10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

COMMISSION FILE NUMBER 000-10685

Midwest Holding Inc.
(Exact name of registrant as specified in its charter)

Nebraska	20-0362426
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2900 S. 70th, Suite 400, Lincoln, Nebraska	68506
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (402) 489-8266

Former name, former address and former fiscal year, if changed since last report: Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( § 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or reviewed financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ☐ No ☒

As of May 1, 2018, there were 22,860,701 shares of Voting Common Stock, par value $0.001 per share, issued and outstanding.

MIDWEST HOLDING INC.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item No.	Item Caption	Page
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II – OTHER INFORMATION
Item No.	Item Caption	Page
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
	Signatures	30

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Midwest Holding Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

	March 31, 2018			December 31, 2017
Assets
Investments, available for sale, at fair value
Fixed maturities (amortized cost: $21,503,891 and $21,573,519 respectively)	$	20,348,789		$	21,005,907
Real estate, held for investment		502,678			505,688
Policy Loans		431,755			435,196
Total investments		21,283,222			21,946,791
Cash and cash equivalents		505,220			951,527
Amounts recoverable from reinsurers		22,721,637			21,855,266
Interest due and accrued		228,319			223,166
Due premiums		564,206			635,835
Deferred acquisition costs, net		2,005,409			2,046,864
Value of business acquired, net		409,694			427,454
Intangible assets		700,000			700,000
Property and equipment, net		115,418			127,976
Other assets		91,091			107,723
Total assets	$	48,624,216		$	49,022,602
Liabilities and Stockholders' Equity
Liabilities:
Benefit reserves	$	26,289,438		$	26,228,105
Policy claims		426,965			447,513
Deposit-type contracts		18,860,160			18,421,055
Advance premiums		59,085			40,839
Deferred gain on coinsurance transaction		943,333			322,487
Total policy liabilities		46,578,981			45,459,999
Accounts payable and accrued expenses		588,204			790,361
Surplus notes		550,000			550,000
Total liabilities		47,717,185			46,800,360
Commitments and Contingencies (See Note 8)
Stockholders' Equity:
Common stock, $0.001 par value. Authorized 120,000,000 shares; issued and outstanding 22,860,701 as of March 31, 2018 and as of December 31, 2017.		22,861			22,861
Additional paid-in capital		33,006,255			33,006,255
Accumulated deficit		(30,994,953	)		(30,252,971	)
Accumulated other comprehensive loss		(1,127,132	)		(553,903	)
Total stockholders' equity		907,031			2,222,242
Total liabilities and stockholders' equity	$	48,624,216		$	49,022,602

See Notes to Consolidated Financial Statements.

3

Midwest Holding Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)

	Three months ended March 31,
	2018			2017
Income:
Premiums	$	466,042		$	832,847
Investment income, net of expenses		203,461			254,680
Net realized loss on investments		(49,671	)		(35,504	)
Miscellaneous income		26,240			18,800
		646,072			1,070,823
Expenses:
Death and other benefits		266,860			295,257
Interest credited		121,507			219,232
(Decrease) Increase in benefit reserves		(8,341	)		145,126
Amortization of deferred acquisition costs		94,858			158,705
Salaries and benefits		482,716			576,608
Other operating expenses		430,454			719,799
		1,388,054			2,114,727
Loss before income taxes		(741,982	)		(1,043,904	)
Income tax expense		-			-
Net loss		(741,982	)		(1,043,904	)
Comprehensive (loss) income :
Unrealized (losses) income on investments arising during period		(622,900	)		183,013
Less: reclassification adjustment for net realized losses on investments		49,671			35,504
Other comprehensive (loss) income		(573,229	)		218,517
Comprehensive loss	$	(1,315,211	)	$	(825,387	)
Net loss per common share, basic and diluted	$	(0.03	)	$	(0.05	)

See Notes to Consolidated Financial Statements.

4

Midwest Holding Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

	Three Months ended March 31,
	2018			2017
Cash Flows from Operating Activities:
Net loss	$	(741,982	)	$	(1,043,904	)
Adjustments to arrive at cash provided by operating activities:
Net premium and discount on investments		30,785			53,312
Depreciation and amortization		33,328			85,647
Deferred acquisition costs capitalized		(39,142	)		(93,674	)
Amortization of deferred acquisition costs		94,858			158,705
Net realized gains on investments		49,671			35,504
Deferred coinsurance ceding commission		(26,556	)		-
Changes in operating assets and liabilities:
Amounts recoverable from reinsurers		(218,969	)		56,882
Interest and dividends due and accrued		(5,153	)		(26,061	)
Due premiums		71,629			70,029
Policy liabilities		398,740			132,237
Other assets and liabilities		(185,525	)		(206,280	)
Net cash used for operating activities		(538,316	)		(777,603	)
Cash Flows from Investing Activities:
Securities available for sale:
Purchases		(3,323,196	)		(3,870,624	)
Proceeds from sale or maturity		3,312,368			4,712,145
Net change in policy loans		3,441			(2,138	)
Net purchases of property and equipment		-			(24,165	)
Net cash (used for) provided by investing activities		(7,387	)		815,218
Cash Flows from Financing Activities:
Preferred stock dividend		-			(21,560	)
Receipts on deposit-type contracts		312,611			863,617
Withdrawals on deposit-type contracts		(213,215	)		(319,707	)
Net cash provided by financing activities		99,396			522,350
Net (decrease) increase in cash and cash equivalents		(446,307	)		559,965
Cash and cash equivalents:
Beginning		951,527			661,545
Ending	$	505,220		$	1,221,510

See Notes to Consolidated Financial Statements.

5

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Special Note. We were not able to obtain and assimilate all information required to complete the required independent audit of our financial statements for the fiscal year ended December 31, 2017. Hence our financial statements for that period were unaudited as filed in our Annual Report on Form 10-K (“Current 10-K”). As we undertake and complete the audit process for the year ended December 31, 2017, certain adjustments may be required to be made in our Current 10-K which may have to be carried forward and may result in material changes to our financial position and results of operations presented in this Quarterly Report on Form 10-Q for the period ended March 31, 2018 (“Current 10-Q”). When our audited financial statements are completed, they will be filed as an amendment to our Current 10-K and if, as a result, changes are required in this Current 10-Q, they will also be filed under an appropriate amendment.

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of operations: Midwest Holding Inc. (“Midwest” or “the Company”) was incorporated in Nebraska on October 31, 2003 for the primary purpose of becoming a financial services company. The Company is in the life insurance business and operates through its wholly owned subsidiary, American Life & Security Corp. (“American Life”). The Company has made several acquisitions of life insurance companies and related entities since 2008, all of which have been merged into the Company or into American Life.

Basis of presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions from the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Therefore, the information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements.

In the opinion of management and subject to the special note above, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months period ended March 31, 2018, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018. All material inter-company accounts and transactions have been eliminated in consolidation.

Investments: All fixed maturities and a portion of the equity securities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in comprehensive loss.

Declines in the fair value of available for sale securities below their amortized cost are evaluated to assess whether any other-than-temporary impairment loss should be recorded. In determining if these losses are expected to be other-than-temporary, the Company considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost.

6

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the statement of comprehensive income as an other-than-temporary impairment. If the Company does not expect to recover the amortized basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default.

No other-than-temporary impairments were recognized during the three months ended March 31, 2018 or 2017.

Investment income consists of interest, dividends, and real estate income, which are recognized on an accrual basis and amortization of premiums and discounts.

Policy loans: Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value.

Real estate, held for investment: Real estate, held for investment is comprised of ten condominiums in Hawaii. Real estate is carried at depreciated cost. Depreciation on residential real estate is computed on a straight-line basis over 50 years.

Cash: The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. At March 31, 2018 and December 31, 2017, the Company had no cash equivalents.

Deferred acquisition costs: Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to reinsurers, that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. These costs are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. The Company evaluates the types of acquisition costs it capitalizes. The Company capitalizes agent compensation and benefits and other expenses that are directly related to the successful acquisition of contracts. The Company also capitalizes expenses directly related to activities performed by the Company, such as underwriting, policy issuance, and processing fees incurred in connection with successful contract acquisitions.

Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company determined that no events occurred in the three months ended March 31, 2018 that suggest a review should be undertaken.

7

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

The following table provides information about deferred acquisition costs for the periods ended March 31, 2018 and December 31, 2017, respectively.

	March 31, 2018			December 31, 2017
Balance at beginning of period	$	2,046,864		$	2,568,799
Capitalization of commissions, sales and issue expenses		39,142			333,940
Change in DAC due to unrealized investment losses		14,261			(14,144	)
Gross amortization		(94,858	)		(404,111	)
Change in DAC due to coinsurance ceding commission		-			(437,620	)
Balance at end of period	$	2,005,409		$	2,046,864

Value of business acquired: Value of business acquired (“VOBA”) represents the estimated value assigned to purchased companies or insurance in force of the assumed policy obligations at the date of acquisition of a block of policies.

Recoverability of value of business acquired is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company determined that no events occurred in the three months ended March 31, 2018 that suggest a review should be undertaken.

Property and equipment: Property and equipment are stated at cost net of accumulated depreciation. Annual depreciation is primarily computed using straight-line methods for financial reporting and straight-line and accelerated methods for tax purposes. Furniture and equipment is depreciated over 3 to 7 years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $12,558 and $16,390 for the three months ended March 31, 2018 and 2017, respectively. Accumulated depreciation totaled $906,572 and $894,014 as of March 31, 2018 and December 31, 2017, respectively.

Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. Management has determined that no such events occurred in the three months ended March 31, 2018 that would indicate the carrying amounts may not be recoverable.

Reinsurance: In the normal course of business, the Company seeks to limit any single exposure to losses on large risks by purchasing reinsurance. The amounts reported in the consolidated balance sheets as reinsurance recoverable include amounts billed to reinsurers on losses paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverable on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Insurance liabilities are reported gross of reinsurance recoverable. Management believes the recoverables are appropriately established. The Company generally strives to diversify its credit risks related to reinsurance ceded. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were no allowances as of March 31, 2018 or December 31, 2017.

8

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

Benefit reserves: The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables.

Policy claims: Policy claims are based on reported claims plus estimated incurred but not reported claims developed from trends of historical data applied to current exposure.

Deposit-type contracts: Deposit-type contracts consist of amounts on deposit associated with deferred annuity riders, premium deposit funds and supplemental contracts without life contingencies.

Income taxes: The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state or local tax examinations by tax authorities for the years before 2010. The provision for income taxes is based on income as reported in the financial statements. The income tax provision is calculated under the asset and liability method. Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. The Company has no uncertain tax positions that it believes are more-likely-than not that the benefit will not to be realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company had no accruals for payments of interest and penalties at March 31, 2018 or December 31, 2017.

Revenue recognition and related expenses: Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due.

Amounts received as payment for annuities and/or non-traditional contracts such as interest sensitive whole life contracts, single payment endowment contracts, single payment juvenile contracts and other contracts without life contingencies are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services and cost of insurance, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the consolidated statements of cash flows.

Amounts received under our multi-benefit policy form are allocated to the life insurance portion of the multi-benefit life insurance arrangement and the annuity portion based upon the signed policy.

Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts. Acquisition costs are amortized over the premium paying period using the net level premium method. Traditional life insurance products are treated as long duration contracts, which generally remain in force for the lifetime of the insured.

Comprehensive loss: Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable securities classified as available for sale, net of applicable taxes.

Common and preferred stock and earnings (loss) per share: The par value per common share is $0.001 with 120,000,000 voting common shares authorized, 20,000,000 non-voting common shares authorized, and 10,000,000 preferred shares authorized. At March 31, 2018 and December 31, 2017, the Company had 22,860,701 voting common shares issued and outstanding.

9

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

The Class A preferred shares were non-cumulative, non-voting and convertible by the holder to voting common shares after May, 2015, at a rate of 1.3 common shares for each preferred share (subject to customary anti-dilution adjustments). The par value per preferred share was $0.001 with 2,000,000 shares authorized. At December 31, 2017 the 74,159 Class A preferred shares outstanding were converted by the Company into 96,407 voting common shares.

The Class B preferred shares were non-cumulative, non-voting and convertible by the holder or the Company to voting common shares after May 1, 2017 at a rate of 2.0 common shares for each preferred share. The par value per preferred share was $0.001 with 1,000,000 shares authorized. The stated annual dividend rate on the Class B preferred shares was 7%. Dividends totaling $30,544 were paid as of June 30, 2017. On June 15, 2017, the 102,669 outstanding Class B preferred shares were converted by the Company into 205,338 voting common shares.

Earnings (loss) per share attributable to the Company’s common stockholders were computed based on the weighted average number of shares outstanding during each period. The weighted average number of shares outstanding during the three months ended March 31, 2018 and 2017 were 22,860,701 and 22,558,956 shares, respectively.

New accounting standards: In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326). Under the new guidance, this replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to perform credit loss estimates. This update changes the methodology from an incurred loss to an expected credit loss. An allowance for the expected credit loss will be set up and the net income will be impacted. The credit losses will be evaluated in the current period and an adjustment to the allowance can be made. The new standard becomes effective after December 15, 2019. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

10

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

Note 2. Investments

The cost or amortized cost and estimated fair value of investments classified as available-for-sale as of March 31, 2018 and December 31, 2017 are as follows:

	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
March 31, 2018:
Fixed maturities:
U.S. government obligations	$	2,127,142	$	-	$	140,505	$	1,986,637
Mortgage-back securities		1,300,212		-		56,143		1,244,069
States and political subdivisions -- general obligations		268,805		-		3,649		265,156
States and political subdivisions -- special revenue		25,318		-		214		25,104
Corporate		17,782,414		7,533		962,124		16,827,823
Total fixed maturities	$	21,503,891	$	7,533	$	1,162,635	$	20,348,789
December 31, 2017:
Fixed maturities:
U.S. government obligations	$	2,132,441	$	-	$	102,343	$	2,030,098
Mortgage-back securities		1,365,684		-		47,103		1,318,581
States and political subdivisions -- general obligations		269,884		1,123		1,020		269,987
States and political subdivisions -- special revenue		25,347		38		-		25,385
Corporate		17,780,163		44,037		462,344		17,361,856
Total fixed maturities	$	21,573,519	$	45,198	$	612,810	$	21,005,907

The Company has two securities that individually exceed 10% of the total of the state and political subdivisions categories as of March 31, 2018. The amortized cost, fair value, credit ratings, and description of each security is as follows:

	Amortized		Estimated
	Cost		Fair Value		Credit Rating
March 31, 2018:
Fixed maturities:
States and political subdivisions -- general obligations
Bellingham Wash	$	109,671	$	106,363	AA+
Longview Washington Refunding		159,134		158,793	Aa3
Total	$	268,805	$	265,156

11

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

The following table summarizes, for all securities in an unrealized loss position at March 31, 2018 and December 31, 2017, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position.

