re Insurance Company		A		-		-		690		-		690
Sagicor Life Insurance Company		A-		-		238		10,626		(326)		10,538
Ascendant Re		NR		-		-		(3,906)		-		(3,906)
Crestline SP1		NR		-		-		(14,352)		-		(14,352)
American Republic Insurance Company		A		-		-		3,364		-		3,364
SRC4		NR		-		-		(12,749)		-		(12,749)
Unified Life Insurance Company		NR		-		25		991		(14)		1,002
US Alliance Life and Security Company		NR		-		-		49,997		(23)		49,974
			$	-	$	263	$	39,999	$	(363)	$	39,899

The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by third-party reinsurers as of December 31, 2022:

							Recoverable on				Total Amount
			Recoverable		Recoverable		Benefit		Ceded		Recoverable
(In thousands)	AM Best		on Paid		on Unpaid		Reserves/Deposit-		Due		from
Reinsurer	Rating		Losses		Losses		type Contracts		Premiums		Reinsurer
Ironbound Reinsurance Company Limited		NR	$	-	$	-	$	(344)	$	-	$	(344)
Optimum Re Insurance Company		A		-		-		601		-		601
Sagicor Life Insurance Company		A-		-		154		10,744		(303)		10,595
Ascendant Re		NR		-		-		(2,130)		-		(2,130)
Crestline SP1		NR		-		-		(3,357)		-		(3,357)
American Republic Insurance Company		A		-		-		5,879		-		5,879
SRC4		NR		-		-		(44,442)		-		(44,442)
Unified Life Insurance Company		NR		-		41		986		(17)		1,010
US Alliance Life and Security Company		NR		-		-		52,400		(22)		52,378
			$	-	$	195	$	20,337	$	(342)	$	20,190

Schedule of ceding commissions from the reinsurers

The tables below shows the ceding commissions from the reinsurers, excluding SRC1 and SRC3, and what was earned on a GAAP basis for the three and six months ended June 30, 2023 and 2022:

	Three months ended June 30,
(In thousands)	2023								2022
Reinsurer	Gross Ceding Commission		Expense Allowance(1)		Interest on Ceding Commission		Earned Ceding Commission		Gross Ceding Commission		Expense Allowance		Interest on Ceding Commission		Earned Ceding Commission
Unified Life Insurance Company	$	—	$	—	$	—	$	9	$	-	$	-	$	-	$	6
Ironbound Reinsurance Company Limited		—		—		43		125		-		-		49		144
Ascendant Re		181		175		23		100		-		-		23		77
US Alliance Life and Security Company		—		—		11		73		-		-		14		76
Crestline Re SP 1		771		716		193		758		1,491		2,401		88		559
American Republic Insurance Company		1		48		84		257		1,026		1,774		30		197
SRC4		2,514		2,401		86		176		-		-		-		-
	$	3,467	$	3,340	$	440	$	1,498	$	2,517	$	4,175	$	204	$	1,059

	Six months ended June 30,
(In thousands)	2023								2022
Reinsurer	Gross Ceding Commission		Expense Allowance(1)		Interest on Ceding Commission		Earned Ceding Commission		Gross Ceding Commission		Expense Allowance		Interest on Ceding Commission		Earned Ceding Commission
Unified Life Insurance Company	$	—	$	—	$	—	$	11	$	—	$	—	$	—	$	14
Ironbound Reinsurance Company Limited		—		—		93		253		—		—		98		258
Ascendant Re		181		175		46		185		—		—		47		163
US Alliance Life and Security Company		—		—		25		156		—		—		28		163
Crestline SP1		1,805		1,631		272		1,640		2,525		4,231		168		1,065
American Republic Insurance Company		560		753		106		562		1,827		3,227		52		349
SRC4		3,881		3,614		86		264		—		—		—		—
	$	6,427	$	6,173	$	628	$	3,071	$	4,352	$	7,458	$	393	$	2,012

