Best Meridian International

Insurance Company SPC

(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)

Financial Statements

Years Ended December 31, 2023 and 2022

 Best Meridian International Insurance Company SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)

TABLE OF CONTENTS

Page No.

Independent Auditor’s Report ................................................................................... 1-3

Financial Statements

Balance Sheets ......................................................................................................... 4

Statements of Income and Retained Earnings........................................................... 5

Statements of Comprehensive Income ...................................................................... 6

Statements of Cash Flows......................................................................................... 7

Notes to Financial Statements................................................................................... 8-47

Required Supplementary Information

Incurred and Cumulative Paid Losses and Allocated Loss Adjustment Expenses,
Net of Reinsurance (Unaudited) – Short Duration Contracts ................................. 48
 Tel: +1 (345) 943-8800 PO Box 31118
Fax: +1 (345) 943-8801 2nd Floor – Building 3
Email: [email protected] Governors Square
www.bdo.ky 23 Lime Tree Bay Avenue
Grand Cayman KY1-1205
Cayman Islands

Independent Auditor’s Report

The Directors
Best Meridian International Insurance Company SPC
Grand Cayman, Cayman Islands

Opinion
We have audited the financial statements of Best Meridian International Insurance Company SPC (the
“Company”), a wholly owned subsidiary of BMI Financial Group, Inc., and comprising of the “General
Company”, Segregated Portfolio P1 (Variable Annuities) (“Cell 1”), and Segregated Portfolio 2 (Non-
life and Health) (“Cell 2”), which comprise the balance sheets as of December 31, 2023, and the
statements of income and retained earnings, statements of comprehensive income, and statements
of cash flows for the year then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2023, and the results of its operations and its
cash flows for the year then ended in accordance with accounting principles generally accepted in
the United States of America.
Basis for Opinion`
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America (GAAS). Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are
required to be independent of the Company and to meet our other ethical responsibilities, in
accordance with the relevant ethical requirements relating to our audit. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with accounting principles generally accepted in the United States of America, and for
the design, implementation, and maintenance of internal control relevant to the preparation and
fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date that the financial statements
are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute
assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will
always detect a material misstatement when it exists. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial
statements.

1
BDO Cayman Ltd., a Cayman Islands company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO
network of independent member firms.
Independent Auditor’s Report (continued)

Auditor’s Responsibilities for the Audit of the Financial Statements (continued)

In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, and design and perform audit procedures responsive to those risks.
Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control. Accordingly, no such
opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluate the overall
presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about the Company’s ability to continue as a going
concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit, significant audit findings, and certain internal
control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
incurred and paid claims development information for the years ended December 31, 2023 and
prior, and the historical claims duration information included in the Required Supplementary
Information on page 48 be presented to supplement the basic financial statements. Such
information is the responsibility of management and, although not a part of basic financial
statements, is required by the Financial Accounting Standards Board who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic or historical context. We have applied certain limited procedures to the
required supplementary information in accordance with auditing standards generally accepted
in the United States of America, which consists of inquires of management about the methods of
preparing information and comparing the information for consistency with management
responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements.

We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.

2
Independent Auditor’s Report (continued)

Other Matter - Required Supplementary Information

Management has omitted loss triangles and average annual percentage of payout of incurred claims
by age that US GAAP require to be presented, going back ten years, to supplement the financial
statements. Such missing information, although not a part of the financial statements, is required by
the Financial Accounting Standards Board who considers it to be an essential part of financial
reporting for placing the financial statements in an appropriate operational, economic, or historical
context. Our opinion on the financial statements is not affected by this missing information.
Restriction on Use
This report has been prepared for and only for Best Meridian International Insurance Company SPC and
its directors in accordance with the terms of our engagement letter dated December 11, 2023 and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume any liability or
duty of care for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.