	March 31, 2018					December 31, 2017
			Gross		Number			Gross		Number
	Estimated		Unrealized		of	Estimated		Unrealized		of
	Fair Value		Loss		Securities(1)	Fair Value		Loss		Securities(1)
Fixed Maturities:
Less than 12 months:
U.S. government obligations	$	254,346	$	20,816	2	$	262,662	$	13,877	2
Mortgage-back securities		1,244,069		56,143	19		1,318,581		47,103	19
States and political subdivisions -- general obligations		265,156		3,649	2		108,917		1,020	1
States and political subdivisions -- special revenue		25,104		214	1		-		-	-
Corporate		10,680,779		471,058	55		7,511,874		133,061	35
Greater than 12 months:
U.S. government obligations		1,732,291		119,689	10		1,767,435		88,466	10
Corporate		5,886,070		491,066	37		7,144,231		329,283	42
Total fixed maturities	$	20,087,815	$	1,162,635	126	$	18,113,700	$	612,810	109

⁽¹⁾ We may reflect a security in more than one aging category based on various purchase dates.

Based on our review of the securities in an unrealized loss position at March 31, 2018 and December 31, 2017, no other-than-temporary impairments were deemed necessary. Management believes that the Company will fully recover its cost basis in the securities held at March 31, 2018, and management does not have the intent to sell nor is it more likely than not that the Company will be required to sell such securities until they recover or mature. The temporary impairments shown herein are primarily the result of the current interest rate environment rather than credit factors that would imply other-than-temporary impairment.

The amortized cost and estimated fair value of fixed maturities at March 31, 2018, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Estimated
	Cost		Fair Value
Due in one year or less	$	200,819	$	198,962
Due after one year through five years		1,450,714		1,392,599
Due after five years through ten years		6,427,610		6,045,849
Due after ten years		13,424,748		12,711,379
	$	21,503,891	$	20,348,789

The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At March 31, 2018 and December 31, 2017, these required deposits had a total amortized cost of $3,281,240 and $3,287,932 and fair values of $3,085,185 and $3,167,727, respectively.

12

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

The components of net investment income for the three months ended March 31, 2018 and 2017 are as follows:

	Three months ended March 31,
	2018			2017
Fixed maturities	$	200,106		$	264,581
Other		14,711			16,007
		214,817			280,588
Less investment expenses		(11,356	)		(25,908	)
Investment income, net of expenses	$	203,461		$	254,680

Proceeds for the three months ended March 31, 2018 and 2017 from sales of investments classified as available-for-sale were $3,312,368 and $4,712,145, respectively. Gross gains of $24,910 and $10,141 and gross losses of $74,581 and $45,645 were realized on those sales during the three months ended March 31, 2018 and 2017, respectively.

Note 3. Fair Values of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

● Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
 

● Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
 

● Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the period in which the reclassifications occur.

A description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

13

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

Fixed maturities: Fixed maturities are recorded at fair value on a recurring basis utilizing a third-party pricing source. The valuations are reviewed and validated quarterly through random testing by comparisons to separate pricing models or other third party pricing services. For the period ended March 31, 2018, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third party prices were changed from the values received. Securities with prices based on validated quotes from pricing services are reflected within Level 2.

Cash: The carrying value of cash and cash equivalents and short-term investments approximate the fair value because of the short maturity of the instruments.

Policy loans: Policy loans are stated at unpaid principal balances. As these loans are fully collateralized by the cash surrender value of the underlying insurance policies, the carrying value of the policy loans approximates their fair value. Policy loans are categorized as Level 3 in the fair value hierarchy.

Deposit-type contracts: The fair value for direct and assumed liabilities under deposit-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and nonperformance risk of the liabilities. These liabilities are categorized as Level 3 in the fair value hierarchy.

Surplus notes: The fair value for surplus notes is calculated using a discounted cash flow approach. Cash flows are projected utilizing scheduled repayments and discounted to the valuation date using market rates currently available for debt with similar remaining maturities. These notes are structured such that all interest is paid at maturity. In the following fair value tables, the Company has included accrued interest expense, which is recorded in the accounts payable and accrued expenses, of approximately $301,930 and $293,922 in carrying value of the surplus notes as of March 31, 2018 and December 31, 2017, respectively. These liabilities are categorized as Level 3 in the fair value hierarchy.

The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017.

			Significant
	Quoted		Other		Significant
	Markets		Inputs		Inputs		Fair
	(Level 1)		(Level 2)		(Level 3)		Value
March 31, 2018
Fixed maturities:
U.S. government obligations	$	-	$	1,986,637	$	-	$	1,986,637
Mortgage-back securities		-		1,244,069		-		1,244,069
States and political subdivisions - general obligations		-		265,156		-		265,156
States and political subdivisions - special revenue		-		25,104		-		25,104
Corporate		-		16,827,823		-		16,827,823
Total fixed maturities	$	-	$	20,348,789	$	-	$	20,348,789
December 31, 2017
Fixed maturities:
U.S. government obligations	$	-	$	2,030,098	$	-	$	2,030,098
Mortgage-back securities		-		1,318,581		-		1,318,581
States and political subdivisions - general obligations		-		269,987		-		269,987
States and political subdivisions - special revenue		-		25,385		-		25,385
Corporate		-		17,361,856		-		17,361,856
Total fixed maturities	$	-	$	21,005,907	$	-	$	21,005,907

14

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

There were no transfers of financial instruments between any levels during the three months ended March 31, 2018 or during the year ended December 31, 2017.

Accounting standards require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis are discussed above. There were no financial assets or financial liabilities measured at fair value on a non-recurring basis.

The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of March 31, 2018 and December 31, 2017, respectively:

	March 31, 2018
			Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical Assets		Observable		Unobservable
	Carrying		and Liabilities		Inputs		Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Policy loans	$	431,755	$	-	$	-	$	431,755	$	431,755
Cash		505,220		505,220		-		-		505,220
Liabilities:
Policyholder deposits (Deposit-type contracts)		18,860,160		-		-		18,860,160		18,860,160
Surplus notes and accrued interest payable		851,930		-		-		851,930		851,930
	December 31, 2017
			Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical Assets		Observable		Unobservable
	Carrying		and Liabilities		Inputs		Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Policy loans	$	435,196	$	-	$	-	$	435,196	$	435,196
Cash		951,527		951,527		-		-		951,527
Liabilities:
Policyholder deposits (Deposit-type contracts)		18,421,055		-		-		18,421,055		18,421,055
Surplus notes and accrued interest payable		843,922		-		-		843,922		843,922

15

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

Note 4. Income Tax Matters

Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2018 and December 31, 2017 are as follows:

	March 31, 2018			December 31, 2017
Deferred tax assets:
Loss carryforwards	$	5,990,586		$	5,782,279
Capitalized costs		305,137			317,026
Unrealized losses on investments		246,655			123,454
Benefit reserves		656,853			655,954
Total deferred tax assets		7,199,231			6,878,713
Less valuation allowance		(6,574,445	)		(6,240,192	)
Total deferred tax assets, net of valuation allowance		624,786			638,521
Deferred tax liabilities:
Policy acquisition costs		269,503			264,231
Due premiums		118,483			133,525
Value of business acquired		86,036			89,765
Intangible assets		147,000			147,000
Property and equipment		3,764			4,000
Total deferred tax liabilities		624,786			638,521
Net deferred tax assets	$	-		$	-

At March 31, 2018 and December 31, 2017, the Company recorded a valuation allowance of $6,574,445 and $6,240,192, respectively, on the deferred tax assets to reduce the total to an amount that management believes will ultimately be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income.

Loss carryforwards for tax purposes as of March 31, 2018, have expiration dates that range from 2024 through 2036.

There was no income tax expense for the three months ended March 31, 2018 and 2017. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following:

	Three months ended March 31
	2018			2017
Computed expected income tax benefit	$	(155,816	)	$	(354,927	)
Increase (reduction) in income taxes resulting from:
Meals, entertainment and political contributions		1,957			2,877
Other		(57,193	)		236
		(55,236	)		3,113
Tax benefit before valuation allowance		(211,052	)		(351,814	)
Change in valuation allowance		211,052			351,814
Net income tax expenses	$	-		$	-

16

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

Note 5. Reinsurance

A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 is as follows:

	March 31, 2018		December 31, 2017
Balance sheets:
Benefit and claim reserves assumed	$	2,620,723	$	2,638,477
Benefit and claim reserves ceded		22,721,637		21,855,266
	Three months ended March 31,
	2018		2017
Statements of comprehensive income:
Premiums assumed	$	6,236	$	6,514
Premiums ceded		342,509		50,015
Benefits assumed		59,270		15,766
Benefits ceded		61,076		115,846
Commissions assumed		6		10
Commissions ceded		1,934		-

The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by reinsurer along with the A.M. Best credit rating as of March 31, 2018:

						Recoverable on				Total Amount
		Recoverable		Recoverable		Benefit		Ceded		Recoverable
	AM Best	on Paid		on Unpaid		Reserves/Deposit-		Due/Advance		from
Reinsurer	Rating	Losses		Losses		type Contracts		Premiums		Reinsurer
Optimum Re Insurance Company	A-	$	-	$	6,877	$	94,926	$	-	$	101,803
Sagicor Life Insurance Company	A-		-		279,115		12,196,175		244,128		12,231,162
US Alliance Life and Security Company	NR		-		8,000		10,477,970		97,298		10,388,672
		$	-	$	293,992	$	22,769,071	$	341,426	$	22,721,637

Effective September 30, 2017, American Life entered into an indemnity coinsurance transaction with US Alliance Life and Security Company (“US Alliance”) to transfer 100% of the risk related to the Great Plains Life and First Wyoming Life blocks of business. The purpose of this transaction was to provide statutory capital and surplus for American Life and has minimal effect on GAAP financials. We paid no commissions or brokerage fees for this transaction and the proceeds of the transaction were based upon valuations prepared by our third party actuary. American Life had more than one offer to assume this business. Under the indemnity coinsurance, US Alliance assumed certain liabilities and obligations for incurred claims, surrenders and commissions. As we are not relieved of our legal liability to the policyholders; the liabilities and obligations associated with the reinsured blocks of business remain on our Consolidated Balance Sheets with a corresponding reinsurance receivable from US Alliance. We transferred $9,569,175 of GAAP net adjusted reserves as of September 30, 2017 to US Alliance for cash of $7,078,223 which was net of a ceding allowance of $1,850,000 which is treated as an increase to surplus on a statutory basis. As a result of the transaction, in addition to the reserves, American Life will cede approximately $883,000 of annual GAAP revenues and $1,758,250 of statutory revenues. US Alliance assumes all responsibilities for incurred claims, surrenders and commission from the effective date.

17

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

The ceding commission of $1,850,000 first reduced DAC of $437,620 and VOBA of $1,085,811 which had been held on our books from the Great Plains Life and First Wyoming Life acquisitions. The remaining $967,521 has been reflected as a deferred gain, which will be recognized into income over the expected duration of the Great Plains Life and First Wyoming Life blocks of business.

At March 31, 2018 and December 31, 2017, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to Sagicor were $12,231,162 and $12,320,695, respectively. At March 31, 2018 and December 31, 2017, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to US Alliance was $10,388,672 and $9,426,203, respectively. American Life remains contingently liable on the ceded reinsurance should Sagicor or US Alliance be unable to meet their obligations.

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. 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, a separate contingency reserve may be established. At March 31, 2018 and December 31, 2017, no contingency reserve was established.

Note 6. Deposit-Type Contracts

The Company’s deposit-type contracts represent the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. Liabilities for these deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less policyholder withdrawals. The following table provides information about deposit-type contracts for the quarter ended March 31, 2018 and the year ended December 31, 2017:

	March 31, 2018			December 31, 2017
Beginning balance	$	18,421,055		$	16,012,567
US Alliance		220,202			-
Deposits received		312,611			2,511,107
Investment earnings		121,507			808,085
Withdrawals		(213,215	)		(899,799	)
Contract Charges		(2,000	)		(10,905	)
Ending balance	$	18,860,160		$	18,421,055

Under the terms of American Life’s coinsurance agreement with Security National Life Insurance or SNL, American Life assumes certain deposit-type contract obligations, as shown in the table above. The remaining deposits, withdrawals and interest credited represent those for American Life’s direct business. Additionally, American Life cedes 100% of the Great Plains Life and First Wyoming Life’s block of business to US Alliance. Accordingly, this amount is presented within the corresponding single line above.

Note 7. Commitments and Contingencies

Legal Proceedings: We are involved in litigation incidental to our operations from time to time. We are not presently a party to any legal proceedings other than litigation arising in the ordinary course of our business, and we are not aware of any claims that could materially affect our financial position or results of operations.

18

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

Regulatory Matters: State regulatory bodies and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning the Company’s compliance with laws in relation to, but not limited to, insurance and securities matters.

Office Lease: The Company leases office space in Lincoln, Nebraska under an agreement executed October 17, 2013 that expires on January 31, 2024. The Company executed an amendment to its lease for an additional 2,876 square feet of office space on October 23, 2015, which expired on May 31, 2017. Rent expense for the three months ended March 31, 2018 and 2017 was $47,461 and $56,219, respectively. Future minimum lease payments for the remainder of 2017 and the subsequent years are as follows:

2018	$	102,418
2019		141,412
2020		146,477
2021		151,543
2022		156,608
Later years		175,182
Total	$	873,640

Note 8. Statutory Net Income and Surplus

American Life is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Nebraska Department of Insurance. Statutory practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis. Effective September 30, 2017, American Life entered into a coinsurance agreement with US Alliance to cede 100% of the First Wyoming Life’s and Great Plains Life’s blocks of business. American Life’s statutory net loss for the quarters ended March 31, 2018 and 2017 were $651,716 and $722,991, respectively. Capital and surplus of American Life as of March 31, 2018 and December 31, 2017 was $2,321,219 and $2,962,885, respectively.

Note 9. Surplus Notes

The following provides a summary of the Company’s surplus notes along with issue dates, maturity dates, face amounts, and interest rates as of March 31, 2018:

						Annual
Creditor	Issue Date	Maturity Date	Face Amount			Interest Rate
David G. Elmore	September 1, 2006	September 1, 2016		$	250,000	7%
David G. Elmore	August 4, 2011	August 1, 2016			300,000	5%

Any payments and/or repayments must be approved by the Nebraska Department of Insurance. As of March 31, 2018, the Company had accrued $301,930 of interest expense under accounts payable and accrued expenses on the consolidated balance sheet. No payments were made in the three months ended March 31, 2018, or during the year ended December 31, 2017. The surplus notes for $300,000 and $250,000 matured on August 1, 2016 and September 1, 2016, respectively.

19

Midwest Holding Inc. and Subsidiaries
Notes to Consolidated Financial Statements – Continued

Note 10. Related Party Transactions

The Company commenced its third party administrative (“TPA”) services in 2012 as an additional revenue source. These services are offered to non-consolidated entities. These agreements, for various levels of administrative services on behalf of each company, generate fee income for the Company. Services provided vary based on their needs and can include some or all aspects of back-office accounting and policy administration. We have been able to perform our TPA services using our existing in-house resources. Fees earned during the three months ended March 31, 2018 and 2017 amounted to $24,240 and $16,500, respectively.

