#1Midwest Holding Investor Presentation November 2021#2DISCLAIMER Forward-Looking Statements This presentation contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on various facts and derived utilizing numerous important assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from the Company's historical results or those described in our forward-looking statements. The Company undertakes no obligation to revise or update publicly any forward-looking statements except as required by law. Non-GAAP Financial Measures This presentation includes certain non-GAAP financial measures. While the Company believes these are useful measures for investors, they are not presented in accordance with GAAP. You should not consider non-GAAP measures in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Because not all companies use identical calculations, the presentation herein of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. Please see Section 07 Appendix for important reconciliations between our non-GAAP and GAAP financial measures. - Industry and Other Data Certain market and industry data included in this presentation have been obtained from third-party sources that the Company believes to be reliable. Market estimates are calculated by using independent industry publications, government publications, reports by market research firms and third-party forecasts in conjunction with the Company's assumptions about its markets. Some data are also based on the Company's good faith estimates, which are derived from its review of internal surveys and from independent sources. The Company believe these estimates to be reasonable based on the information available to it as of the date of this presentation. However, the Company has not independently verified such third- party information and cannot assure the recipient of its accuracy or completeness.#3| Table of Contents 1. Key Takeaways 2. Our Company 4 6 3. Our Opportunity 13 4. Our Differentiated Platform 19 5. Financial Highlights 24 6. Our Team / History 27 7. Appendix 32#401 Key Takeaways#5KEY TAKEAWAYS к 기 Complementary annuity & investment products powered by innovative technology We established a unique ecosystem of technology, insurance, and asset management Significant opportunity set as insurance and asset management industries collide We are poised for growth and just scratching the surface of our capabilities Differentiated approach within the marketplace We developed an optimal business model under one roof High-growth base plan in the near term We are well positioned for profitable growth and scalability Tailored and interdisciplinary team with broad capabilities Our seasoned professionals are the core of what we do O Midwest Holding Inc. | | 5#602 Our Company#7We are the future of planning for tomorrow O Midwest Holding Inc. | 7#8INSURANCE & INVESTMENT MANAGEMENT PLATFORM Midwest is a technology-enabled insurance and asset management company. We manufacture and distribute investment and annuity products to retail and institutional investors in partnership with third-party asset managers. Alternative Assets Annuity Products D Investment Products Platform Highlights Built from the ground up in 2018 to reinvent the insurance value chain by connecting individual annuity buyers with institutional asset managers and investors Our goal is to build a unique platform capable of significant long-term earnings power for our stakeholders Midwest intermediates a fully distributed capital structure O Midwest Holding Inc. | 8#9COMPLEMENTARY PRODUCTS Our annuity products provide our investment products with long duration, low-cost capital while our investment products provide our annuity products with complementary capital --- Low-cost Capital Enhanced Return ANNUITY PRODUCTS INVESTMENT PRODUCTS Guaranteed Return Capital Complementary Products O Midwest Holding Inc. | 9#10MIDWEST ANNUITY PRODUCTS Our annuities are simple, competitive, and easy to integrate with our distribution ANNUITY PRODUCTS American Life Accumulation Product Similar to a CD • 3- and 5-year surrender charge periods Offer a loyalty bonus for not making withdrawals No complicated riders Guaranteed Return with Equity Upside 7-year & 10-year surrender charge period • Policyholder has various equity index selection options Premium bonus