July 10, 2024

3
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
Balance Sheets
December 31, 2023 and 2022
(In U.S. Dollars)

2023 2022
General General
ASSETS Company Cell 1 Cell 2 Company Cell 1 Cell 2
Cash and cash equivalents $ 121,723,914 $ 4,101,363 $ 36,591,058 $ 116,259,601 $ 1,469,034 $ 26,908,845
Investment in equity securities at fair value 27,433,438 23,110,525 - 19,471,416 19,399,331 -
Investment in equity securities (equity method) 6,215,817 - - 5,163,222 - -
Investment in fixed maturity securities, available for sale 76,376,778 - - 52,097,142 - -
Mortgage loans 41,879,649 - - 29,399,423 - -
Policy loans 1,258,098 - - 672,993 - -
Premium receivable 39,739,027 299,462 107,270,540 49,220,979 306,560 26,169,686
Reinsurance recoverable other 89,293,493 705,693 186,992,120 87,396,327 996,428 159,912,005
Reinsurance recoverable unearned premium reserves 25,362,373 - 37,051,938 23,463,243 - 25,837,019
Due from General Company - - 1,853,357 - - 1,961,750
Due from Cell 1 17,602,735 - - 14,067,135 - -
Due from affiliates 34,437,093 - 2,990,568 32,904,115 - 2,343,755
Deferred policy acquisition costs 211,017,485 6,994,264 - 172,686,709 6,861,047 -
Segregated account investments - 27,698,714 - - 26,074,752 -
Fixed assets, net 7,596,399 - - 7,609,599 - -
Other assets 50,186,737 - - 7,224,053 444,706 -

TOTAL ASSETS $ 750,123,036 $ 62,910,021 $ 372,749,581 $ 617,635,957 $ 55,551,858 $ 243,133,060

LIABILITIES AND SHAREHOLDER'S EQUITY

LIABILITIES
Policy liabilities
Future policy benefits $ 100,582,939 $ 5,085 $ - $ 87,947,042 $ 5,556 $ -
Unearned premium reserves 25,362,373 - 37,051,938 23,463,243 - 25,837,019
Policyholders' account balances 323,718,591 - - 274,920,529 - -
Claims and losses payable 21,516,596 109,036 171,862,179 21,543,453 131,365 157,469,719
Unearned policy charges 105,061,082 5,835,631 - 77,183,770 5,549,976 -
Other policy funds 26,678,276 175,194 - 2,164,487 - -
Due to Cell 2 1,853,357 - - 1,961,750 - -
Due to General Company - 17,602,735 - - 14,067,135 -
Accounts payable and accrued expenses 11,155,433 250,077 120,673,786 22,898,747 324,657 28,502,389
Due to affiliates 27,741,745 19,142 2,429,871 31,942,371 11,958 2,434,141
Segregated account liabilities - 27,698,714 - - 26,074,752 -
Deferred tax liability 23,780,330 - - 20,167,880 - -
Other liabilities 6,388,348 403,790 3,171,127 1,087,934 - 2,597,376

TOTAL LIABILITIES 673,839,070 52,099,404 335,188,901 565,281,206 46,165,399 216,840,644

SHAREHOLDER'S EQUITY
General common shares, $1 par value,
authorized 1,999,900 shares;
issued and outstanding 500,000 shares 500,000 - - 500,000 - -
Additional paid-in capital 2,750,000 1,279,228 - 2,750,000 1,279,228 -
Retained earnings 73,033,966 9,531,389 37,560,680 49,104,751 8,107,231 26,292,416

TOTAL SHAREHOLDER'S EQUITY 76,283,966 10,810,617 37,560,680 52,354,751 9,386,459 26,292,416

TOTAL LIABILITIES AND

SHAREHOLDER'S EQUITY $ 750,123,036 $ 62,910,021 $ 372,749,581 $ 617,635,957 $ 55,551,858 $ 243,133,060

See accompanying notes to financial statements. Page 4

 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
Statements of Income and Retained Earnings
Years Ended December 31, 2023 and 2022
(In U.S. Dollars)