Note 11. Subsequent Events

On May 9, 2018, the Company entered into a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement (the “Agreement”) with a non-affiliated third party, Xenith Holdings LLC, a Delaware limited liability company (“Xenith”).

The following summarizes the Agreement:

Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement.

1. After certain conditions are met, primarily receipt of approval of the Agreement by the Nebraska Department of Insurance which is expected, but cannot be assured, within 30-60 days, a closing will be held (the “Initial Closing”) at which Xenith will loan $600,000 (the “Loan”) to the Company, repayable upon maturity in 10 years with cash interest of 4% per annum payable quarterly and accrued interest of another 4% per annum payable upon maturity.

2. The first $500,000 of the Loan will be convertible, at Xenith’s election, into approximately 24,300,000 shares of the Company’s voting common stock (which equates to approximately $0.02 per share). The remaining $100,000 will also be convertible at the same rate if the Company has adequate authorized voting common stock available which will require an amendment to its Articles of Incorporation under an SEC proxy statement.

3. Also at the Initial Closing Xenith will purchase 1,500,000 shares of the Company’s newly created Class C Preferred Stock for $1,500,000. The Preferred Stock will be convertible, at Xenith’s election, into approximately 72,900,000 shares of the Company’s voting common stock (also at approximately $0.02 per share).

4. After the Initial Closing (sale and issuance of the $600,000 Notes and the Preferred Stock) Xenith, in its sole discretion, may loan up to an additional $22,900,000 to the Company. Any loans made by Xenith under this election (“Subsequent Loans”) will also be convertible into the Company’s voting common stock at the rate of approximately $0.02 per share.

5. To summarize the above for purposes of illustration assuming the Notes and shares of Preferred Stock are converted into the Company’s voting common stock:

	Number	Percentage
Current Company Shareholders	22,900,000	18.3%
Note Conversion ($500,000)	24,300,000	19.5%
Note Conversion ($100,000)	4,900,000	3.9%
Preferred Stock Conversion	72,900,000	58.3%
Total Outstanding	125,000,000	100.0%

For additional details, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2018.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the financial condition as of March 31, 2018, compared with December 31, 2017, and the results of operations for the three months ended March 31, 2018, compared with the corresponding period in 2017 of Midwest Holding Inc. and its consolidated subsidiary. The MD&A is provided as a supplement to, and should be read in conjunction with our consolidated financial statements and the accompanying notes to the consolidated financial statements (“Notes”) presented in “Part 1 – Item 1. Financial Statements”; our Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”), including the sections entitled “Part I – Item 1A. Risk Factors,” and “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Cautionary Note Regarding Forward-Looking Statements

Except for certain historical information contained herein, this report contains certain statements that may be considered “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, and such statements are subject to the safe harbor created by those sections. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of revenues, earnings, cash flows, capital expenditures, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed acquisition plans, new services, or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statement of assumptions underlying any of the foregoing. Words such as “believe,” “may,” “could,” “expects,” “hopes,” “estimates,” “projects,” “intends,” “anticipates,” and “likely,” and variations of these words, or similar expressions, terms, or phrases, are intended to identify such forward-looking statements. Forward-looking statements are inherently subject to risks, assumptions, and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Item 1A. Risk Factors," set forth in our 2017 Form 10-K.

All such forward-looking statements speak only as of the date of this Form 10-Q. You are cautioned not to place undue reliance on such forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the our expectations with regard thereto or any change in the events, conditions, or circumstances on which any such statement is based.

Overview

We were formed on October 31, 2003 for the primary purpose of becoming a financial services company. We presently conduct our business through our sole life insurance subsidiary, American Life & Security Corp. (“American Life”). In 2009, American Life was issued a certificate of authority to conduct life insurance business in Nebraska

We have incurred losses since inception that resulted primarily from costs incurred while raising capital and establishing and operating American Life and other entities. We expect to continue to incur operating losses until American Life achieves a volume of in-force life insurance policies that provides premiums that are sufficient to cover our operating expenses.

Critical Accounting Policies and Estimates

The MD&A included in our 2017 Form 10-K contains a detailed discussion of our critical accounting policies and estimates. This report should be read in conjunction with the “Critical Accounting Policies and Estimates” discussed in our 2017 Form 10-K.

21

Consolidated Results of Operations

The following discussion compares the results of the quarter ended March 31, 2018 with the quarter ended March 31, 2017. Unless the context indicates otherwise, the 2018 results are stated first followed by 2017 results.

Net Loss: The decrease in net loss was primarily due to the decline in death benefits and surrenders, interest credited, lower reserves, the amortization of deferred acquisition costs, and the decrease in other operating expenses and salaries. These decreases were offset by a decline in revenues.

Revenues are primarily generated from premium revenues and investment income. Insurance revenues are summarized in the table below.

	Three months ended March 31,
	2018			2017
Premiums	$	466,042		$	832,847
Investment income, net of expenses		203,461			254,680
Net realized gains (losses) on investments		(49,671	)		(35,504	)
Miscellaneous income		26,240			18,800
	$	646,072		$	1,070,823

Premium revenue: Premium revenue decreased primarily due to American Life’s coinsurance agreement with US Alliance to cede 100% the Great Plains and First Wyoming blocks of business. We had limited production of new insurance business in 2017 and expect the same during the remainder of 2018.

Investment income, net of expenses: The components of our net investment income are as follows:

	Three months ended March 31,
	2018			2017
Fixed maturities	$	200,106		$	264,581
Other		14,711			16,007
		214,817			280,588
Less investment expenses		(11,356	)		(25,908	)
Investment income, net of expenses	$	203,461		$	254,680

The decrease in investment income was due primarily to the decrease in our bond portfolio from the sale of bonds during the third quarter of 2017 to provide cash to US Alliance for the coinsurance agreement. Policy loan interest and miscellaneous investment income is included in the “Other” line item above. The decrease in investment expenses was due to the transfer of bonds to American Life’s custodial account from the custodial accounts that were held for First Wyoming Life and Great Plains Life prior to our acquisition of those companies in January of 2017.

Net realized gains on investments: The net realized gain decreased primarily due the market conditions deteriorating in 2018 when most of our bond portfolio was in an unrealized loss position, therefore, when bonds are sold we incurred losses.

Miscellaneous income: Miscellaneous income increased due an increase in our TPA fees. We have two customers for whom we performed these services. We do not expect such services to be a significant source of future revenue. TPA fees earned during the three months ended March 31, 2018 and 2017 were $24,240 and $16,500, respectively.

22

Expenses are summarized in the table below.

	Three months ended March 31,
	2018			2017
Death and other benefits	$	266,860		$	295,257
Interest credited		121,507			219,232
Increase in benefit reserves		(8,341	)		145,126
Amortization of deferred acquisition costs		94,858			158,705
Salaries and benefits		482,716			576,608
Other operating expenses		430,454			719,799
	$	1,388,054		$	2,114,727

Death and other benefits: Death benefits decreased due to an decrease in our direct paid claims. We expect death benefits to continue at current levels due to the age of a block of business we acquired several years ago. Claims experience on our current underwritten block has been minimal. We maintain policy reserves to offset the effect of all claims. Claim expenses on our acquired block of business are largely offset by a release in policy reserves. The decrease in our direct block of business was offset by an increase in our assumed claims.

Interest credited: The decrease was due to American Life’s coinsurance agreement with US Alliance to cede 100% of the Great Plains Life and First Wyoming Life’s blocks of business.

Increase in benefit reserves: The decrease in benefit reserves reflects American Life’s coinsurance agreement with US Alliance to cede 100% of the great Plains Life and First Wyoming Life’s blocks of business. Surrenders primarily from acquired blocks of business also had a direct impact on the decrease in reserves. American Life’s overall persistency is 94% which is above industry average and better than the pricing model for the block.

Amortization of deferred acquisition costs: The decrease was due to American Life’s coinsurance agreement with US Alliance to cede 100% of the Great Plains Life and First Wyoming Life’s blocks of business.

Salaries and benefits: The decrease was due to management’s cost cutting efforts primarily through reduction of staff.

Other operating expenses: Other operating expenses decreased due to reduction in audit fees of $94,000 incurred in the first quarter of 2018 compared to 2017, the Nebraska Department of Insurance regulatory examination fees of $80,000 incurred in 2017, and a decrease in VOBA amortization of $48,000 due to American Life’s coinsurance agreement with US Alliance to cede 100% of the Great Plains Life and First Wyoming Life’s blocks of business which resulted in us writing off the VOBA associated with those businesses. The reduction in audit fees resulted from our inability to start and complete the independent audit of our financial statements for the year ended December 31, 2017.

23

Investments

The Company’s overall investment philosophy is reflected in the allocation of its investments. The Company emphasizes investment grade debt securities, with smaller holdings in equity securities, real estate held for investment, and policy loans. The following table shows the carrying value of our investments by investment category and cash and cash equivalents, and the percentage of each to total invested assets as of March 31, 2018 and December 31, 2017.

	March 31, 2018				December 31, 2017
	Carrying		Percent		Carrying		Percent
	Value		of Total		Value		of Total
Fixed maturity securities:
U.S. government obligations	$	1,986,637	9.1	%	$	2,030,098	8.9	%
Mortgage-back securities		1,244,069	5.7			1,318,581	5.8
States and political subdivisions - general obligation		265,156	1.2			269,987	1.2
States and political subdivisions - special revenue		25,104	0.1			25,385	0.1
Corporate		16,827,823	77.3			17,361,856	75.7
Total fixed maturity securities		20,348,789	93.4			21,005,907	91.7
Cash and cash equivalents		505,220	2.3			951,527	4.2
Other investments:
Real estate, held for investment		502,678	2.3			505,688	2.2
Policy loans		431,755	2.0			435,196	1.9
Total	$	21,788,442	100.0	%	$	22,898,318	100.0	%

The following table shows the distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of March 31, 2018 and December 31, 2017.

	March 31, 2018				December 31, 2017
	Carrying				Carrying
	Value		Percent		Value		Percent
AAA and U.S. Government	$	4,793,677	23.6	%	$	3,146,782	15.0	%
AA		1,421,020	7.0			2,979,616	14.2
A		5,138,155	25.3			6,797,613	32.4
BBB		8,546,646	41.9			7,573,843	36.0
Total investment grade		19,899,498	97.8			20,497,854	97.6
BB and other		449,291	2.2			508,053	2.4
Total	$	20,348,789	100.0	%	$	21,005,907	100.0	%

Reflecting the quality of securities maintained by the Company, 97.8% and 97.6% of all fixed maturity securities were investment grade as of March 31, 2018 and December 31, 2017, respectively. Due to the low interest rate environment, the Company has invested in bonds with “A” or “BBB” ratings.

Market Risks of Financial Instruments

The Company holds a portfolio of investments that primarily includes cash, bonds, stocks, and real estate, held for investment. Each of these investments is subject to market risks that can affect their return and their fair value. A majority of the investments are fixed maturity securities including debt issues of corporations, U.S. Treasury securities, or securities issued by government agencies. The primary market risks affecting the investment portfolio are interest rate risk, credit risk, and equity risk.

24

Interest Rate Risk

Interest rate risk arises from the price sensitivity of investments to changes in interest rates. Interest and dividend income represent the greatest portion of an investment’s return for most fixed maturity securities in stable interest rate environments. The changes in the fair value of such investments are inversely related to changes in market interest rates. As interest rates fall, the interest and dividend streams of existing fixed-rate investments become more valuable and fair values rise. As interest rates rise, the opposite effect occurs. We attempt to mitigate our exposure to adverse interest rate movements through staggering the maturities of the fixed maturity investments and through maintaining cash and other short term investments to assure sufficient liquidity to meet its obligations and to address reinvestment risk considerations. Due to the composition of our book of insurance business, we believe it is unlikely that we would encounter large surrender activity due to an interest rate increase that would force the disposal of fixed maturities at a loss.

Credit Risk

We are exposed to credit risk through counterparties and within the investment portfolio. Credit risk relates to the uncertainty associated with an obligor’s ability to make timely payments of principal and interest in accordance with the contractual terms of an instrument or contract. We manage our credit risk through diversification of investments amongst many corporations and numerous industries. Additionally our investment policy limits the size of holding in any particular issuer.

Liquidity and Capital Resources

At March 31, 2018, we had cash and cash equivalents totaling $505,220. We believe that our existing cash and cash equivalents will be sufficient to fund the anticipated operating expenses and capital expenditures for the remainder of 2018 when combined with the liquidity associated with our investment portfolio. However, most of our liquid assets are held in our insurance subsidiary and under existing insurance law, the subsidiary cannot make significant payments to us as the parent company. Accordingly, unless we are able to raise substantial additional capital in the near term, our ability to continue as a going concern is doubtful. Management has been seeking to raise additional capital or obtain other financing in order to meet the liquidity issues that we face, but we cannot assure that additional capital or another form of funding will occur in 2018. We have based the foregoing upon assumptions that may prove to be wrong and we could use our limited capital resources sooner than we currently expect.

The National Association of Insurance Commissioners (“NAIC”) has established minimum capital requirements in the form of Risk-Based Capital (“RBC”). RBC factors the type of business written by an insurance company, the quality of its assets and various other aspects of an insurance company’s business to develop a minimum level of capital called “authorized control level risk-based capital” and compares this level to adjusted statutory capital that includes capital and surplus as reported under statutory accounting principles, plus certain investment reserves. Should the ratio of adjusted statutory capital to control level RBC fall below 200%, a series of remedial actions by the affected company would be required. Our RBC at December 31, 2017 was 533.907%.

Effective September 30, 2017, American Life entered into an indemnity coinsurance transaction with US Alliance to transfer 100% of the risk related to the Great Plains Life and First Wyoming Life blocks of business. The purpose of this transaction was to provide statutory capital and surplus for American Life and has minimal effect on GAAP financials. We paid no commissions or brokerage fees for this transaction and the proceeds of the transaction were based upon valuations prepared by our third party actuary. Under the indemnity coinsurance, US Alliance assumed certain liabilities and obligations for incurred claims, surrenders and commission from the effective date. As we are not relieved of our legal liability to the policyholders; the liabilities and obligations associated with the reinsured blocks of business remain on our Consolidated Balance Sheets with a corresponding reinsurance receivable from US Alliance. We transferred $9,569,175 of GAAP net adjusted reserves as of September 30, 2017 to US Alliance for cash of $7,078,223 which was net of a ceding allowance of $1,850,000 which is treated as an increase to surplus on a statutory basis. As a result of the transaction, in addition to the reserves, American Life will cede approximately $883,000 of annual GAAP revenues and $1,758,250 of statutory revenues.

25

Our surplus notes of $300,000 and $250,000 matured on August 1, 2016 and September 1, 2016, respectively. Due to the nature of surplus notes a repayment cannot be made without the prior approval of the Nebraska regulators and they have not approved any repayment to date.

Since inception, our operations have been financed primarily through the sale of voting common stock and preferred stock. Our operations have generated significant operating losses since we were incorporated in 2003. We expect to continue to incur losses for at least the foreseeable future.