version offers day one account value credit O Midwest Holding Inc. | 10 Multi-Year Guaranteed Annuity ("MYGA") Fixed Indexed Annuity ("FIA")#11MIDWEST INVESTMENT PRODUCTS Powered by our annuity products, Midwest has created an innovative suite of attractive investment solutions for institutional and retail investors Asset Manager Product Uncorrelated Flexible Financing Solutions • Turnkey solution for asset managers actively seeking annuity risk Offering the benefit of insurance liabilities packaged as a product Stable Risk Adjusted Returns • Income Product Passive investors seeking strong expected income returns • Midwest manages entire product with institutional asset management partners O Midwest Holding Inc. | 11 INVESTMENT PRODUCTS 1505 CAPITAL#12MIDWEST TECHNOLOGY PLATFORM Midwest is building on a modern technology stack enabling best-in-class customer experience which provides us a foundation for low-cost scalable operations Technology applied to solve industry inefficiencies Cloud-based systems with internal development PRACTICA m. m.pas m.risk EFFICIENT Data Analytics Secure Log-ins Product Development Policy Issuance and Admin Document Management Electronic Applications Agent/ Policyholder Portal Asset Liability Management SCALABLE FLEXIBLE O Midwest Holding Inc. | 12 Speed to market on new products, automation drives down costs Allows for seamless integration with distribution channels#1303 Our Opportunity#14Midwest sits at the intersection of two large and converging industries O Midwest Holding Inc. | 14#15ADDRESSABLE MARKET - LIFE & ANNUITY INDUSTRY Annual U.S. Life & Annuity Premium (1) Individual Agents: $42BN Individual Annuity Market: $219BN MDWT share of individual annuity market = 22 bps(2) Life and Health Market: $1,001BN Sources: S&P Global Market Intelligence, Insurance Information Institute, "U.S. Individual Annuities, 2020 Year in Review, LIMRA, 2021.". United Nations World Population Prospects - 2019. Market data reflects 2020 direct written premiums. 1. 2. Based on 2020 direct written premiums. 3. Compound Annual Growth Rate O Midwest Holding Inc. | 15 Market Highlights • Expected retirement age population CAGR (3): ~3.0% Asset managers make up 38% of top 20 annuity writers, up from 0% in 2008#16ADDRESSABLE MARKET – ALTERNATIVE ASSET MANAGEMENT INDUSTRY - U.S. Alternative Asset Market (1) Alternative Asset 2020 Fundraising: $581BN 1. Source: Preqin as of August 2021 2. Based on $45MM of reinsurance capital raised in 2020. Alternative Asset AUM: $7.6TN O Midwest Holding Inc. | 16 MDWT share of U.S. alternative asset fundraising market = 1 bp(2)#17THE LIFE & ANNUITY AND ASSET MANAGEMENT INDUSTRIES SIT AT A POINT OF CONVERGENCE Asset managers make up 38% of top 20 annuity writers, up from 0% in 2008 Company Name AIG New York Life Aviva Company Name APOLLO 2020 Fixed Annuity Sales (SBN) 9.9 8.5 8.0 7.7 6.6 KKR 6.5 5.0 Blackstone 4.2 4.2 mmm mmm N 3.7 3.4 3.3 ELDRIDGE 3.3 3.2 3.2 Brookfield 2008 Fixed Annuity Sales (SBN) 11.0 New York Life 9.1 AIG 7.9 Sammons MetLife 6.0 Athene Aegon 5.8 Global Atlantic Allianz 5.2 MasMutual Jackson National 4.1 Allianz Allstate 3.7 Fidelity & Guaranty Principal Financial Group 3.6 Security Benefit Hartford 2.8 American Equity Investment Life Western Southern Group 2.7 Great American Lincoln Financial Group 2.4 Nationwide ING 2.3 Pacific Life Genworth 2.3 Western Southern American Equity Investment Life 2.3 Symetra Protective 2.2 Midland National 2.1 Old Mutual 1.8 RiverSource John Hancock Top 20 1.8 Delaware Life Brighthouse Protective EquiTrust 1.8 USAA 80.9 Top 20 Total Sales Top 20 Share of Total Sales Asset Manager Backed Top 20 Writers 109.4 Total Sales 74.0% Top 20 Share of Total Sales 0.0% Asset Manager Backed Top 20 Writers Asset Manager Sponsored Top 20 Writers Total % of Top 20 Writers Asset Manager Controlled Carriers Source: LIMRA, Secure Retirement Institute U.S. Individual Annuities Sales Survey Asset Manager Sponsored Carriers O Midwest Holding Inc. | 17 2.7 2.3 2.3 2.0 1.7 91.7 120.4 76.2% 28.9% 8.6% 37.5% GUGGENHEIM#18MIDWEST IS A GROWTH OPPORTUNITY IN A VALIDATED BUSINESS MODEL Apollo Investor Day - October 2021 Validation of the Path We've Chosen is All Around Us IF RETIREMENT SERVICES IS TRULY A 'LESS VALUABLE' BUSINESS, WHY ARE OTHERS PILING IN? New Initiative: Insurance Blackstone Investor Day SEPTEMBER 2018 Blackstone Ares Insurance Solutions - Aspida 3. A provides et management, sapital solutions and corporate development services to Aray modern life and annuly prote By $2.78 Maggio Al $38 Trillion APOLLO INVESTOR DAY 2021 2 ASPIDA Aspid's Annuity Platform Growth Strategy Primary Origination Reinsurance M&A Activity DARES Enormous Potential to Expand Insurance Solutions LARGE ADDRESSABLE MARKET & OPPORTUNITY 51% We estimate the global market for potential transactions to further leverage our insurance capabilities exceeds $2 TN+ Carlyle Investor Day FEBRUARY 2021 Ares Investor Day AUGUST 2021 Insurance Solutions is a natural extension of our credit business O Midwest Holding Inc. | 18 3 THE GLOBAL ATLANTIC ACQUISITION INCREASES OUR OPPORTUNITY SET FEE RELATED EARNINGS DISTRIBUTABLE EARNINGS | BOOK VALUE PER SHARE KKR Investor Day APRIL 2021 Brookfield Investor Day SEPTEMBER 2021 148#1904 Our Differentiated Business Model#20Midwest combines the best of technology, insurance and asset management to create the optimal business model. O Midwest Holding Inc. | 20#21WHY ARE THE LIFE & ANNUITY AND ASSET MANAGEMENT INDUSTRIES CONVERGING? Products Traditional Life & Annuity Company Insurance Investment Strategy Legacy Distribution Model Retail Duration/Cost of Capital Long/Low Cost Technology Legacy Capital Requirements Intensive Overall Platform Suboptimal COMPLEMENTARY INDUSTRIES O Midwest Holding Inc. | 21 Traditional Alternative Asset Manager Investment Modern Institutional Short/High Cost Legacy Light Suboptimal#22MIDWEST COMBINES THE BEST OF BOTH Products Traditional Life & Annuity Company MIDWEST MODEL - BEST OF BOTH WORLDS Traditional Alternative Asset Manager Insurance Insurance + Investment Investment Strategy Legacy Modern Distribution Model Retail Midwest deploys complementary insurance and investment products Open-architecture investment strategy deployed in tandem with 1505 Capital Investment Modern Retail + Institutional Diversified investor base allows for broader distribution capabilities Duration/Cost of Capital Long/Low Cost Long / Low Cost Technology Legacy Modern Capital Requirements Intensive Light Overall Platform Suboptimal Optimal Longer duration / lower cost of capital compared to traditional asset managers Institutional Short/High Cost Tailored product solutions drive efficient connectivity to clients Legacy Allows for significant scalability to grow the platform O Midwest Holding Inc. | 22 Light Suboptimal#23HOW WE DO IT - THE MIDWEST HOLDING MODEL We've built a transformational platform capable of significant long- term earnings power for our stakeholders m.pas m.risk Technology Modern technology solutions for insurance and investment products End-to-end, cloud-based policy administration Comprehensive asset & liability risk management platform American Life Insurance Seneca Re Reinsurance Existing insurance company formed in 1960, reimagined in 2018 • Industry best practices combined with forward- thinking technology • Provides strong annuity products Vermont-sponsored captive reinsurer • Rapid and efficient launch of investor reinsurance vehicles Efficiently and quickly transforms capital into reinsurance • 1505 CAPITA Asset Management SEC-registered investment advisor Product specialists across the fixed income spectrum • Insurance experience, relationships & capabilities • Unique investment solutions for American Life and investors O Midwest Holding Inc. | 23#2405 Financial Highlights#25FINANCIAL HIGHLIGHTS Annuity Direct Written Premiums (SMM)(Statutory) Assets Under Management(1) ($MM) GAAP Revenue / Reinsurance Fees (2) Economic Book Value Per Share (3) $161.4 $503.5 +92%(4) $415.6 FY '19 FY '20 LTM Q3 '21 $182.3 12/31/19 +168%(4) Reinsurance Fees ■GAAP Revenue $1,024.3 +54%(4) $13.4 $669.9 +790%(4) $12.5 $10.58 $18.5 +77%(4) $28.88 $6.3 $0.4 $6.2 12/31/20 9/30/21 FY '19 FY '20 LTM Q3 '21 12/31/19 9/30/21 Note: LTM figures represent data from the 12 months preceding the end of Q3 2021 Includes Investments and Cash 1. 2. 3. 