2023 2022
General General
Company Cell 1 Cell 2 Company Cell 1 Cell 2

REVENUE
Premium income $ 187,719,090 $ - $ 550,738,207 $ 186,976,247 $ - $ 435,120,214
Reinsurance premiums ceded (176,930,017) - (550,738,207) (174,175,064) - (435,120,214)
Universal life and investment-type product charges 69,102,782 413,150 - 54,697,927 1,529,226 -
Movement in unearned policy charges (27,877,311) (285,655) - (16,041,395) 821,734 -
Interest, dividends, and other income 35,973,292 2,311,313 75,114,537 (8,413,149) (2,014,464) 48,677,265

TOTAL REVENUE 87,987,836 2,438,808 75,114,537 43,044,566 336,496 48,677,265

EXPENSES
Policyholders' benefits 103,195,865 - 77,896,118 71,480,516 998,669 3,738,662
Reinsurance recovered and recoverable (72,450,785) - (77,896,118) (66,768,754) (907,125) (3,738,662)
Movement in provision for future policy benefits 12,909,880 (471) - 11,389,495 (449) -
Commissions, professional fees, insurance, and
other expenses, net of commission allowances 15,983,988 735,812 60,675,146 15,138,414 832,229 37,680,754
Amortization of deferred policy
acquisition costs, net (2,377,086) (124,481) - 5,931,315 1,193,441 -

TOTAL EXPENSES 57,261,862 610,860 60,675,146 37,170,986 2,116,765 37,680,754

INCOME (LOSS) BEFORE INCOME TAX 30,725,974 1,827,948 14,439,391 5,873,580 (1,780,269) 10,996,511

Income Tax Expenses (Benefit) 6,796,759 403,790 3,171,127 1,387,340 (420,530) 2,597,376

NET INCOME (LOSS) 23,929,215 1,424,158 11,268,264 4,486,240 (1,359,739) 8,399,135

Retained earnings, at the beginning of year 49,104,751 8,107,231 26,292,416 57,618,511 9,466,970 17,893,281

Dividends declared - - - (13,000,000) - -

Retained earnings, at the end of year $ 73,033,966 $ 9,531,389 $ 37,560,680 $ 49,104,751 $ 8,107,231 $ 26,292,416

See accompanying notes to financial statements. Page 5

 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly Owned Subsidiary of BMI Financial Group, Inc.)
Statements of Comprehensive Income
Years Ended December 31, 2023 and 2022
(In U.S. dollars)

2023 2022
General General
Company Cell 1 Cell 2 Company Cell 1 Cell 2
Net income (loss) $ 23,929,215 $ 1,424,158 $ 11,268,264 $ 4,486,240 $ (1,359,739) $ 8,399,135
Other comprehensive income:
Unrealized holding gain on securities
arising during the period - - - - - -
Reclassification adjustment for loss (gain)
included in net income - - - - - -
Other comprehensive income - - - - - -

Comprehensive income (loss) for the year $ 23,929,215 $ 1,424,158 $ 11,268,264 $ 4,486,240 $ (1,359,739) $ 8,399,135

See accompanying notes to financial statements. Page 6

 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly Owned Subsidiary of BMI Financial Group, Inc.)
Statements of Cash Flows
Years Ended December 31, 2023 and 2022
(In U.S. Dollars)