Aside from raising capital, which has funded the vast majority of our operations, premium income, deposits to policyholder account balances, and investment income are the primary sources of funds while withdrawals of policyholder account balances, investment purchases, policy benefits in the form of claims, and operating expenses are the primary uses of funds. To ensure we will be able to meet future commitments, the funds received as premium payments and deposits are invested in primarily fixed income securities. Funds are invested with the intent that the income from investments, plus proceeds from maturities, will in the future meet our ongoing cash flow needs. The approach of matching asset and liability durations and yields requires an appropriate mix of investments. Our investments consist primarily of marketable debt securities that could be readily converted to cash for liquidity needs. Cash flow projections and cash flow tests under various market interest scenarios are also performed annually to assist in evaluating liquidity needs and adequacy.

Net cash used by operating activities was $538,316 for March 31, 2018, which was comprised primarily of the net loss of $741,982 and the amounts recoverable from reinsurers of $218,969, partially offset by an increase in policy liabilities of $398,740. Net cash used for investing activities was $7,387. The primary source of cash was from sales of available for sale securities. Offsetting this source of cash was our purchases of investments in available-for-sale securities and the purchase of property and equipment. Net cash provided by financing activities was $99,396. The primary source of cash was net receipts on deposit-type contracts.

Management has been focused on raising additional capital or seeking other funding from outside investors. On May 9, 2018, the Company entered into a Loan, Covertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement (the “Agreement”) with a non-affiliated third party, Xenith Holdings LLC, a Delaware limited liability company (“Xenith”). The Nebraska Department of Insurance will need to approve the Agreement, which is expected, within 30-60 days.

For more information, see Note. 11 Subsequent Events on page 20 above and/or the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2018.

Impact of Inflation

Insurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflation may affect such losses and expenses, are known. We attempt, in establishing premiums, to anticipate the potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by us. Inflation also affects the rate of investment return on the investment portfolio with a corresponding effect on investment income.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Contractual Obligations

As a “smaller reporting company” the Company is not required to provide the table of contractual obligations required pursuant to this Item.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company,” the Company is not required to provide disclosure pursuant to this Item.

ITEM 4. CONTROLS AND PROCEDURES.

We have established disclosure controls and procedures to ensure, among other things, material information relating to our Company, including our consolidated subsidiary, is made known to our officers who certify our financial reports and to the other members of our senior management and the Board of Directors.

26

Management, (with the participation of our principal executive officer/principal financial officer), carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of March 31, 2018. Based on this evaluation, our principal executive officer/principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures along with the related internal controls over financial reporting were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our principal executive officer/principal financial officer to allow timely decisions regarding required disclosure.

However, we were not able to obtain and assimilate all information required to complete the required independent audit of our financial statements for the fiscal year ended December 31, 2017. Hence our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on April 16, 2018 (“Original Filing”) did not technically meet the requirements of the Exchange Act. When the audited financial statements are completed, they will be filed under an amendment to the Original Filing.

27

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are involved in litigation incidental to our operations from time to time. We are not presently a party to any legal proceedings other than litigation arising in the ordinary course of our business, and we are not aware of any claims that could materially affect our financial position or results of operations.

ITEM 1A. RISK FACTORS.

There have been no material changes from the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 in response to Item 1A of Part I of such Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

28

ITEM 6. EXHIBITS.

EXHIBIT
NUMBER	DESCRIPTION
31.1*	Certification of Principal Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS **	XBRL Instance Document.
101.SCH **	XBRL Taxonomy Extension Schema Document.
101.CAL **	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB **	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE **	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF **	XBRL Taxonomy Extension Definition Linkbase Document.

____________________

* Filed herewith.

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 15, 2018

MIDWEST HOLDING INC.
By:	/s/ Mark A. Oliver
Name:	Mark A. Oliver
Title:	Chief Executive Officer
	Principal Executive Officer & Principal Financial Officer

30

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark A. Oliver, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Midwest Holding Inc. (the “Company”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2018	/s/ Mark A. Oliver
	Mark A. Oliver
	Chief Executive Officer
	Principal Executive Officer & Principal Financial Officer

EX-32

Exhibit 32

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Midwest Holding Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2018	/s/ Mark A. Oliver
	Mark A. Oliver
	Chief Executive Officer
	Principal Executive Officer & Principal Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 01, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	MIDWEST HOLDING INC.
Entity Central Index Key	0000355379
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		22,860,701
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2018

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Investments, available for sale, at fair value
Fixed maturities (amortized cost: $21,503,891 and $21,573,519 respectively)	$ 20,348,789	$ 21,005,907
Real estate, held for investment	502,678	505,688
Policy Loans	431,755	435,196
Total investments	21,283,222	21,946,791
Cash and cash equivalents	505,220	951,527
Amounts recoverable from reinsurers	22,721,637	21,855,266
Interest due and accrued	228,319	223,166
Due premiums	564,206	635,835
Deferred acquisition costs, net	2,005,409	2,046,864
Value of business acquired, net	409,694	427,454
Intangible assets	700,000	700,000
Property and equipment, net	115,418	127,976
Other assets	91,091	107,723
Total assets	48,624,216	49,022,602
Liabilities:
Benefit reserves	26,289,438	26,228,105
Policy claims	426,965	447,513
Deposit-type contracts	18,860,160	18,421,055
Advance premiums	59,085	40,839
Deferred gain on coinsurance transaction	943,333	322,487
Total policy liabilities	46,578,981	45,459,999
Accounts payable and accrued expenses	588,204	790,361
Surplus notes	550,000	550,000
Total liabilities	47,717,185	46,800,360
Commitments and Contingencies (See Note 8)
Stockholders' Equity:
Common stock, $0.001 par value. Authorized 120,000,000 shares; issued and outstanding 22,860,701 as of March 31, 2018 and as of December 31, 2017.	22,861	22,861
Additional paid-in capital	33,006,255	33,006,255
Accumulated deficit	(30,994,953)	(30,252,971)
Accumulated other comprehensive loss	(1,127,132)	(553,903)
Total stockholders' equity	907,031	2,222,242
Total liabilities and stockholders' equity	$ 48,624,216	$ 49,022,602

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Amortized Cost	$ 21,503,891	$ 21,573,519
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	120,000,000	120,000,000
Common stock, shares issued	22,860,701	22,860,701
Common stock, shares outstanding	22,860,701	22,860,701

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income:
Premiums	$ 466,042	$ 832,847
Investment income, net of expenses	203,461	254,680
Net realized loss on investments	(49,671)	(35,504)
Miscellaneous income	26,240	18,800
Total Income	646,072	1,070,823
Expenses:
Death and other benefits	266,860	295,257
Interest credited	121,507	219,232
(Decrease) Increase in benefit reserves	(8,341)	145,126
Amortization of deferred acquisition costs	94,858	158,705
Salaries and benefits	482,716	576,608
Other operating expenses	430,454	719,799
Total Expenses	1,388,054	2,114,727
Loss before income taxes	(741,982)	(1,043,904)
Income tax expense
Net loss	(741,982)	(1,043,904)
Comprehensive (loss) income :
Unrealized (losses) income on investments arising during period	(622,900)	183,013
Less: reclassification adjustment for net realized losses on investments	49,671	35,504
Other comprehensive (loss) income	(573,229)	218,517
Comprehensive loss	$ (1,315,211)	$ (825,387)
Net loss per common share, basic and diluted	$ (0.03)	$ (0.05)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash Flows from Operating Activities:
Net loss	$ (741,982)	$ (1,043,904)
Adjustments to arrive at cash provided by operating activities:
Net premium and discount on investments	30,785	53,312
Depreciation and amortization	33,328	85,647
Deferred acquisition costs capitalized	(39,142)	(93,674)
Amortization of deferred acquisition costs	94,858	158,705
Net realized gains on investments	49,671	35,504
Deferred coinsurance ceding commission	(26,556)
Changes in operating assets and liabilities:
Amounts recoverable from reinsurers	(218,969)	56,882
Interest and dividends due and accrued	(5,153)	(26,061)
Due premiums	71,629	70,029
Policy liabilities	398,740	132,237
Other assets and liabilities	(185,525)	(206,280)
Net cash used for operating activities	(538,316)	(777,603)
Securities available for sale:
Purchases	(3,323,196)	(3,870,624)
Proceeds from sale or maturity	3,312,368	4,712,145
Net change in policy loans	3,441	(2,138)
Net purchases of property and equipment		(24,165)
Net cash (used for) provided by investing activities	(7,387)	815,218
Cash Flows from Financing Activities:
Preferred stock dividend		(21,560)
Receipts on deposit-type contracts	312,611	863,617
Withdrawals on deposit-type contracts	(213,215)	(319,707)
Net cash provided by financing activities	99,396	522,350
Net (decrease) increase in cash and cash equivalents	(446,307)	559,965
Cash and cash equivalents:
Beginning	951,527	661,545
Ending	$ 505,220	$ 1,221,510

XML

Nature of Operations and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Nature of Operations and Summary of Significant Accounting Policies

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of operations: Midwest Holding Inc. (“Midwest” or “the Company”) was incorporated in Nebraska on October 31, 2003 for the primary purpose of becoming a financial services company. The Company is in the life insurance business and operates through its wholly owned subsidiary, American Life & Security Corp. (“American Life”). The Company has made several acquisitions of life insurance companies and related entities since 2008, all of which have been merged into the Company or into American Life.

Basis of presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions from the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Therefore, the information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements.

In the opinion of management and subject to the special note above, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months period ended March 31, 2018, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018. All material inter-company accounts and transactions have been eliminated in consolidation.

Investments: All fixed maturities and a portion of the equity securities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in comprehensive loss.

Declines in the fair value of available for sale securities below their amortized cost are evaluated to assess whether any other-than-temporary impairment loss should be recorded. In determining if these losses are expected to be other-than-temporary, the Company considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost.

The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the statement of comprehensive income as an other-than-temporary impairment. If the Company does not expect to recover the amortized basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default.

No other-than-temporary impairments were recognized during the three months ended March 31, 2018 or 2017.

Investment income consists of interest, dividends, and real estate income, which are recognized on an accrual basis and amortization of premiums and discounts.

Policy loans: Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value.

Real estate, held for investment: Real estate, held for investment is comprised of ten condominiums in Hawaii. Real estate is carried at depreciated cost. Depreciation on residential real estate is computed on a straight-line basis over 50 years.

Cash: The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. At March 31, 2018 and December 31, 2017, the Company had no cash equivalents.

Deferred acquisition costs: Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to reinsurers, that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. These costs are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. The Company evaluates the types of acquisition costs it capitalizes. The Company capitalizes agent compensation and benefits and other expenses that are directly related to the successful acquisition of contracts. The Company also capitalizes expenses directly related to activities performed by the Company, such as underwriting, policy issuance, and processing fees incurred in connection with successful contract acquisitions.

Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company determined that no events occurred in the three months ended March 31, 2018 that suggest a review should be undertaken.

The following table provides information about deferred acquisition costs for the periods ended March 31, 2018 and December 31, 2017, respectively.

	March 31, 2018			December 31, 2017
Balance at beginning of period	$	2,046,864		$	2,568,799
Capitalization of commissions, sales and issue expenses		39,142			333,940
Change in DAC due to unrealized investment losses		14,261			(14,144	)
Gross amortization		(94,858	)		(404,111	)
Change in DAC due to coinsurance ceding commission		-			(437,620	)
Balance at end of period	$	2,005,409		$	2,046,864

Value of business acquired: Value of business acquired (“VOBA”) represents the estimated value assigned to purchased companies or insurance in force of the assumed policy obligations at the date of acquisition of a block of policies.

Recoverability of value of business acquired is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company determined that no events occurred in the three months ended March 31, 2018 that suggest a review should be undertaken.

Property and equipment: Property and equipment are stated at cost net of accumulated depreciation. Annual depreciation is primarily computed using straight-line methods for financial reporting and straight-line and accelerated methods for tax purposes. Furniture and equipment is depreciated over 3 to 7 years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $12,558 and $16,390 for the three months ended March 31, 2018 and 2017, respectively. Accumulated depreciation totaled $906,572 and $894,014 as of March 31, 2018 and December 31, 2017, respectively.

Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. Management has determined that no such events occurred in the three months ended March 31, 2018 that would indicate the carrying amounts may not be recoverable.

Reinsurance: In the normal course of business, the Company seeks to limit any single exposure to losses on large risks by purchasing reinsurance. The amounts reported in the consolidated balance sheets as reinsurance recoverable include amounts billed to reinsurers on losses paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverable on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Insurance liabilities are reported gross of reinsurance recoverable. Management believes the recoverables are appropriately established. The Company generally strives to diversify its credit risks related to reinsurance ceded. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were no allowances as of March 31, 2018 or December 31, 2017.

Benefit reserves: The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables.

Policy claims: Policy claims are based on reported claims plus estimated incurred but not reported claims developed from trends of historical data applied to current exposure.

Deposit-type contracts: Deposit-type contracts consist of amounts on deposit associated with deferred annuity riders, premium deposit funds and supplemental contracts without life contingencies.

Income taxes: The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state or local tax examinations by tax authorities for the years before 2010. The provision for income taxes is based on income as reported in the financial statements. The income tax provision is calculated under the asset and liability method. Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. The Company has no uncertain tax positions that it believes are more-likely-than not that the benefit will not to be realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company had no accruals for payments of interest and penalties at March 31, 2018 or December 31, 2017.

Revenue recognition and related expenses: Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due.

Amounts received as payment for annuities and/or non-traditional contracts such as interest sensitive whole life contracts, single payment endowment contracts, single payment juvenile contracts and other contracts without life contingencies are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services and cost of insurance, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the consolidated statements of cash flows.

Amounts received under our multi-benefit policy form are allocated to the life insurance portion of the multi-benefit life insurance arrangement and the annuity portion based upon the signed policy.

Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts. Acquisition costs are amortized over the premium paying period using the net level premium method. Traditional life insurance products are treated as long duration contracts, which generally remain in force for the lifetime of the insured.

Comprehensive loss: Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable securities classified as available for sale, net of applicable taxes.

Common and preferred stock and earnings (loss) per share: The par value per common share is $0.001 with 120,000,000 voting common shares authorized, 20,000,000 non-voting common shares authorized, and 10,000,000 preferred shares authorized. At March 31, 2018 and December 31, 2017, the Company had 22,860,701 voting common shares issued and outstanding.

The Class A preferred shares were non-cumulative, non-voting and convertible by the holder to voting common shares after May, 2015, at a rate of 1.3 common shares for each preferred share (subject to customary anti-dilution adjustments). The par value per preferred share was $0.001 with 2,000,000 shares authorized. At December 31, 2017 the 74,159 Class A preferred shares outstanding were converted by the Company into 96,407 voting common shares.