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

Schedule of ceding commissions deferred on each reinsurance transaction

(In thousands)	June 30, 2023		December 31, 2022
Reinsurer	Deferred Gain on Reinsurance Transactions		Deferred Gain on Reinsurance Transactions
US Alliance Life and Security Company(1)	$	-	$	152
Unified Life Insurance Company(1)		352		217
Ironbound Reinsurance Company Limited(2)		4,811		4,876
Ascendant Re		3,104		2,947
US Alliance Life and Security Company(2)		2,025		2,069
American Republic Insurance Company(2)		7,684		7,502
Crestline SP1(2)		19,346		18,475
SRC4(2)		5,892		1,825
	$	43,214	$	38,063

1) These reinsurance transactions on our legacy life insurance business received gross ceding commissions on the effective dates of the transaction. The difference between the statutory net adjusted reserves and the GAAP adjusted reserves plus the elimination of DAC and value of business acquired related to these businesses reduces the gross ceding commission with the remaining deferred and amortized over the lifetime of the blocks of business.

2) These reinsurance transactions include the ceding commissions and expense allowances which are accounted for as described in (1).

Schedule of retained and reinsurance balance sheets

The tables below shows the retained and reinsurance consolidated balance sheets:

	June 30, 2023						December 31, 2022
(In thousands)	Retained		Reinsured		Consolidated		Retained		Reinsured		Consolidated
Assets
Total investments	$	1,104,198	$	982,401	$	2,086,599	$	812,177	$	802,780	$	1,614,957
Cash and cash equivalents		125,156		69,119		194,275		127,291		64,123		191,414
Deferred acquisition costs, net		57,604		-		57,604		43,433		-		43,433
Premiums receivable		-		372		372		-		-		-
Accrued investment income		14,648		20,402		35,050		11,307		13,858		25,165
Reinsurance recoverables		(62,609)		102,508		39,899		(6,853)		27,405		20,552
Property and equipment, net		1,811		-		1,811		1,897		-		1,897
Receivable for securities sold		441		-		441		2,033		8,485		10,518
Other assets		9,255		2,735		11,990		12,259		236		12,495
Total assets	$	1,250,504	$	1,177,537	$	2,428,041	$	1,003,544	$	916,887	$	1,920,431
Liabilities and Stockholders’ Equity
Liabilities:
Benefit reserves	$	944	$	11,702	$	12,646	$	1,332	$	11,613	$	12,945
Deposit-type contracts		1,103,844		1,114,881		2,218,725		841,980		901,368		1,743,348
Other policy-holder funds		6,069		405		6,474		4,105		-		4,105
Notes payable		25,000		-		25,000		25,000		-		25,000
Deferred gain on coinsurance transactions		231		42,983		43,214		38,063		-		38,063
Payable for securities sold		44,656		-		44,656		8,872		-		8,872
Other liabilities		40,460		7,566		48,026		49,815		3,906		53,721
Total liabilities	$	1,221,204	$	1,177,537	$	2,398,741	$	969,167	$	916,887	$	1,886,054
Stockholders’ Equity:
Preferred stock	$	-	$	-	$	-	$	-	$	-	$	-
Voting common stock		4		-		4		4		-		4
Additional paid-in capital		139,085		-		139,085		138,482		-		138,482
Treasury stock		(175)		-		(175)		(175)		-		(175)
Accumulated deficit		(67,746)		-		(67,746)		(63,019)		-		(63,019)
Accumulated other comprehensive loss		(57,433)		-		(57,433)		(51,386)		-		(51,386)
Total Midwest Holding Inc.'s stockholders' equity	$	13,735	$	-	$	13,735	$	23,906	$	-	$	23,906
Noncontrolling interest		15,565		-		15,565		10,471		-		10,471
Total stockholders' equity		29,300		-		29,300		34,377		-		34,377
Total liabilities and stockholders' equity	$	1,250,504	$	1,177,537	$	2,428,041	$	1,003,544	$	916,887	$	1,920,431