2023 2022
General General
Company Cell 1 Cell 2 Company Cell 1 Cell 2
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 23,929,215 $ 1,424,158 $ 11,268,264 $ 4,486,240 $ (1,359,739) $ 8,399,135
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation expense 133,296 - - 149,265 - -
Change in deferred policy acquisition costs, net (2,377,086) (124,481) - 5,931,315 1,193,441 -
Unrealized (gain) loss on equity securities (5,623,774) (2,134,404) - 4,030,038 2,178,535 -
(Gain) loss on sale of investment securities (20,133,221) - - 11,315,341 - -
Loss on equity method investment 39,748 - - 201,855 - -
Gain on maturities and impairment of investments
in life settlements (1,271) - - (223,775) - -
Gain on disposition of assets - - - (4,418,441) - -
Changes in assets and liabilities:
Decrease (increase) in premiums receivable 9,481,952 7,098 (81,100,854) (9,849,911) 83,896 (7,497,798)
(Increase) decrease in reinsurance recoverable other (1,897,166) 290,735 (27,080,115) (1,554,699) (755,445) 38,820,125
(Increase) decrease in reinsurance recoverable unearned premium reserves (1,899,130) - (11,214,919) (2,121,023) - 20,530,483
Increase in deferred policy acquisition costs (35,953,690) (8,736) - (33,441,066) (16,409) -
Decrease (increase) in due from General Company - - 108,393 - - (58,329)
Increase in due from Cell 1 (3,535,600) - - (3,258,866) - -
Increase in due from affiliates (1,532,978) - (646,813) (2,790,142) - (57,994)
(Increase) decrease in other assets (42,962,684) 444,706 - 12,401,232 (419,377) -
Increase (decrease) in future policy benefits 12,635,897 (471) - 18,142,021 (449) -
Increase (decrease) in unearned premium reserves 1,899,130 - 11,214,919 2,121,023 - (20,530,483)
Increase in policyholders' account balances 48,798,062 - - 59,626,821 - -
(Decrease) increase in claims and losses payable (26,857) (22,329) 14,392,460 (5,909,914) (186,127) (41,262,411)
Increase (decrease) in unearned policy charges 27,877,312 285,655 - 16,041,394 (821,733) -
Increase (decrease) in other policy funds 24,513,789 175,194 - 1,648,378 (504,358) -
(Decrease) increase in due to Cell 2 (108,393) - - 58,329 - -
Increase in due to General Company - 3,535,600 - - 3,258,866 -
(Decrease) increase in accounts payable and accrued expenses (11,743,314) (74,580) 92,171,397 13,930,686 44,935 8,630,501
(Decrease) increase in due to affiliates (4,200,626) 7,184 (4,270) (2,693,522) 2,546 2,434,141
Increase in deferred tax liabilities 3,612,450 - - 269,315 - -
Increase (decrease) in other liabilities 5,300,415 403,790 573,751 (9,076,961) (3,161,603) 588,765

NET CASH PROVIDED (USED IN) BY

OPERATING ACTIVITIES 26,225,476 4,209,119 9,682,213 75,014,933 (463,021) 9,996,135

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of hedging investment (25,836,259) - - (11,970,843) - -
Purchases of other investments (1,092,343) - - (1,522,597) - -
Purchases of equity funds shares (3,788,182) (1,576,790) - (3,070,685) (2,276,709) -
Premiums on life settlement investments - - - (121,385) - -
Purchases of interests in mortgage (15,509,699) - - (22,647,000) - -
Purchases of property and equipment (120,096) - - (337,728) - -
Sale of hedging investment 45,499,637 - - 102,628 - -
Principal reductions in mortgages 3,029,473 - - 3,264,000 - -
Purchases of fixed maturity investments (24,279,636) - - (18,915,091) - -
Sale of equity funds shares 1,919,776 - - 5,305,427 - -
Maturity of life settlement investments 1,271 - - 3,000,000 - -
Sale of fixed assets - - - 11,700,000 - -
Change in policy loans (585,105) - - (214,492) - -

NET CASH USED IN INVESTING ACTIVITIES (20,761,163) (1,576,790) - (35,427,766) (2,276,709) -

CASH FLOWS FROM FINANCING ACTIVITIES

Capital Contribution - - - 2,750,000 - -
Payment of dividends - - - (13,000,000) - -
Proceeds from notes receivable collection - - - 5,764,000 - -

NET CASH USED IN FINANCING ACTIVITIES - - - (4,486,000) - -

NET INCREASE (DECREASE) IN

CASH AND CASH EQUIVALENTS 5,464,313 2,632,329 9,682,213 35,101,167 (2,739,730) 9,996,135

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 116,259,601 1,469,034 26,908,845 81,158,434 $ 4,208,764 16,912,710

CASH AND CASH EQUIVALENTS, END OF YEAR $ 121,723,914 $ 4,101,363 $ 36,591,058 $ 116,259,601 $ 1,469,034 $ 26,908,845

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for taxes and withholding taxes $ 973,043 $ - $ - $ 1,038,806 $ - $ -

SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES

Change in fair value on equity funds $ 5,623,774 $ 2,134,404 $ - $ (4,030,038) $ (2,178,535) $ -