The Class B preferred shares were non-cumulative, non-voting and convertible by the holder or the Company to voting common shares after May 1, 2017 at a rate of 2.0 common shares for each preferred share. The par value per preferred share was $0.001 with 1,000,000 shares authorized. The stated annual dividend rate on the Class B preferred shares was 7%. Dividends totaling $30,544 were paid as of June 30, 2017. On June 15, 2017, the 102,669 outstanding Class B preferred shares were converted by the Company into 205,338 voting common shares.

Earnings (loss) per share attributable to the Company’s common stockholders were computed based on the weighted average number of shares outstanding during each period. The weighted average number of shares outstanding during the three months ended March 31, 2018 and 2017 were 22,860,701 and 22,558,956 shares, respectively.

New accounting standards: In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326). Under the new guidance, this replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to perform credit loss estimates. This update changes the methodology from an incurred loss to an expected credit loss. An allowance for the expected credit loss will be set up and the net income will be impacted. The credit losses will be evaluated in the current period and an adjustment to the allowance can be made. The new standard becomes effective after December 15, 2019. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

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Investments

3 Months Ended

Mar. 31, 2018

Marketable Securities [Abstract]

Investments

Note 2. Investments

The cost or amortized cost and estimated fair value of investments classified as available-for-sale as of March 31, 2018 and December 31, 2017 are as follows:

	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
March 31, 2018:
Fixed maturities:
U.S. government obligations	$	2,127,142	$	-	$	140,505	$	1,986,637
Mortgage-back securities		1,300,212		-		56,143		1,244,069
States and political subdivisions -- general obligations		268,805		-		3,649		265,156
States and political subdivisions -- special revenue		25,318		-		214		25,104
Corporate		17,782,414		7,533		962,124		16,827,823
Total fixed maturities	$	21,503,891	$	7,533	$	1,162,635	$	20,348,789
December 31, 2017:
Fixed maturities:
U.S. government obligations	$	2,132,441	$	-	$	102,343	$	2,030,098
Mortgage-back securities		1,365,684		-		47,103		1,318,581
States and political subdivisions -- general obligations		269,884		1,123		1,020		269,987
States and political subdivisions -- special revenue		25,347		38		-		25,385
Corporate		17,780,163		44,037		462,344		17,361,856
Total fixed maturities	$	21,573,519	$	45,198	$	612,810	$	21,005,907

The Company has two securities that individually exceed 10% of the total of the state and political subdivisions categories as of March 31, 2018. The amortized cost, fair value, credit ratings, and description of each security is as follows:

	Amortized		Estimated
	Cost		Fair Value		Credit Rating
March 31, 2018:
Fixed maturities:
States and political subdivisions -- general obligations
Bellingham Wash	$	109,671	$	106,363	AA+
Longview Washington Refunding		159,134		158,793	Aa3
Total	$	268,805	$	265,156

The following table summarizes, for all securities in an unrealized loss position at March 31, 2018 and December 31, 2017, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position.

	March 31, 2018					December 31, 2017
			Gross		Number			Gross		Number
	Estimated		Unrealized		of	Estimated		Unrealized		of
	Fair Value		Loss		Securities(1)	Fair Value		Loss		Securities(1)
Fixed Maturities:
Less than 12 months:
U.S. government obligations	$	254,346	$	20,816	2	$	262,662	$	13,877	2
Mortgage-back securities		1,244,069		56,143	19		1,318,581		47,103	19
States and political subdivisions -- general obligations		265,156		3,649	2		108,917		1,020	1
States and political subdivisions -- special revenue		25,104		214	1		-		-	-
Corporate		10,680,779		471,058	55		7,511,874		133,061	35
Greater than 12 months:
U.S. government obligations		1,732,291		119,689	10		1,767,435		88,466	10
Corporate		5,886,070		491,066	37		7,144,231		329,283	42
Total fixed maturities	$	20,087,815	$	1,162,635	126	$	18,113,700	$	612,810	109

⁽¹⁾ We may reflect a security in more than one aging category based on various purchase dates.

Based on our review of the securities in an unrealized loss position at March 31, 2018 and December 31, 2017, no other-than-temporary impairments were deemed necessary. Management believes that the Company will fully recover its cost basis in the securities held at March 31, 2018, and management does not have the intent to sell nor is it more likely than not that the Company will be required to sell such securities until they recover or mature. The temporary impairments shown herein are primarily the result of the current interest rate environment rather than credit factors that would imply other-than-temporary impairment.

The amortized cost and estimated fair value of fixed maturities at March 31, 2018, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Estimated
	Cost		Fair Value
Due in one year or less	$	200,819	$	198,962
Due after one year through five years		1,450,714		1,392,599
Due after five years through ten years		6,427,610		6,045,849
Due after ten years		13,424,748		12,711,379
	$	21,503,891	$	20,348,789

The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At March 31, 2018 and December 31, 2017, these required deposits had a total amortized cost of $3,281,240 and $3,287,932 and fair values of $3,085,185 and $3,167,727, respectively.

The components of net investment income for the three months ended March 31, 2018 and 2017 are as follows:

	Three months ended March 31,
	2018			2017
Fixed maturities	$	200,106		$	264,581
Other		14,711			16,007
		214,817			280,588
Less investment expenses		(11,356	)		(25,908	)
Investment income, net of expenses	$	203,461		$	254,680

Proceeds for the three months ended March 31, 2018 and 2017 from sales of investments classified as available-for-sale were $3,312,368 and $4,712,145, respectively. Gross gains of $24,910 and $10,141 and gross losses of $74,581 and $45,645 were realized on those sales during the three months ended March 31, 2018 and 2017, respectively.

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Fair Values of Financial Instruments

3 Months Ended

Mar. 31, 2018

Investments, All Other Investments [Abstract]

Fair Values of Financial Instruments

Note 3. Fair Values of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

— Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
 

— Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
 

— Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the period in which the reclassifications occur.

A description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Fixed maturities: Fixed maturities are recorded at fair value on a recurring basis utilizing a third-party pricing source. The valuations are reviewed and validated quarterly through random testing by comparisons to separate pricing models or other third party pricing services. For the period ended March 31, 2018, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third party prices were changed from the values received. Securities with prices based on validated quotes from pricing services are reflected within Level 2.

Cash: The carrying value of cash and cash equivalents and short-term investments approximate the fair value because of the short maturity of the instruments.

Policy loans: Policy loans are stated at unpaid principal balances. As these loans are fully collateralized by the cash surrender value of the underlying insurance policies, the carrying value of the policy loans approximates their fair value. Policy loans are categorized as Level 3 in the fair value hierarchy.

Deposit-type contracts: The fair value for direct and assumed liabilities under deposit-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and nonperformance risk of the liabilities. These liabilities are categorized as Level 3 in the fair value hierarchy.

Surplus notes: The fair value for surplus notes is calculated using a discounted cash flow approach. Cash flows are projected utilizing scheduled repayments and discounted to the valuation date using market rates currently available for debt with similar remaining maturities. These notes are structured such that all interest is paid at maturity. In the following fair value tables, the Company has included accrued interest expense, which is recorded in the accounts payable and accrued expenses, of approximately $301,930 and $293,922 in carrying value of the surplus notes as of March 31, 2018 and December 31, 2017, respectively. These liabilities are categorized as Level 3 in the fair value hierarchy.

The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017.

			Significant
	Quoted		Other		Significant
	Markets		Inputs		Inputs		Fair
	(Level 1)		(Level 2)		(Level 3)		Value
March 31, 2018
Fixed maturities:
U.S. government obligations	$	-	$	1,986,637	$	-	$	1,986,637
Mortgage-back securities		-		1,244,069		-		1,244,069
States and political subdivisions - general obligations		-		265,156		-		265,156
States and political subdivisions - special revenue		-		25,104		-		25,104
Corporate		-		16,827,823		-		16,827,823
Total fixed maturities	$	-	$	20,348,789	$	-	$	20,348,789
December 31, 2017
Fixed maturities:
U.S. government obligations	$	-	$	2,030,098	$	-	$	2,030,098
Mortgage-back securities		-		1,318,581		-		1,318,581
States and political subdivisions - general obligations		-		269,987		-		269,987
States and political subdivisions - special revenue		-		25,385		-		25,385
Corporate		-		17,361,856		-		17,361,856
Total fixed maturities	$	-	$	21,005,907	$	-	$	21,005,907

There were no transfers of financial instruments between any levels during the three months ended March 31, 2018 or during the year ended December 31, 2017.

Accounting standards require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis are discussed above. There were no financial assets or financial liabilities measured at fair value on a non-recurring basis.

The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of March 31, 2018 and December 31, 2017, respectively:

	March 31, 2018
			Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical Assets		Observable		Unobservable
	Carrying		and Liabilities		Inputs		Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Policy loans	$	431,755	$	-	$	-	$	431,755	$	431,755
Cash		505,220		505,220		-		-		505,220
Liabilities:
Policyholder deposits (Deposit-type contracts)		18,860,160		-		-		18,860,160		18,860,160
Surplus notes and accrued interest payable		851,930		-		-		851,930		851,930
	December 31, 2017
			Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical Assets		Observable		Unobservable
	Carrying		and Liabilities		Inputs		Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Policy loans	$	435,196	$	-	$	-	$	435,196	$	435,196
Cash		951,527		951,527		-		-		951,527
Liabilities:
Policyholder deposits (Deposit-type contracts)		18,421,055		-		-		18,421,055		18,421,055
Surplus notes and accrued interest payable		843,922		-		-		843,922		843,922

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Income Tax Matters

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Tax Matters

Note 4. Income Tax Matters

Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2018 and December 31, 2017 are as follows:

	March 31, 2018			December 31, 2017
Deferred tax assets:
Loss carryforwards	$	5,990,586		$	5,782,279
Capitalized costs		305,137			317,026
Unrealized losses on investments		246,655			123,454
Benefit reserves		656,853			655,954
Total deferred tax assets		7,199,231			6,878,713
Less valuation allowance		(6,574,445	)		(6,240,192	)
Total deferred tax assets, net of valuation allowance		624,786			638,521
Deferred tax liabilities:
Policy acquisition costs		269,503			264,231
Due premiums		118,483			133,525
Value of business acquired		86,036			89,765
Intangible assets		147,000			147,000
Property and equipment		3,764			4,000
Total deferred tax liabilities		624,786			638,521
Net deferred tax assets	$	-		$	-

At March 31, 2018 and December 31, 2017, the Company recorded a valuation allowance of $6,574,445 and $6,240,192, respectively, on the deferred tax assets to reduce the total to an amount that management believes will ultimately be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income.

Loss carryforwards for tax purposes as of March 31, 2018, have expiration dates that range from 2024 through 2036.

There was no income tax expense for the three months ended March 31, 2018 and 2017. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following:

	Three months ended March 31
	2018			2017
Computed expected income tax benefit	$	(155,816	)	$	(354,927	)
Increase (reduction) in income taxes resulting from:
Meals, entertainment and political contributions		1,957			2,877
Other		(57,193	)		236
		(55,236	)		3,113
Tax benefit before valuation allowance		(211,052	)		(351,814	)
Change in valuation allowance		211,052			351,814
Net income tax expenses	$	-		$	-

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Reinsurance

3 Months Ended

Mar. 31, 2018

Reinsurance Disclosures [Abstract]

Reinsurance

Note 5. Reinsurance

A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 is as follows:

	March 31, 2018		December 31, 2017
Balance sheets:
Benefit and claim reserves assumed	$	2,620,723	$	2,638,477
Benefit and claim reserves ceded		22,721,637		21,855,266
	Three months ended March 31,
	2018		2017
Statements of comprehensive income:
Premiums assumed	$	6,236	$	6,514
Premiums ceded		342,509		50,015
Benefits assumed		59,270		15,766
Benefits ceded		61,076		115,846
Commissions assumed		6		10
Commissions ceded		1,934		-

The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by reinsurer along with the A.M. Best credit rating as of March 31, 2018:

						Recoverable on				Total Amount
		Recoverable		Recoverable		Benefit		Ceded		Recoverable
	AM Best	on Paid		on Unpaid		Reserves/Deposit-		Due/Advance		from
Reinsurer	Rating	Losses		Losses		type Contracts		Premiums		Reinsurer
Optimum Re Insurance Company	A-	$	-	$	6,877	$	94,926	$	-	$	101,803
Sagicor Life Insurance Company	A-		-		279,115		12,196,175		244,128		12,231,162
US Alliance Life and Security Company	NR		-		8,000		10,477,970		97,298		10,388,672
		$	-	$	293,992	$	22,769,071	$	341,426	$	22,721,637

Effective September 30, 2017, American Life entered into an indemnity coinsurance transaction with US Alliance Life and Security Company (“US Alliance”) to transfer 100% of the risk related to the Great Plains Life and First Wyoming Life blocks of business. The purpose of this transaction was to provide statutory capital and surplus for American Life and has minimal effect on GAAP financials. We paid no commissions or brokerage fees for this transaction and the proceeds of the transaction were based upon valuations prepared by our third party actuary. American Life had more than one offer to assume this business. Under the indemnity coinsurance, US Alliance assumed certain liabilities and obligations for incurred claims, surrenders and commissions. As we are not relieved of our legal liability to the policyholders; the liabilities and obligations associated with the reinsured blocks of business remain on our Consolidated Balance Sheets with a corresponding reinsurance receivable from US Alliance. We transferred $9,569,175 of GAAP net adjusted reserves as of September 30, 2017 to US Alliance for cash of $7,078,223 which was net of a ceding allowance of $1,850,000 which is treated as an increase to surplus on a statutory basis. As a result of the transaction, in addition to the reserves, American Life will cede approximately $883,000 of annual GAAP revenues and $1,758,250 of statutory revenues. US Alliance assumes all responsibilities for incurred claims, surrenders and commission from the effective date.

The ceding commission of $1,850,000 first reduced DAC of $437,620 and VOBA of $1,085,811 which had been held on our books from the Great Plains Life and First Wyoming Life acquisitions. The remaining $967,521 has been reflected as a deferred gain, which will be recognized into income over the expected duration of the Great Plains Life and First Wyoming Life blocks of business.

At March 31, 2018 and December 31, 2017, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to Sagicor were $12,231,162 and $12,320,695, respectively. At March 31, 2018 and December 31, 2017, total benefit reserves, policy claims, deposit-type contracts, and due premiums ceded by American Life to US Alliance was $10,388,672 and $9,426,203, respectively. American Life remains contingently liable on the ceded reinsurance should Sagicor or US Alliance be unable to meet their obligations.

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. 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, a separate contingency reserve may be established. At March 31, 2018 and December 31, 2017, no contingency reserve was established.