4. GAAP Revenue includes operating components of GAAP revenue & excludes net realized gain (loss) on investments. Reinsurance Fees account for reinsurance transactions completes during the referenced periods. Represents the revenue Midwest receives on a statutory basis and retains accounting for completed reinsurance transactions. Represents annualized Compound Annual Growth Rate (CAGR) from 12/31/19 to 9/30/21. O Midwest Holding Inc. | 25#26ILLUSTRATIVE MIDWEST REVENUE MODEL The expected average duration of our assets is ~7 years. $2BN of premium per annum (1) implies a $14B Balance Sheet and $140M of annualized recurring revenue к $2B in annual written premiums(1) 7-year average asset duration Long-term target for annual premium issued Average duration of Midwest products $14B in fee- generating assets 1% annualized recurring fees $140M annual recurring revenues Total fee- generating capital under current long- term target Inclusive of ceding, asset management, and administration fees Total annual recurring fee revenue opportunity(1) 1. Based on Statutory Accounting methodology 2. Annualized recurring revenue is based on $14BN ceded premium, assuming 7 year average policy duration. O Midwest Holding Inc. | 26#2706 Our Team / History#28COMPANY LEADERSHIP C Mike Minnich Founder, Chairman & Co-CEO 25 years of experience in insurance, technology and asset management Managing member of insurance advisory firm Rendezvous Capital LLC since 2010 Former Managing Director at Swiss Re, managing a multibillion-dollar credit portfolio B.S. Electrical Engineering from MIT and MBA from MIT Sloan Michael Salem Founder, Co-CEO 16 years of experience in insurance investing, distribution and technology Co-founded Vanbridge LLC, a boutique insurance intermediary sold in 2018 Founding Portfolio Manager of Arrowgrass Capital Partners, a multibillion- dollar multi-strategy asset manager B.S. Computer Science from Brown University and M.S. Electrical Engineering from Stanford University • • • • Georgette Nicholas President & Chief Financial Officer Joined Midwest in September 2021 30 years of experience in the global financial services industry including insurance, reinsurance, and capital markets Former CEO of Genworth Mortgage Insurance Australia Held various senior roles within the insurance business of Genworth Financial, Inc. Worked in public accounting for approximately 20 years B.S. in Accounting from University of Bridgeport (CPA & CGMA) Midwest Holding Inc. | 28#29OUR INTERDISCIPLINARY TEAM Dedicated team of 61 professionals across offices in New York, NY and Lincoln, NE Investment Management Professionals 7 Avg. Experience 17 years As of November 1, 2021 Corporate Strategy 含音 Technology Professionals 14 Avg. Experience 15 years Insurance & Reinsurance Professionals 13 Avg. Experience 20 years Operations Professionals 20 Avg. Experience 21 years O Midwest Holding Inc. | 29 Professionals 7 Avg. Experience 18 years ०-२०१०#30OUR ALIGNMENT Insider Ownership (1) - MDWT vs. Life & Annuity (2) and Alternative Asset Management (3) Industry Medians -23 1. 2. 3. 40x+ Mean Ownership % 0.8% 4x+ Mean Ownership % 7.4% 31.8% L&A Industry Median (2) Alt. AM Industry Median (3) Source: CaplQ Pro. Insider Ownership includes Individuals, Insiders, Strategic Investors. MDWT Life & Annuity Index includes MET, AFL, PRU, PFG, GL, EQH, ATH, VOYA, LNC, UNM, BHF, GNW, CNO, AEL. Market data as of 11/8/21. Alternative Asset Management Index includes KKR, APO, CG, ARES, BAM.A, BK. Market data as of 11/8/21. O Midwest Holding Inc. | 30#31MIDWEST HISTORY 2003 Midwest operates as a private financial services company Midwest incorporates in Nebraska 2003-2017 American Life & Security is incorporated 1960 Insurance operations begin at Midwest 2009 2018 Mike Minnich and Michael Salem join Midwest, setting innovation in motion 1505 Capital is formed as a DE LLC to provide asset management services to insurance companies 2018 Midwest purchases 51% of 1505 Capital 2019 O Midwest Holding Inc. | 31 2020 2020 Midwest completes public offering and NASDAQ listing (MDWT) in Dec. 2020, raising gross proceeds of $70mm Midwest purchases remaining 49% stake in 1505 2020 Midwest forms Seneca Re to operate as a sponsored captive insurance company 2021 Midwest Holding announced a strategic reinsurance partnership with AEG#3207 Appendix#33SUPPLEMENTAL INFORMATION - OPERATING METRICS - ($000's) Annuity Premiums (SAP) MYGA direct written premiums FIA direct written premiums Annuity direct written premiums ANNUITY PREMIUMS Three months ended 2021 September 