SEC Company Response from MIDWEST HOLDING INC. (CIK 0000355379) — Sep 13, 2021
MIDWEST HOLDING INC. (CIK 0000355379)
Date: Sept. 13, 2021 · CIK: 0000355379 · Accession: 0001104659-21-114980
AI Filing Summary & Sentiment
File numbers found in text: 001-39812
Referenced dates: August 21, 2021
Letter
Jones & Keller, P.C.
1675 Broadway, 26th Floor
Denver, Colorado 80202
Telephone: (303) 573-1600
September 13, 2021
VIA EDGAR AND OVERNIGHT COURIER
Securities and Exchange Commission
Division of Corporate Finance
100 F Street, N.E.
Washington, D.C. 20549
Attention: Mark Brunhofer
Sharon Blume
Division of Corporation Finance
Office of Finance
Re: Midwest Holding Inc.
Form 10-K for the Fiscal Year Ended December 31, 2020
Filed March 15, 2021
Form 8-K Dated August 12, 2021
Filed August 12, 2021
File No. 001-39812
Ladies and Gentlemen:
We are submitting this letter on behalf of Midwest Holding Inc. (the “Company”) in response to comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) received by electronic mail dated August 21, 2021 relating to the above-reference filings. The numbered paragraph below corresponds to the numbered comment in the Staff’s letter and the Staff’s comment is presented in bold italics.
Form 8-K Filed August 12, 2021
Exhibit 99.1 - Press Release Dated August 12, 2021
Q2 2021 Key Performance Indicators and Non-GAAP Financial Measures
Management Revenue, page 2
1. We note from page 11 of your earnings release for the first quarter of 2021 furnished as Exhibit 99.1 to your May 13, 2021 Form 8-K that non-GAAP “adjusted revenue” was a subtotal in the reconciliation form GAAP total revenues to non-GAAP “management revenue.” We also note that although you removed “adjusted revenue” from your June 30, 2021 Form 10-Q (in
response to prior comment 1) and from this earnings release, you continue to add back deferred coinsurance ceding commission as a non-GAAP adjustment in deriving your non-GAAP “management revenue” and its “net revenue on reinsurance” component. Consistent with our previous request, please represent to us that in the future you will revise your non-GAAP revenue and net income measures to remove the deferred coinsurance ceding commission adjustment or tell us why the acceleration of these deferred commissions is not an individually tailored revenue recognition method. See Question 100.04 of the Compliance and Disclosure Interpretations (CDIs) on Non-GAAP Financial Measures.
Response: We believe that important supplemental information is provided to our stakeholders, analysts and the investment community with the inclusion of deferred coinsurance ceding commission referred to in the comment. This number is derived from the financial statements of our primary insurance subsidiary that are prepared under statutory accounting principles (“SAP”), under which such number is recognized as revenue upon receipt of the ceding commission by our insurance subsidiary. The combination of the deferred coinsurance ceding commission (recognized as revenue under SAP and shown in our GAAP consolidated statements of cash flow) and the amortization of deferred gain on reinsurance (a GAAP number) is an operating measure used by our management to assess our financial performance as well as our cash flow. Thus, we believe the metric of management revenue, inclusive of the deferred coinsurance ceding commission is meaningful disclosure.
We further believe that this presentation is not an individually tailored revenue recognition method because:
(a) upon completion of a reinsurance agreement, we have no further obligation to provide future goods and services in contrast to those instances in Accounting Standards Codification 606 “Revenue From Contracts with Customers” where consideration is received “up front” with an obligation to provide future goods or services;
(b) notwithstanding the general principle in (a), our financial statements were and are prepared in accordance with ASU 944 “Financial Services — Insurance” and therefore reflect the deferral of coinsurance ceding premiums;
(c) as noted above, our GAAP statement of cash flows reflects the unrestricted cash received by us from the full ceding commissions; and
(d) regulations of the Nebraska Department of Insurance (“NDOI”) and SAP prescribe the immediate recognition of ceding commission revenue in these circumstances. Further both the NDOI and SAP permit the amount of cash ceding commission to be categorized as a credit to surplus, critically important to the financial ratios and permitted operations of a regulated insurance company such as owned by us.
The supplemental information provided by us is supplemental and is not intended to be utilized, nor is it utilized, in lieu of GAAP accounting principles, to which we adhere. For these reasons, we submit the form and nature of disclosures reflecting the foregoing provides a broader picture and deeper understanding of our business. Notwithstanding our provided disclosures, we
continue to consider ways to provide meaningful financial disclosure to our stakeholders, analysts, and the investment community.
We would welcome the opportunity to discuss these issues with you at your convenience.
* * *
We hope the foregoing response adequately addresses the Staff’s comment. Please do not hesitate to contact Reid A. Godbolt by telephone at (303) 573-1600 or by email at rgodbolt@joneskeller.com, with any questions or comments regarding this correspondence.