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Deposit-Type Contracts

3 Months Ended

Mar. 31, 2018

Separate Accounts Disclosure [Abstract]

Deposit-Type Contracts

Note 6. Deposit-Type Contracts

The Company’s deposit-type contracts represent the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. Liabilities for these deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less policyholder withdrawals. The following table provides information about deposit-type contracts for the quarter ended March 31, 2018 and the year ended December 31, 2017:

	March 31, 2018			December 31, 2017
Beginning balance	$	18,421,055		$	16,012,567
US Alliance		220,202			-
Deposits received		312,611			2,511,107
Investment earnings		121,507			808,085
Withdrawals		(213,215	)		(899,799	)
Contract Charges		(2,000	)		(10,905	)
Ending balance	$	18,860,160		$	18,421,055

Under the terms of American Life’s coinsurance agreement with Security National Life Insurance or SNL, American Life assumes certain deposit-type contract obligations, as shown in the table above. The remaining deposits, withdrawals and interest credited represent those for American Lif’s direct business. Additionally, American Life cedes 100% of the Great Plains Life and First Wyoming Life’s block of business to US Alliance. Accordingly, this amount is presented within the corresponding single line above.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 7. Commitments and Contingencies

Legal Proceedings: We are involved in litigation incidental to our operations from time to time. We are not presently a party to any legal proceedings other than litigation arising in the ordinary course of our business, and we are not aware of any claims that could materially affect our financial position or results of operations.

Regulatory Matters: State regulatory bodies and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning the Company’s compliance with laws in relation to, but not limited to, insurance and securities matters.

Office Lease: The Company leases office space in Lincoln, Nebraska under an agreement executed October 17, 2013 that expires on January 31, 2024. The Company executed an amendment to its lease for an additional 2,876 square feet of office space on October 23, 2015, which expired on May 31, 2017. Rent expense for the three months ended March 31, 2018 and 2017 was $47,461 and $56,219, respectively. Future minimum lease payments for the remainder of 2017 and the subsequent years are as follows:

2018	$	102,418
2019		141,412
2020		146,477
2021		151,543
2022		156,608
Later years		175,182
Total	$	873,640

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Statutory Net Income and Surplus

3 Months Ended

Mar. 31, 2018

Statutory Net Income and Surplus [Abstract]

Statutory Net Income and Surplus

Note 8. Statutory Net Income and Surplus

American Life is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Nebraska Department of Insurance. Statutory practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis. Effective September 30, 2017, American Life entered into a coinsurance agreement with US Alliance to cede 100% of the First Wyoming Lif’s and Great Plains Lif’s blocks of business. American Lif’s statutory net loss for the quarters ended March 31, 2018 and 2017 were $651,716 and $722,991, respectively. Capital and surplus of American Life as of March 31, 2018 and December 31, 2017 was $2,321,219 and $2,962,885, respectively.

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Surplus Notes

3 Months Ended

Mar. 31, 2018

Surplus Notes [Abstract]

Surplus Notes

Note 9. Surplus Notes

The following provides a summary of the Company’s surplus notes along with issue dates, maturity dates, face amounts, and interest rates as of March 31, 2018:

						Annual
Creditor	Issue Date	Maturity Date	Face Amount			Interest Rate
David G. Elmore	September 1, 2006	September 1, 2016		$	250,000	7%
David G. Elmore	August 4, 2011	August 1, 2016			300,000	5%

Any payments and/or repayments must be approved by the Nebraska Department of Insurance. As of March 31, 2018, the Company had accrued $301,930 of interest expense under accounts payable and accrued expenses on the consolidated balance sheet. No payments were made in the three months ended March 31, 2018, or during the year ended December 31, 2017. The surplus notes for $300,000 and $250,000 matured on August 1, 2016 and September 1, 2016, respectively.

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Related Party Transactions

3 Months Ended

Mar. 31, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Note 10. Related Party Transactions

The Company commenced its third party administrative (“TPA”) services in 2012 as an additional revenue source. These services are offered to non-consolidated entities. These agreements, for various levels of administrative services on behalf of each company, generate fee income for the Company. Services provided vary based on their needs and can include some or all aspects of back-office accounting and policy administration. We have been able to perform our TPA services using our existing in-house resources. Fees earned during the three months ended March 31, 2018 and 2017 amounted to $24,240 and $16,500, respectively.

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Subsequent Events

3 Months Ended

Mar. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

Note 11. Subsequent Events

On May 9, 2018, the Company entered into a Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement (the “Agreement”) with a non-affiliated third party, Xenith Holdings LLC, a Delaware limited liability company (“Xenith”).

The following summarizes the Agreement:

Loan, Convertible Preferred Stock and Convertible Senior Secured Note Purchase Agreement.

1. After certain conditions are met, primarily receipt of approval of the Agreement by the Nebraska Department of Insurance which is expected, but cannot be assured, within 30-60 days, a closing will be held (the “Initial Closing”) at which Xenith will loan $600,000 (the “Loan”) to the Company, repayable upon maturity in 10 years with cash interest of 4% per annum payable quarterly and accrued interest of another 4% per annum payable upon maturity.

2. The first $500,000 of the Loan will be convertible, at Xenith’s election, into approximately 24,300,000 shares of the Company’s voting common stock (which equates to approximately $0.02 per share). The remaining $100,000 will also be convertible at the same rate if the Company has adequate authorized voting common stock available which will require an amendment to its Articles of Incorporation under an SEC proxy statement.

3. Also at the Initial Closing Xenith will purchase 1,500,000 shares of the Company’s newly created Class C Preferred Stock for $1,500,000. The Preferred Stock will be convertible, at Xenith’s election, into approximately 72,900,000 shares of the Company’s voting common stock (also at approximately $0.02 per share).

4. After the Initial Closing (sale and issuance of the $600,000 Notes and the Preferred Stock) Xenith, in its sole discretion, may loan up to an additional $22,900,000 to the Company. Any loans made by Xenith under this election (“Subsequent Loans”) will also be convertible into the Company’s voting common stock at the rate of approximately $0.02 per share.

5. To summarize the above for purposes of illustration assuming the Notes and shares of Preferred Stock are converted into the Company’s voting common stock:

	Number	Percentage
Current Company Shareholders	22,900,000	18.3%
Note Conversion ($500,000)	24,300,000	19.5%
Note Conversion ($100,000)	4,900,000	3.9%
Preferred Stock Conversion	72,900,000	58.3%
Total Outstanding	125,000,000	100.0%

For additional details, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2018.

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Nature of Operations and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Nature of operations

Nature of operations: Midwest Holding Inc. (“Midwest” or “the Company”) was incorporated in Nebraska on October 31, 2003 for the primary purpose of becoming a financial services company. The Company is in the life insurance business and operates through its wholly owned subsidiary, American Life & Security Corp. (“American Life”). The Company has made several acquisitions of life insurance companies and related entities since 2008, all of which have been merged into the Company or into American Life.

Basis of presentation

Basis of presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions from the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Therefore, the information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements.

In the opinion of management and subject to the special note above, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months period ended March 31, 2018, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018. All material inter-company accounts and transactions have been eliminated in consolidation.

Investments

Investments: All fixed maturities and a portion of the equity securities owned by the Company are considered available-for-sale and are included in the consolidated financial statements at their fair value as of the financial statement date. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Realized gains and losses on securities sold during the year are determined using the specific identification method. Unrealized holding gains and losses, net of applicable income taxes, are included in comprehensive loss.

Declines in the fair value of available for sale securities below their amortized cost are evaluated to assess whether any other-than-temporary impairment loss should be recorded. In determining if these losses are expected to be other-than-temporary, the Company considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings, and the intent and ability of the Company to hold the investment until the recovery of the cost.

The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the statement of comprehensive income as an other-than-temporary impairment. If the Company does not expect to recover the amortized basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default.

No other-than-temporary impairments were recognized during the three months ended March 31, 2018 or 2017.

Investment income consists of interest, dividends, and real estate income, which are recognized on an accrual basis and amortization of premiums and discounts.

Policy loans

Policy loans: Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. No valuation allowance is established for these policy loans as the amount of the loan is fully secured by the death benefit of the policy and cash surrender value.

Real estate, held for investment

Real estate, held for investment: Real estate, held for investment is comprised of ten condominiums in Hawaii. Real estate is carried at depreciated cost. Depreciation on residential real estate is computed on a straight-line basis over 50 years.

Cash

Cash: The Company considers all liquid investments with original maturities of three months or less when purchased to be cash equivalents. At March 31, 2018 and December 31, 2017, the Company had no cash equivalents.

Deferred acquisition costs

Deferred acquisition costs: Deferred acquisition costs (“DAC”) consist of incremental direct costs, net of amounts ceded to reinsurers, that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. These costs are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. The Company evaluates the types of acquisition costs it capitalizes. The Company capitalizes agent compensation and benefits and other expenses that are directly related to the successful acquisition of contracts. The Company also capitalizes expenses directly related to activities performed by the Company, such as underwriting, policy issuance, and processing fees incurred in connection with successful contract acquisitions.

Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company determined that no events occurred in the three months ended March 31, 2018 that suggest a review should be undertaken.

The following table provides information about deferred acquisition costs for the periods ended March 31, 2018 and December 31, 2017, respectively.

	March 31, 2018			December 31, 2017
Balance at beginning of period	$	2,046,864		$	2,568,799
Capitalization of commissions, sales and issue expenses		39,142			333,940
Change in DAC due to unrealized investment losses		14,261			(14,144	)
Gross amortization		(94,858	)		(404,111	)
Change in DAC due to coinsurance ceding commission		-			(437,620	)
Balance at end of period	$	2,005,409		$	2,046,864

Value of business acquired

Value of business acquired: Value of business acquired (“VOBA”) represents the estimated value assigned to purchased companies or insurance in force of the assumed policy obligations at the date of acquisition of a block of policies.

Recoverability of value of business acquired is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense. The Company performs a recoverability analysis annually in the fourth quarter unless events occur which require an immediate review. The Company determined that no events occurred in the three months ended March 31, 2018 that suggest a review should be undertaken.

Property and equipment

Property and equipment: Property and equipment are stated at cost net of accumulated depreciation. Annual depreciation is primarily computed using straight-line methods for financial reporting and straight-line and accelerated methods for tax purposes. Furniture and equipment is depreciated over 3 to 7 years and computer software and equipment is generally depreciated over 3 years. Depreciation expense totaled $12,558 and $16,390 for the three months ended March 31, 2018 and 2017, respectively. Accumulated depreciation totaled $906,572 and $894,014 as of March 31, 2018 and December 31, 2017, respectively.

Maintenance and repairs are expensed as incurred. Replacements and improvements which extend the useful life of the asset are capitalized. The net book value of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. Management has determined that no such events occurred in the three months ended March 31, 2018 that would indicate the carrying amounts may not be recoverable.

Reinsurance

Reinsurance: In the normal course of business, the Company seeks to limit any single exposure to losses on large risks by purchasing reinsurance. The amounts reported in the consolidated balance sheets as reinsurance recoverable include amounts billed to reinsurers on losses paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverable on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Insurance liabilities are reported gross of reinsurance recoverable. Management believes the recoverables are appropriately established. The Company generally strives to diversify its credit risks related to reinsurance ceded. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were no allowances as of March 31, 2018 or December 31, 2017.

Benefit reserves

Benefit reserves: The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables.

Policy claims

Policy claims: Policy claims are based on reported claims plus estimated incurred but not reported claims developed from trends of historical data applied to current exposure.

Deposit-type contracts

Deposit-type contracts: Deposit-type contracts consist of amounts on deposit associated with deferred annuity riders, premium deposit funds and supplemental contracts without life contingencies.

Income taxes

Income taxes: The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state or local tax examinations by tax authorities for the years before 2010. The provision for income taxes is based on income as reported in the financial statements. The income tax provision is calculated under the asset and liability method. Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. The Company has no uncertain tax positions that it believes are more-likely-than not that the benefit will not to be realized. When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company had no accruals for payments of interest and penalties at March 31, 2018 or December 31, 2017.

Revenue recognition and related expenses

Revenue recognition and related expenses: Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due.

Amounts received as payment for annuities and/or non-traditional contracts such as interest sensitive whole life contracts, single payment endowment contracts, single payment juvenile contracts and other contracts without life contingencies are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services and cost of insurance, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the consolidated statements of cash flows.

Amounts received under our multi-benefit policy form are allocated to the life insurance portion of the multi-benefit life insurance arrangement and the annuity portion based upon the signed policy.

Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts. Acquisition costs are amortized over the premium paying period using the net level premium method. Traditional life insurance products are treated as long duration contracts, which generally remain in force for the lifetime of the insured.

Comprehensive loss

Comprehensive loss: Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable securities classified as available for sale, net of applicable taxes.

Common and preferred stock and earnings (loss) per share

Common and preferred stock and earnings (loss) per share: The par value per common share is $0.001 with 120,000,000 voting common shares authorized, 20,000,000 non-voting common shares authorized, and 10,000,000 preferred shares authorized. At March 31, 2018 and December 31, 2017, the Company had 22,860,701 voting common shares issued and outstanding.

The Class A preferred shares were non-cumulative, non-voting and convertible by the holder to voting common shares after May, 2015, at a rate of 1.3 common shares for each preferred share (subject to customary anti-dilution adjustments). The par value per preferred share was $0.001 with 2,000,000 shares authorized. At December 31, 2017 the 74,159 Class A preferred shares outstanding were converted by the Company into 96,407 voting common shares.

The Class B preferred shares were non-cumulative, non-voting and convertible by the holder or the Company to voting common shares after May 1, 2017 at a rate of 2.0 common shares for each preferred share. The par value per preferred share was $0.001 with 1,000,000 shares authorized. The stated annual dividend rate on the Class B preferred shares was 7%. Dividends totaling $30,544 were paid as of June 30, 2017. On June 15, 2017, the 102,669 outstanding Class B preferred shares were converted by the Company into 205,338 voting common shares.

Earnings (loss) per share attributable to the Company’s common stockholders were computed based on the weighted average number of shares outstanding during each period. The weighted average number of shares outstanding during the three months ended March 31, 2018 and 2017 were 22,860,701 and 22,558,956 shares, respectively.

New accounting standards

New accounting standards: In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326). Under the new guidance, this replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to perform credit loss estimates. This update changes the methodology from an incurred loss to an expected credit loss. An allowance for the expected credit loss will be set up and the net income will be impacted. The credit losses will be evaluated in the current period and an adjustment to the allowance can be made. The new standard becomes effective after December 15, 2019. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

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Nature of Operations and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Schedule of Deferred Policy Acquisition Costs

The following table provides information about deferred acquisition costs for the periods ended March 31, 2018 and December 31, 2017, respectively.