30, 2020 Nine months ended September 30, 2021 2020 46,719 27,537 82,279 86,503 71,208 104,514 285,167 193,034 117,927 132,051 367,446 279,537 60,062 58,991 193,632 177,979 Ceded premiums Annuity Premiums Statistics Premiums ceded % 51% 45% 53% 64% Direct written premiums growth y-o-y %: MYGA 70% (33%) (5%) 9% FIA (32%) NMF 48% NMF Total (11%) 220% 31% 252% Direct written premiums composition %: MYGA 40% 21% 22% 31% FIA 60% 79% 78% 69% Total 100% 100% 100% 100% O Midwest Holding Inc. | 33#34SUPPLEMENTAL INFORMATION - OPERATING METRICS GAAP REVENUE & FEES RECEIVED FOR REINSURANCE ($000's) Operating Components of GAAP Revenue - OPERATING COMPONENTS OF Three months ended September 30, 2021 2020 Nine months ended September 30, 2021 2020 Investment income, net of expenses $ 6,196 434 12,303 1,277 Service fee revenue, net of expenses 628 590 1,738 1,359 Other revenue 400 117 1,007 134 Operating components of GAAP revenue - total $ 7,224 1,141 $ 15,048 $ 2,770 Fees Received for Reinsurance (1) 1. Fees received for reinsurance - total $ 3,589 4,545 11,312 8,975 Consists of: 1) amortization of deferred gain on reinsurance, which is a line item from our GAAP Consolidated Statements of Comprehensive Loss; and 2) deferred coinsurance ceding commission, which is a line item from our GAAP Consolidated Statements of Cash Flows. O Midwest Holding Inc. | 34#35- SUPPLEMENTAL INFORMATION - RECONCILIATION MANAGEMENT EXPENSES TO GAAP EXPENSES ($000's) Management Expenses (1) G&A Three months ended September 30, 2021 2020 Nine months ended September 30, 2021 2020 $ 6,212 $ 3,279 $ 17,357 $ 9,152 Management interest credited Amortization of deferred acquisition costs 3,230 753 639 6,110 856 235 1,780 376 Expenses related to retained business 3,983 874 7,890 1,232 Management expenses - total $ 10,195 $ 4,153 $ 25,247 $ 10,384 G&A Salaries and benefits - GAAP Other operating expenses - GAAP Subtotal $ 4,025 $ 1,444 $ 4,124 1,706 8,149 3,150 11,466 6,769 18,235 $ 3,624 5,337 8,961 Adjustments: Less: Stock-based compensation (996) (12) (2,765) (25) Less: Mark-to-market option allowance (941) 141 1,887 216 G&A $ 6,212 $ 3,279 $ 17,357 $ 9,152 Management Interest Credited (1) Interest credited - GAAP Adjustments: $ 284 $ 380 $ 1,868 $ 464 Less: FIA interest credited - GAAP Add: FIA options cost - amortized 549 (115) (38) (109) 2,397 374 4,280 501 Management interest credited $ 3,230 $ 639 $ 6,110 $ 856 Reconciliation Management Expenses to GAAP Expenses Total expenses - GAAP $ 9,186 $ 3,762 $ 21,883 $ 9,795 Adjustments: Less: Benefits Less: Stock-based compensation Less: Mark-to-market option allowance Less: FIA interest credited - GAAP Add: FIA options cost - amortized 6 (996) (2,765) (25) (941) 1,887 216 549 (115) Management expenses - total $ 2,397 10,195 374 $ 4,153 $ (38) 4,280 25,247 (109) 501 $ 10,384 1. Non-GAAP. See earnings release 8-K for further information. 3 (12) 141 O Midwest Holding Inc. | 35#36SUPPLEMENTAL INFORMATION - RETAINED AND REINSURANCE BALANCE SHEETS (GAAP) September 30, 2021 Reinsurance Consolidated December 31, 2020 Retained Reinsurance Consolidated ($000's) Assets Total investments Cash and cash equivalents Accrued investment income Retained $ 418,170 $ 51,583 3,471 524,669 $ 29,904 8,704 942,839 81,487 $ 185,368 $ 102,335 332,827 $ 49,344 518,195 151,679 12,175 1,956 4,851 6,807 Deferred acquisition costs, net 24,037 24,037 13,456 13,456 Reinsurance recoverables 37,720 37,720 32,146 32,146 Other assets Total assets $ 8,921 506,182 $ 446 601,443 9,367 2,685 1,433 4,118 $ 1,107,625 $ 305,800 $ 420,601 $ 726,401 Liabilities and Stockholders' Equity Liabilities: Policyholder liabilities Deferred gain on coinsurance transactions Other liabilities Total liabilities $ 364,439 27,799 33,816 426,054 614,036 $ $ (12,593) 601,443 $ 978,475 27,799 21,223 $ 191,887 $ 418,921 $ 610,808 18,199 18,199 9,384 1,027,497 $ 219,470 $ 1,680 420,601 11,064 $ 640,071 Stockholders' Equity: Voting common stock 4 4 4 4 Additional paid-in capital 136,061 136,061 133,417 133,417 Accumulated deficit (63,178) (63,178) (53,522) (53,522) Accumulated other comprehensive income 7,241 7,241 6,431 6,431 Total Midwest Holding Inc.'s stockholders' equity $ Total liabilities and stockholders' equity $ 80,128 $ 506,182 $ $ 80,128 601,443 $ 1,107,625 $ $ 86,330 $ 305,800 $ $ 86,330 