Very truly yours,
JONES & KELLER, P.C.
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CORRESP 1 filename1.htm Jones & Keller, P.C. 1675 Broadway, 26th Floor Denver, Colorado 80202 Telephone: (303) 573-1600 September 13, 2021 VIA EDGAR AND OVERNIGHT COURIER Securities and Exchange Commission Division of Corporate Finance 100 F Street, N.E. Washington, D.C. 20549 Attention: Mark Brunhofer Sharon Blume Division of Corporation Finance Office of Finance Re: Midwest Holding Inc. Form 10-K for the Fiscal Year Ended December 31, 2020 Filed March 15, 2021 Form 8-K Dated August 12, 2021 Filed August 12, 2021 File No. 001-39812 Ladies and Gentlemen: We are submitting this letter on behalf of Midwest Holding Inc. (the “Company”) in response to comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) received by electronic mail dated August 21, 2021 relating to the above-reference filings. The numbered paragraph below corresponds to the numbered comment in the Staff’s letter and the Staff’s comment is presented in bold italics. Form 8-K Filed August 12, 2021 Exhibit 99.1 - Press Release Dated August 12, 2021 Q2 2021 Key Performance Indicators and Non-GAAP Financial Measures Management Revenue, page 2 1. We note from page 11 of your earnings release for the first quarter of 2021 furnished as Exhibit 99.1 to your May 13, 2021 Form 8-K that non-GAAP “adjusted revenue” was a subtotal in the reconciliation form GAAP total revenues to non-GAAP “management revenue.” We also note that although you removed “adjusted revenue” from your June 30, 2021 Form 10-Q (in response to prior comment 1) and from this earnings release, you continue to add back deferred coinsurance ceding commission as a non-GAAP adjustment in deriving your non-GAAP “management revenue” and its “net revenue on reinsurance” component. Consistent with our previous request, please represent to us that in the future you will revise your non-GAAP revenue and net income measures to remove the deferred coinsurance ceding commission adjustment or tell us why the acceleration of these deferred commissions is not an individually tailored revenue recognition method. See Question 100.04 of the Compliance and Disclosure Interpretations (CDIs) on Non-GAAP Financial Measures. Response: We believe that important supplemental information is provided to our stakeholders, analysts and the investment community with the inclusion of deferred coinsurance ceding commission referred to in the comment. This number is derived from the financial statements of our primary insurance subsidiary that are prepared under statutory accounting principles (“SAP”), under which such number is recognized as revenue upon receipt of the ceding commission by our insurance subsidiary. The combination of the deferred coinsurance ceding commission (recognized as revenue under SAP and shown in our GAAP consolidated statements of cash flow) and the amortization of deferred gain on reinsurance (a GAAP number) is an operating measure used by our management to assess our financial performance as well as our cash flow. Thus, we believe the metric of management revenue, inclusive of the deferred coinsurance ceding commission is meaningful disclosure. We further believe that this presentation is not an individually tailored revenue recognition method because: (a) upon completion of a reinsurance agreement, we have no further obligation to provide future goods and services in contrast to those instances in Accounting Standards Codification 606 “Revenue From Contracts with Customers” where consideration is received “up front” with an obligation to provide future goods or services; (b) notwithstanding the general principle in (a), our financial statements were and are prepared in accordance with ASU 944 “Financial Services — Insurance” and therefore reflect the deferral of coinsurance ceding premiums; (c) as noted above, our GAAP statement of cash flows reflects the unrestricted cash received by us from the full ceding commissions; and (d) regulations of the Nebraska Department of Insurance (“NDOI”) and SAP prescribe the immediate recognition of ceding commission revenue in these circumstances. Further both the NDOI and SAP permit the amount of cash ceding commission to be categorized as a credit to surplus, critically important to the financial ratios and permitted operations of a regulated insurance company such as owned by us. The supplemental information provided by us is supplemental and is not intended to be utilized, nor is it utilized, in lieu of GAAP accounting principles, to which we adhere. For these reasons, we submit the form and nature of disclosures reflecting the foregoing provides a broader picture and deeper understanding of our business. Notwithstanding our provided disclosures, we 2 continue to consider ways to provide meaningful financial disclosure to our stakeholders, analysts, and the investment community. We would welcome the opportunity to discuss these issues with you at your convenience. * * * We hope the foregoing response adequately addresses the Staff’s comment. Please do not hesitate to contact Reid A. Godbolt by telephone at (303) 573-1600 or by email at rgodbolt@joneskeller.com, with any questions or comments regarding this correspondence. Very truly yours, JONES & KELLER, P.C. /s/ Reid A. Godbolt Reid A. Godbolt cc via email: A. Michael Salem, Midwest Holding Inc. 3