	March 31, 2018			December 31, 2017
Balance at beginning of period	$	2,046,864		$	2,568,799
Capitalization of commissions, sales and issue expenses		39,142			333,940
Change in DAC due to unrealized investment losses		14,261			(14,144	)
Gross amortization		(94,858	)		(404,111	)
Change in DAC due to coinsurance ceding commission		-			(437,620	)
Balance at end of period	$	2,005,409		$	2,046,864

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Investments (Tables)

3 Months Ended

Mar. 31, 2018

Marketable Securities [Abstract]

Schedule of Available for Sale Investments

The cost or amortized cost and estimated fair value of investments classified as available-for-sale as of March 31, 2018 and December 31, 2017 are as follows:

	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
March 31, 2018:
Fixed maturities:
U.S. government obligations	$	2,127,142	$	-	$	140,505	$	1,986,637
Mortgage-back securities		1,300,212		-		56,143		1,244,069
States and political subdivisions -- general obligations		268,805		-		3,649		265,156
States and political subdivisions -- special revenue		25,318		-		214		25,104
Corporate		17,782,414		7,533		962,124		16,827,823
Total fixed maturities	$	21,503,891	$	7,533	$	1,162,635	$	20,348,789
December 31, 2017:
Fixed maturities:
U.S. government obligations	$	2,132,441	$	-	$	102,343	$	2,030,098
Mortgage-back securities		1,365,684		-		47,103		1,318,581
States and political subdivisions -- general obligations		269,884		1,123		1,020		269,987
States and political subdivisions -- special revenue		25,347		38		-		25,385
Corporate		17,780,163		44,037		462,344		17,361,856
Total fixed maturities	$	21,573,519	$	45,198	$	612,810	$	21,005,907

Schedule of Amortized Cost, Fair Value, Credit Rating

The Company has two securities that individually exceed 10% of the total of the state and political subdivisions categories as of March 31, 2018. The amortized cost, fair value, credit ratings, and description of each security is as follows:

	Amortized		Estimated
	Cost		Fair Value		Credit Rating
March 31, 2018:
Fixed maturities:
States and political subdivisions -- general obligations
Bellingham Wash	$	109,671	$	106,363	AA+
Longview Washington Refunding		159,134		158,793	Aa3
Total	$	268,805	$	265,156

Schedule of Unrealized Loss of Securities

The following table summarizes, for all securities in an unrealized loss position at March 31, 2018 and December 31, 2017, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position.

	March 31, 2018					December 31, 2017
			Gross		Number			Gross		Number
	Estimated		Unrealized		of	Estimated		Unrealized		of
	Fair Value		Loss		Securities(1)	Fair Value		Loss		Securities(1)
Fixed Maturities:
Less than 12 months:
U.S. government obligations	$	254,346	$	20,816	2	$	262,662	$	13,877	2
Mortgage-back securities		1,244,069		56,143	19		1,318,581		47,103	19
States and political subdivisions -- general obligations		265,156		3,649	2		108,917		1,020	1
States and political subdivisions -- special revenue		25,104		214	1		-		-	-
Corporate		10,680,779		471,058	55		7,511,874		133,061	35
Greater than 12 months:
U.S. government obligations		1,732,291		119,689	10		1,767,435		88,466	10
Corporate		5,886,070		491,066	37		7,144,231		329,283	42
Total fixed maturities	$	20,087,815	$	1,162,635	126	$	18,113,700	$	612,810	109

⁽¹⁾ We may reflect a security in more than one aging category based on various purchase dates.

Schedule of Fixed Maturities

The amortized cost and estimated fair value of fixed maturities at March 31, 2018, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Estimated
	Cost		Fair Value
Due in one year or less	$	200,819	$	198,962
Due after one year through five years		1,450,714		1,392,599
Due after five years through ten years		6,427,610		6,045,849
Due after ten years		13,424,748		12,711,379
	$	21,503,891	$	20,348,789

Components of Net Investment Income

The components of net investment income for the three months ended March 31, 2018 and 2017 are as follows:

	Three months ended March 31,
	2018			2017
Fixed maturities	$	200,106		$	264,581
Other		14,711			16,007
		214,817			280,588
Less investment expenses		(11,356	)		(25,908	)
Investment income, net of expenses	$	203,461		$	254,680

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Fair Values of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Investments, All Other Investments [Abstract]

Schedule of Financial Instruments at Fair Value Measured on a Recurring Basis

The following table presents the Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017.

			Significant
	Quoted		Other		Significant
	Markets		Inputs		Inputs		Fair
	(Level 1)		(Level 2)		(Level 3)		Value
March 31, 2018
Fixed maturities:
U.S. government obligations	$	-	$	1,986,637	$	-	$	1,986,637
Mortgage-back securities		-		1,244,069		-		1,244,069
States and political subdivisions - general obligations		-		265,156		-		265,156
States and political subdivisions - special revenue		-		25,104		-		25,104
Corporate		-		16,827,823		-		16,827,823
Total fixed maturities	$	-	$	20,348,789	$	-	$	20,348,789
December 31, 2017
Fixed maturities:
U.S. government obligations	$	-	$	2,030,098	$	-	$	2,030,098
Mortgage-back securities		-		1,318,581		-		1,318,581
States and political subdivisions - general obligations		-		269,987		-		269,987
States and political subdivisions - special revenue		-		25,385		-		25,385
Corporate		-		17,361,856		-		17,361,856
Total fixed maturities	$	-	$	21,005,907	$	-	$	21,005,907

Schedule of Financial Assets and Liabilities at Fair Value

The following disclosure contains the carrying values, estimated fair values and their corresponding placement in the fair value hierarchy, for financial assets and financial liabilities as of March 31, 2018 and December 31, 2017, respectively:

	March 31, 2018
			Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical Assets		Observable		Unobservable
	Carrying		and Liabilities		Inputs		Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Policy loans	$	431,755	$	-	$	-	$	431,755	$	431,755
Cash		505,220		505,220		-		-		505,220
Liabilities:
Policyholder deposits (Deposit-type contracts)		18,860,160		-		-		18,860,160		18,860,160
Surplus notes and accrued interest payable		851,930		-		-		851,930		851,930
	December 31, 2017
			Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical Assets		Observable		Unobservable
	Carrying		and Liabilities		Inputs		Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Policy loans	$	435,196	$	-	$	-	$	435,196	$	435,196
Cash		951,527		951,527		-		-		951,527
Liabilities:
Policyholder deposits (Deposit-type contracts)		18,421,055		-		-		18,421,055		18,421,055
Surplus notes and accrued interest payable		843,922		-		-		843,922		843,922

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Income Tax Matters (Tables)

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Schedule of Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2018 and December 31, 2017 are as follows:

	March 31, 2018			December 31, 2017
Deferred tax assets:
Loss carryforwards	$	5,990,586		$	5,782,279
Capitalized costs		305,137			317,026
Unrealized losses on investments		246,655			123,454
Benefit reserves		656,853			655,954
Total deferred tax assets		7,199,231			6,878,713
Less valuation allowance		(6,574,445	)		(6,240,192	)
Total deferred tax assets, net of valuation allowance		624,786			638,521
Deferred tax liabilities:
Policy acquisition costs		269,503			264,231
Due premiums		118,483			133,525
Value of business acquired		86,036			89,765
Intangible assets		147,000			147,000
Property and equipment		3,764			4,000
Total deferred tax liabilities		624,786			638,521
Net deferred tax assets	$	-		$	-

Schedule of Effective Tax Rate Reconciliation

This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following:

	Three months ended March 31
	2018			2017
Computed expected income tax benefit	$	(155,816	)	$	(354,927	)
Increase (reduction) in income taxes resulting from:
Meals, entertainment and political contributions		1,957			2,877
Other		(57,193	)		236
		(55,236	)		3,113
Tax benefit before valuation allowance		(211,052	)		(351,814	)
Change in valuation allowance		211,052			351,814
Net income tax expenses	$	-		$	-

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Reinsurance (Tables)

3 Months Ended

Mar. 31, 2018

Reinsurance Disclosures [Abstract]

Summary of Significant Reinsurance Amounts

A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 is as follows:

	March 31, 2018		December 31, 2017
Balance sheets:
Benefit and claim reserves assumed	$	2,620,723	$	2,638,477
Benefit and claim reserves ceded		22,721,637		21,855,266
	Three months ended March 31,
	2018		2017
Statements of comprehensive income:
Premiums assumed	$	6,236	$	6,514
Premiums ceded		342,509		50,015
Benefits assumed		59,270		15,766
Benefits ceded		61,076		115,846
Commissions assumed		6		10
Commissions ceded		1,934		-

Schedule of Significant Reinsurance Balances

The following table provides a summary of the significant reinsurance balances recoverable on paid and unpaid policy claims by reinsurer along with the A.M. Best credit rating as of March 31, 2018:

						Recoverable on				Total Amount
		Recoverable		Recoverable		Benefit		Ceded		Recoverable
	AM Best	on Paid		on Unpaid		Reserves/Deposit-		Due/Advance		from
Reinsurer	Rating	Losses		Losses		type Contracts		Premiums		Reinsurer
Optimum Re Insurance Company	A-	$	-	$	6,877	$	94,926	$	-	$	101,803
Sagicor Life Insurance Company	A-		-		279,115		12,196,175		244,128		12,231,162
US Alliance Life and Security Company	NR		-		8,000		10,477,970		97,298		10,388,672
		$	-	$	293,992	$	22,769,071	$	341,426	$	22,721,637

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Deposit-Type Contracts (Tables)

3 Months Ended

Mar. 31, 2018

Deposit Type Contracts [Abstract]

Schedule of Contracts

The following table provides information about deposit-type contracts for the quarter ended March 31, 2018 and the year ended December 31, 2017:

	March 31, 2018			December 31, 2017
Beginning balance	$	18,421,055		$	16,012,567
US Alliance		220,202			-
Deposits received		312,611			2,511,107
Investment earnings		121,507			808,085
Withdrawals		(213,215	)		(899,799	)
Contract Charges		(2,000	)		(10,905	)
Ending balance	$	18,860,160		$	18,421,055

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Payments

Future minimum lease payments for the remainder of 2017 and the subsequent years are as follows:

2018	$	102,418
2019		141,412
2020		146,477
2021		151,543
2022		156,608
Later years		175,182
Total	$	873,640

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Surplus Notes (Tables)

3 Months Ended

Mar. 31, 2018

Surplus Notes [Abstract]

Summary of Surplus Notes

The following provides a summary of the Company’s surplus notes along with issue dates, maturity dates, face amounts, and interest rates as of March 31, 2018:

						Annual
Creditor	Issue Date	Maturity Date	Face Amount			Interest Rate
David G. Elmore	September 1, 2006	September 1, 2016		$	250,000	7%
David G. Elmore	August 4, 2011	August 1, 2016			300,000	5%

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Subsequent Events (Tables)

3 Months Ended

Mar. 31, 2018

Subsequent Events Tables

Schedule of Company's Voting Common Stock

To summarize the above for purposes of illustration assuming the Notes and shares of Preferred Stock are converted into the Company’s voting common stock:

	Number	Percentage
Current Company Shareholders	22,900,000	18.3%
Note Conversion ($500,000)	24,300,000	19.5%
Note Conversion ($100,000)	4,900,000	3.9%
Preferred Stock Conversion	72,900,000	58.3%
Total Outstanding	125,000,000	100.0%

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Nature of Operations and Summary of Significant Accounting Policies (Schedule of Deferred Acquisition Costs) (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Accounting Policies [Abstract]
Balance at beginning of period	$ 2,046,864	$ 2,568,799	$ 2,568,799
Capitalization of commissions, sales and issue expenses	39,142		333,940
Change in DAC due to unrealized investment losses	14,261		(14,144)
Gross amortization	(94,858)	$ (158,705)	(404,110)
Change in DAC due to coinsurance ceding commission			(437,620)
Balance at end of period	$ 2,005,409		$ 2,046,864

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Nature of Operations and Summary of Significant Accounting Policies (Narrative) (Details)	1 Months Ended	3 Months Ended
	Jun. 30, 2017 USD ($)	Mar. 31, 2018 USD ($) $ / shares shares	Mar. 31, 2017 USD ($) shares	Dec. 31, 2017 USD ($) $ / shares shares	Jun. 15, 2017 shares
Common Stock, Par or Stated Value Per Share | $ / shares		$ 0.001		$ 0.001
Common stock, shares authorized		120,000,000
Common stock, shares issued (in shares)		22,860,701		22,860,701
Common stock, shares outstanding (in shares)		22,860,701		22,860,701
Weighted Average Number of Shares Outstanding, Basic (in shares)		22,860,701	22,558,956
Depreciation | $		$ 12,558	$ 16,390
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | $		906,572		$ 894,014
Preferred stock dividend | $			$ 21,560
Residential Real Estate [Member]
Property, Plant and Equipment, Useful Life		50 years
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life		3 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life		7 years
Computer Software, Intangible Asset [Member]
Property, Plant and Equipment, Useful Life		3 years
Non-voting common shares [Member]
Common stock, shares authorized		20,000,000
Series B Preferred Stock [Member]
Conversion Ratio		2.0
Stated dividend rate		7.00%
Preferred stock, par value (in dollars per share) | $ / shares		$ 0.001
Preferred stock, shares authorized (in shares)		1,000,000
Preferred stock, shares outstanding (in shares)				74,159	102,669
Preferred stock dividend | $	$ 30,544
Converted preferred shares				96,407	205,338
Series A Preferred Stock [Member]
Conversion Ratio		1.3
Preferred stock, par value (in dollars per share) | $ / shares		$ 0.001
Preferred stock, shares authorized (in shares)		2,000,000

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Investments (Schedule of Available for Sale Investments) (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Cost or Amortized Cost	$ 21,503,891	$ 21,573,519
Fixed Maturities [Member]
Cost or Amortized Cost	21,503,891	21,573,519
Gross Unrealized Gains	7,533	45,198
Gross Unrealized Losses	1,162,635	612,810
Estimated Fair Value	20,348,789	21,005,907
Fixed Maturities [Member] | U.S. government obligations [Member]
Cost or Amortized Cost	2,127,142	2,132,441
Gross Unrealized Gains
Gross Unrealized Losses	140,505	102,343
Estimated Fair Value	1,986,637	2,030,098
Fixed Maturities [Member] | States and Political Subdivisions - general obligations [Member]
Cost or Amortized Cost	268,805	269,884
Gross Unrealized Gains		1,123
Gross Unrealized Losses	3,649	1,020
Estimated Fair Value	265,156	269,987
Fixed Maturities [Member] | States and Political Subdivisions - special revenue [Member]
Cost or Amortized Cost	25,318	25,347
Gross Unrealized Gains		38
Gross Unrealized Losses	214
Estimated Fair Value	25,104	25,385
Fixed Maturities [Member] | Corporate [Member]
Cost or Amortized Cost	17,782,414	17,780,163
Gross Unrealized Gains	7,533	44,037
Gross Unrealized Losses	962,124	462,344
Estimated Fair Value	16,827,823	17,361,856
Mortgages-backed securities [Member] | U.S. government obligations [Member]
Cost or Amortized Cost	1,300,212	1,365,684
Gross Unrealized Gains
Gross Unrealized Losses	56,143	47,103
Estimated Fair Value	$ 1,244,069	$ 1,318,581

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Investments (Schedule of Amortized Cost, Fair Value, Credit Rating) (Details)

3 Months Ended

Mar. 31, 2018

USD ($)

Amortized Cost

$ 21,503,891

Us States and Political Subdivisions Debt Securities [Member]

Amortized Cost

268,805

Estimated Fair Value

265,156

Bellingham Washington [Member] | States and Political Subdivisions - general obligations [Member] | Us States and Political Subdivisions Debt Securities [Member]