420,601 $ 726,401 O Midwest Holding Inc. | 36#37EXPLANATION OF NON-GAAP FINANCIAL MEASURES Explanation of Non-GAAP Financial Measures We have discussed above below certain GAAP and non-GAAP financial measures that our management uses in conjunction with GAAP financial measures as an integral part of managing our business and to, among other things: • • • • monitor and evaluate the performance of our business operations and financial performance; facilitate internal comparisons of the historical operating performance of our business operations; review and assess the operating performance of our management team; analyze and evaluate financial and strategic planning decisions regarding future operations; and plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. Non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP financial measures should be considered along with, but not as alternatives to, our operating performance measures as prescribed by GAAP. Annuity Premiums - SAP Annuity premiums, also referred to as sales or direct written premiums, do not correspond to revenues under GAAP, but are relevant metrics to understand our business performance. Under statutory accounting principles, or SAP, our annuity premiums received are treated as premium revenue. Our premium metrics include all sums paid into an individual annuity in a given period. We typically transfer all or a substantial portion of the premium and policy obligations to reinsurers. Ceded premium represents the premium we transfer to reinsurers in a given period. Retained premium represents the portion of premium received during a given period that was not ceded to reinsurers and will either be reinsured in a subsequent period or retained by us. We typically retain premiums prior to transferring them to reinsurers to facilitate block and other reinsurance transactions involving portfolios of annuity premiums. Fees Received for Reinsurance We utilize fees received for reinsurance as an economic measure to evaluate our financial performance. We calculate fees received for reinsurance by summing two components: 1) amortization of deferred gain on reinsurance, which is a line item from our GAAP Consolidated Statements of Comprehensive Loss; and 2) deferred coinsurance ceding commission, which is a line item from our GAAP Consolidated Statements of Cash Flows. Management Expenses In addition to total expenses, we utilize management expenses as an economic measure to evaluate our financial performance. Management expenses consist of total GAAP expenses adjusted to eliminate items that fluctuate from quarter to quarter in a manner unrelated to core operations, which we believe are useful in analyzing operating trends. The most significant adjustments to arrive at management expenses include the use of management interest credited (as discussed below), the exclusion of stock-based compensation and the exclusion of the mark-to-market option allowance expense (included in other operating expenses) payable to reinsurers to cover their obligations under FIA policies we have reinsured with them. We believe the combined presentation and evaluation of total expenses together with management expenses provides information that can enhance an investor's understanding of our underlying operating results. Management Interest Credited We utilize management interest credited, a component of management expenses, as an economic measure to evaluate our financial performance. GAAP interest credited contains significant technical considerations related to fair value accounting with respect to the mark-to-market change in the FIA embedded derivative liability and change in actuarial valuation of the FIA reserve, both of which are sensitive to changes in the market as well as changes in actuarial assumptions. Due to these technical considerations that we believe are less meaningful to management and investors, we exclude the GAAP interest credited expense related to our FIA products and include the amortized cost of options we purchase to service our FIA policy obligations. The sum of GAAP interest credited related to our multi-year guaranteed annuity ("MYGA") products and the amortized cost of options we purchase to service our FIA products constitutes management interest credited. O Midwest Holding Inc. | 37