See accompanying notes to financial statements. Page 7

 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(1) Incorporation and Background Information

Best Meridian International Insurance Company SPC (the Company), was incorporated as BMI
International Insurance Company under the Companies Act of the Cayman Islands (the
Companies Act) on November 18, 1994 and changed its name to Best Meridian International
Insurance Company on May 28, 1997. The Company holds an Unrestricted Class ‘B’ Insurer’s
License under Section 4 (2) of the Cayman Islands Insurance Act. The Insurance Act, 2010
became effective November 1, 2012 in the Cayman Islands. Under such law, management
requested to be classified as a Class B (iii) insurer, in accordance with Section 4(3)(b)(iii). On
September 28, 2015 the Cayman Islands Monetary Authority confirmed the Class B(iii)
classification.

On December 5, 2000, the directors resolved to convert the Company to a segregated portfolio
company subject to and in accordance with the Companies (Amendment) (Segregated Portfolio
Companies) Act of the Cayman Islands. The name of the Company was changed to Best
Meridian International Insurance Company SPC, and a segregated portfolio, Segregated Portfolio
P1- [Variable Annuities] (Cell 1), was established. The authorized share capital of the Company
was reorganized from $2 million divided into 2,000,000 ordinary shares of a nominal or par value
of $1 each to $2 million divided into 1,999,900 general common shares of a nominal or par value
of $1 each and 100 preference shares of a nominal or par value of $1 each, none of which are
outstanding. These changes became effective January 1, 2001.

On September 18, 2017, the Cayman Islands Monetary Authority granted an approval in principle
to enable the Company to reinsure certain non-life and health business. The Company
established Segregated Portfolio 2 – [Non-life and Health] (Cell 2) for this purpose.

The Company’s principal activity is the issuance of universal life, variable life, annuity products,
individual term and group term life, and health insurance policies under General Company and
Cell 1. The Company also provides accidental death, permanent and total disability, and hospital
income coverage. Reinsurance of life and health business is provided under the General
Company, some of which are 100% retroceded to unaffiliated reinsurers. Life risks are retained
up to a maximum of $100,000. Group life, permanent disability, and accidental death insurance
coverages entail limits ranging from $2,500 to $100,000 per insured life.

Within Cell 2, the Company reinsures property, casualty, bond, unemployment, securitization,
contingency, professional indemnity, and structured finance. This business is 100% retroceded
to unaffiliated reinsurers.

The assets of the Company can either be general company (General Company) assets or
segregated portfolios (Segregated Portfolio) assets. The assets attributable to the Segregated
Portfolio comprise assets represented by the proceeds of Segregated Portfolio reserves and any
other assets attributable to that Segregated Portfolio. The General Company assets comprise
the assets of the Company which are not Segregated Portfolio assets. Where a liability arises
from a transaction in respect to the Segregated Portfolio and there are insufficient assets within
the Segregated Portfolio, then there will be recourse to the General Company assets to the extent
that the General Company assets exceed any minimum capital amounts lawfully required by the
Cayman Islands Monetary Authority.

Page 8
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(1) Incorporation and Background Information (Continued)

Following is a description of significant risks facing the Company and how those risks are
minimized:

Legal/Regulatory Risk - The risk that changes in the legal or regulatory environment in which
an insurer operates can create additional costs or expenses not anticipated by the insurer in
pricing its products. That is, regulatory initiatives designed to reduce insurer profits or new legal
theories may create costs for the insurer beyond those currently recorded in the financial
statements. The Company attempts to minimize this risk by reviewing legislative and other
regulatory changes and adjusting rates whenever possible.

Concentration Risk - All the Company’s product charges and direct premiums, under General
Company and Cell 1, were derived from products offered to customers located in Latin America
and Asia. Also, the Company invests in mortgage loans that are concentrated in Florida.
Accordingly, the Company could be adversely affected by economic downturns, significant
unemployment, and other conditions that may occur in these regions from time to time.