Amortized Cost

109,671

Estimated Fair Value

$ 106,363

Credit Rating

AA+

Longview Washington Refunding Taxable [Member] | States and Political Subdivisions - general obligations [Member] | Us States and Political Subdivisions Debt Securities [Member]

Amortized Cost

$ 159,134

Estimated Fair Value

$ 158,793

Credit Rating

Aa3

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Investments (Schedule of Unrealized Loss of Securities) (Details)		Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Fixed Maturities [Member]
Estimated Fair Value, Total		$ 20,087,815	$ 18,113,700
Gross Unrealized Loss, Total		$ 1,162,635	$ 612,810
Number of Securities, Total	[1]	126	109
Fixed Maturities [Member] | U.S. government obligations [Member]
Estimated Fair Value, Less than 12 months		$ 254,346	$ 262,662
Gross Unrealized Loss, Less than 12 months		$ 20,816	$ 13,877
Number of Securities, Less than 12 months	[1]	2	2
Estimated Fair value, Greater than 12 months		$ 1,732,291	$ 1,767,435
Gross Unrealized Loss, Greater than 12 months		$ 119,689	$ 88,466
Number of Securities, Greater than 12 months	[1]	10	10
Fixed Maturities [Member] | States and Political Subdivisions - general obligations [Member]
Estimated Fair Value, Less than 12 months		$ 265,156	$ 108,917
Gross Unrealized Loss, Less than 12 months		$ 3,649	$ 1,020
Number of Securities, Less than 12 months	[1]	2	1
Fixed Maturities [Member] | States and Political Subdivisions - special revenue [Member]
Estimated Fair Value, Less than 12 months		$ 25,104
Gross Unrealized Loss, Less than 12 months		$ 214
Number of Securities, Less than 12 months	[1]	1
Fixed Maturities [Member] | Corporate [Member]
Estimated Fair Value, Less than 12 months		$ 10,680,779	$ 7,511,874
Gross Unrealized Loss, Less than 12 months		$ 471,058	$ 133,061
Number of Securities, Less than 12 months	[1]	55	35
Estimated Fair value, Greater than 12 months		$ 5,886,070	$ 7,144,231
Gross Unrealized Loss, Greater than 12 months		$ 491,066	$ 329,283
Number of Securities, Greater than 12 months	[1]	37	42
Mortgages-backed securities [Member] | U.S. government obligations [Member]
Estimated Fair Value, Less than 12 months		$ 1,244,069	$ 1,318,581
Gross Unrealized Loss, Less than 12 months		$ 56,143	$ 47,103
Number of Securities, Less than 12 months	[1]	19	19

[1] We may reflect a security in more than one aging category based on various purchase dates.

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Investments (Schedule of Fixed Maturities) (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Marketable Securities [Abstract]
Amortized Cost, Due in one year or less	$ 200,819
Amortized Cost, Due after one year through five years	1,450,714
Amortized Cost, Due after five years through ten years	6,427,610
Amortized Cost, Due after ten years	13,424,748
Available-for-sale Securities, Debt Maturities, Amortized Cost	21,503,891
Estimated Fair Value, Due in one year or less	198,962
Estimated Fair Value, Due after one year through five years	1,392,599
Estimated Fair Value, Due after five years through ten years	6,045,849
Estimated Fair Value, Due after ten years	12,711,379
Available-for-sale Securities, Debt Securities, Estimated Fair Value	$ 20,348,789	$ 21,005,907

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Investments (Components of Net Investment Income) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net investment income	$ 214,817	$ 280,588
Less investment expenses	(11,356)	(25,908)
Investment income, net of expenses	203,461	254,680
Fixed Maturities [Member]
Net investment income	200,106	264,581
Other [Member]
Net investment income	$ 14,711	$ 16,007

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Investments (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Marketable Securities [Abstract]
Assets on Deposit, Amortized Cost	$ 3,281,240		$ 3,287,932
Assets on Deposit, Fair Value	3,085,185		$ 3,167,727
Proceeds From Sale Of Available-For-Sale Securities	3,312,368	$ 4,712,145
Available-for-sale Securities, Gross Realized Gains	24,910	10,141
Available-for-sale Securities, Gross Realized Losses	$ 74,581	$ 45,645

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Fair Values of Financial Instruments (Schedule of Financial Instruments at Fair Value Measured on a Recurring Basis) (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Fixed Maturities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	$ 20,348,789	$ 21,005,907
Fixed Maturities [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	1,986,637	2,030,098
Fixed Maturities [Member] | States and Political Subdivisions - general obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	265,156	269,987
Fixed Maturities [Member] | States and Political Subdivisions - special revenue [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	25,104	25,385
Fixed Maturities [Member] | Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	16,827,823	17,361,856
Fixed Maturities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 1 [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 1 [Member] | States and Political Subdivisions - general obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 1 [Member] | States and Political Subdivisions - special revenue [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	20,348,789	21,005,907
Fixed Maturities [Member] | Fair Value, Inputs, Level 2 [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	1,986,637	2,030,098
Fixed Maturities [Member] | Fair Value, Inputs, Level 2 [Member] | States and Political Subdivisions - general obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	265,156	269,987
Fixed Maturities [Member] | Fair Value, Inputs, Level 2 [Member] | States and Political Subdivisions - special revenue [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	25,104	25,385
Fixed Maturities [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	16,827,823	17,361,856
Fixed Maturities [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 3 [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 3 [Member] | States and Political Subdivisions - general obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 3 [Member] | States and Political Subdivisions - special revenue [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Fixed Maturities [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Mortgages-backed securities [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	1,244,069	1,318,581
Mortgages-backed securities [Member] | Fair Value, Inputs, Level 1 [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities
Mortgages-backed securities [Member] | Fair Value, Inputs, Level 2 [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities	1,244,069	1,318,581
Mortgages-backed securities [Member] | Fair Value, Inputs, Level 3 [Member] | U.S. government obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, available for sale, equity securities

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Fair Values of Financial Instruments (Schedule of Financial Assets and Liabilities at Fair Value) (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Assets:
Cash	$ 505,220	$ 951,527	$ 1,221,510	$ 661,545
Fair Value, Inputs, Level 1 [Member]
Assets:
Policy loans
Cash	505,220	951,527
Liabilities:
Policyholder deposits (Deposit-type contracts)
Surplus notes and accrued interest payable
Fair Value, Inputs, Level 2 [Member]
Assets:
Policy loans
Cash
Liabilities:
Policyholder deposits (Deposit-type contracts)
Surplus notes and accrued interest payable
Fair Value, Inputs, Level 3 [Member]
Assets:
Policy loans	431,755	435,196
Cash
Liabilities:
Policyholder deposits (Deposit-type contracts)	18,860,160	18,421,055
Surplus notes and accrued interest payable	851,930	843,922
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Assets:
Policy loans	431,755	435,196
Cash	505,220	951,527
Liabilities:
Policyholder deposits (Deposit-type contracts)	18,860,160	18,421,055
Surplus notes and accrued interest payable	851,930	843,922
Estimate Of Fair Value, Fair Value Disclosure [Member]
Assets:
Policy loans	431,755	435,196
Cash	505,220	951,527
Liabilities:
Policyholder deposits (Deposit-type contracts)	18,860,160	18,421,055
Surplus notes and accrued interest payable	$ 851,930	$ 843,922

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Fair Values of Financial Instruments (Narrative) (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Investments, All Other Investments [Abstract]
Accrued interest	$ 301,930	$ 293,922

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Income Tax Matters (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Deferred tax assets:
Loss carryforwards	$ 5,990,586	$ 5,782,279
Capitalized costs	305,137	317,026
Unrealized losses on investments	246,655	123,454
Benefit reserves	656,853	655,954
Total deferred tax assets	7,199,231	6,878,713
Less valuation allowance	(6,574,445)	(6,240,192)
Total deferred tax assets, net of valuation allowance	624,786	638,521
Deferred tax liabilities:
Policy acquisition costs	269,503	264,231
Due premiums	118,483	133,525
Value of business acquired	86,036	89,765
Intangible assets	147,000	147,000
Property and equipment	3,764	4,000
Total deferred tax liabilities	624,786	638,521
Net deferred tax assets

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Income Tax Matters (Schedule of Effective Tax Rate Reconciliation) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Computed expected income tax benefit	$ (155,816)	$ (354,927)
Increase (reduction) in income taxes resulting from:
Meals, entertainment and political contributions	1,957	2,877
Other	(57,193)	236
Total deductions	(55,236)	3,113
Tax benefit before valuation allowance	(211,052)	(351,814)
Change in valuation allowance	211,052	351,814
Net income tax expenses

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Income Tax Matters (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Deferred Tax Assets, Valuation Allowance	$ 6,574,445		$ 6,240,192
U.S. federal income tax rate	21.00%	34.00%
Minimum [Member]
Operating Loss Carryforwards, Expiration Dates	Dec. 31, 2024
Maximum [Member]
Operating Loss Carryforwards, Expiration Dates	Dec. 31, 2036

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Reinsurance (Summary of Significant Reinsurance Amounts) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Balance sheets:
Benefit and claim reserves assumed	$ 2,620,723		$ 2,638,477
Benefit and claim reserves ceded	22,721,637		$ 21,855,266
Statements of comprehensive income:
Premiums assumed	6,236	$ 6,514
Premiums ceded	342,509	50,015
Benefits assumed	59,270	15,766
Benefits ceded	61,076	115,846
Commissions assumed	6	10
Commissions ceded	$ 1,934

XML

Reinsurance (Schedule of Significant Reinsurance Balances) (Details) - USD ($)

3 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Recoverable on Paid Losses

Recoverable on Unpaid Losses

293,992

Recoverable on Benefit Reserves/Deposit-type Contracts

22,769,071

Ceded Due Premiums

341,426

Total Amount Recoverable from Reinsurer

$ 22,721,637

$ 21,855,266

Optimum Reinsurance Company [Member]

AM Best Rating

A-

Recoverable on Paid Losses

Recoverable on Unpaid Losses

6,877

Recoverable on Benefit Reserves/Deposit-type Contracts

94,926

Ceded Due Premiums

Total Amount Recoverable from Reinsurer

$ 101,803

Sagicor Life Insurance Company [Member]

AM Best Rating

A-

Recoverable on Paid Losses

Recoverable on Unpaid Losses

279,115

Recoverable on Benefit Reserves/Deposit-type Contracts

12,196,175

Ceded Due Premiums

244,128

Total Amount Recoverable from Reinsurer

12,231,162

US Alliance Life and Security Company [Member]

Recoverable on Paid Losses

Recoverable on Unpaid Losses

8,000

Recoverable on Benefit Reserves/Deposit-type Contracts

10,477,970

Ceded Due Premiums

97,298

Total Amount Recoverable from Reinsurer

$ 10,388,672

$ 9,426,203

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Reinsurance (Narrative) (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Amounts recoverable from reinsurers	$ 22,721,637		$ 21,855,266
Net of ceding allowance	(26,556)
Coinsurance ceding commission deferred	943,333		322,487
Deferred acquisition cost			(437,620)
Sagicor Life Insurance Company [Member]
Amounts recoverable from reinsurers	12,231,162		12,320,695
US Alliance Life and Security Company [Member]
Amounts recoverable from reinsurers	10,388,672		$ 9,426,203
Amount transferred for reinsurance	9,569,175
Adjusted reserves cash	7,078,223
Net of ceding allowance	1,850,000
Coinsurance ceding commission deferred	$ 0
Deferred gain period	20 years
Deferred acquisition cost	$ 437,620
Value of business acquired	1,085,811
Annual GAAP revenue	883,000
Statutory revenues	$ 1,758,250

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Deposit-Type Contracts (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Deposit Type Contracts [Abstract]
Beginning balance	$ 18,421,055	$ 16,012,567
US Alliance	220,202
Deposits received	312,611	2,511,107
Investment earnings	121,507	808,085
Withdrawals	(213,215)	(899,799)
Contract Charges	(2,000)	(10,905)
Ending balance	$ 18,860,160	$ 18,421,055

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Commitments and Contingencies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Operating Leases, Rent Expense	$ 47,461	$ 56,219
2018	102,418
2019	141,412
2020	146,477
2021	151,543
2022	156,608
Later years	175,182
Total	$ 873,640

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Statutory Net Income and Surplus (Details) - American Life and Security Corporation [Member] - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Statutory Net Loss	$ 651,716	$ 722,991
Capital and Surplus	$ 2,321,219		$ 2,962,885

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Surplus Notes (Summary of Surplus Notes) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Face Amount	$ 550,000	$ 550,000
David Elmore [Member] | Surplus Notes One [Member]
Issue Date	Sep. 01, 2006
Maturity Date	Sep. 01, 2016
Face Amount	$ 250,000
Interest Rate	7.00%
David Elmore [Member] | Surplus Notes Two [Member]
Issue Date	Aug. 04, 2011
Maturity Date	Aug. 01, 2016
Face Amount	$ 300,000
Interest Rate	5.00%

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Surplus Notes (Narrative) (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Interest Payable	$ 301,930	$ 293,922
Surplus Notes [Member]
Interest Payable	$ 301,930

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Related Party Transactions (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
TPA [Member]
Related Party Transaction [Line Items]
Amount of transaction	$ 24,240	$ 16,500

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Subsequent Events (Narrative) (Details) - USD ($)	May 09, 2018	Mar. 31, 2018	Dec. 31, 2017
Subsequent Event [Line Items]
Common stock par value		$ 0.001	$ 0.001
Subsequent Event [Member] | Xenith [Member]
Subsequent Event [Line Items]
Proceeds from issuance of loan	$ 600,000
Loan term	10 years
Interest rate	4.00%
Convertible debt	$ 500,000
Voting common stock	24,300,000
Common stock par value	$ 0.02
Remaining convertible debt	$ 100,000
Proceeds from issuance of notes and preferred stock	600,000
Proceeds from additional loan	$ 22,900,000
Conversion price	$ 0.02
Subsequent Event [Member] | Xenith [Member] | Series C Preferred Stock [Member]
Subsequent Event [Line Items]
Voting common stock	72,900,000
Common stock par value	$ 0.02
Shares repurchased	1,500,000
Shares repurchased, value	$ 1,500,000

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Subsequent Events (Schedule of Company's Voting Common Stock) (Details) - USD ($)	May 09, 2018	Mar. 31, 2018	Dec. 31, 2017
Subsequent Event [Line Items]
Current Company Shareholders, Number		22,860,701	22,860,701
Subsequent Event [Member]
Subsequent Event [Line Items]
Current Company Shareholders, Number	22,900,000
Current Company Shareholders, percentage	18.30%
Note Conversion, Number	24,300,000
Note Conversion, Value	$ 500,000
Note Conversion, percentage	19.50%
Note Conversion, Number	4,900,000
Note Conversion, Value	$ 100,000
Note Conversion, percentage	3.90%
Preferred Stock Conversion, Number	72,900,000
Preferred Stock Conversion, percentage	58.30%
Total Outstanding, Number	125,000,000
Total Outstanding, Percentage	100.00%