Some of the reinsurance business within the General Company is sourced from the major
international insurance broking groups and provides coverage to insurers and reinsurers
operating in a number of jurisdictions for the life and health line of business. The Company
monitors the exposures arising from the reinsurance it assumes and cedes and does not believe
that there is any significant concentration risk.

The reinsurance business within Cell 2 is sourced from the major international insurance broking
groups and provides coverage to insurers and reinsurers operating in a number of jurisdictions
and for different perils. The Company monitors the exposures arising from the reinsurance it
assumes and cedes and does not believe that there is any significant concentration risk.

Credit Risk - Certain amounts in the balance sheet represent amounts owed to the Company
from other parties, including reinsurers, mortgage loan borrowers, and agents. While the
Company believes that all amounts recorded in the financial statements are collectable, there is
a risk that it will not be able to collect all amounts due. The Company attempts to minimize this
risk by placing reinsurance with highly rated reinsurers and by actively monitoring collection of
receivables. This is particularly important for Cell 2 and some of the General Company, where
all business is 100% reinsured.

Market Risk - Market risk arises primarily from changes in the market value of financial
instruments. The Company is exposed to market risk on its mutual fund investments, which are
carried at estimated fair values. Specifically, a risk exists that the ultimate selling price of such
investments may differ from their estimated fair values as of the balance sheet dates, which
would, in turn, affect the net asset value used to determine the estimated fair value on the
Company’s balance sheets.

External Factors - The Company operates in the Cayman Islands as a captive insurance
organization. Insurance companies located in the Cayman Islands are regulated by the Cayman
Islands Monetary Authority established under section 5(1) of the Monetary Authority Act (2013
Revision). Capital and solvency regulations under the Insurance Act, 2010, as revised, for the
Class B(iii) license requires the Company to maintain a minimum capital of $600,000 and a

Page 9
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(1) Incorporation and Background Information (Continued)

prescribed capital requirement (PCR) of $1,784,180 and $1,935,089 at December 31, 2023 and
2022, respectively. The Company was in compliance with its capital requirements at December
31, 2023 and 2022.

(2) Significant Accounting Policies

These financial statements are prepared in accordance with accounting principles generally
accepted (GAAP) in the United States of America. The significant accounting policies adopted
by the Company are as follows:

(a) Basis of Presentation

Upon conversion to a segregated portfolio company, the directors transferred all of the
assets and liabilities of the Company related to the variable life and annuity business to Cell
1. The results of operations and cash flows of this business also are separately accounted
for and reflected in the accounts of Cell 1. The accounts of the General Company reflect
the financial position, results of operations, and cash flows related to all other operations of
the Company. Beginning in 2018, the Company started reinsuring property and casualty
business, which is reported in Cell 2. Expenses that benefit the General Company, Cell 1,
and Cell 2 are allocated equally.

(b) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the year. Actual results could differ from those
estimates.

The liability for future policy benefits and Cell 2 claims and losses payable represent the
most significant estimates in the accompanying financial statements. Although some
variability is inherent in these estimates, management believes the amounts provided are
adequate.

(c) Cash and Cash Equivalents

The Company considers all cash and short-term highly liquid debt instruments with a
maturity of 90 days or less from the date of purchase to be cash and cash equivalents. At
December 31, 2023 and 2022, all cash balances are comprised of current accounts and
money market investments.

(d) Investments
Investments in equity securities (General Company and Cell 1), except for those accounted
for under the equity method of accounting, are reported on the balance sheet at their fair
value. Investment in fixed maturities (General Company) are classified as available for sale
and reported in the balance sheets at their fair value. The fair value of the Company’s
equity funds is based on pricing data obtained from the fund managers. The fair value of

Page 10
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(d) Investments (Continued)
the Company’s investments in fixed maturities is based on information provided by the
account manager. Any unrealized gain or loss on investments in fixed maturities calculated
by reference to cost is recorded as a component of other comprehensive income in
shareholder’s equity. The net change in unrealized gain or loss from equity funds is
recorded as a component of interest, dividends, and other income in the statements of
income and retained earnings.

An available-for-sale (AFS) fixed maturity is impaired if the fair value of the security is below
amortized cost. The impaired loss is charged to net income when the Company has the
intent to sell the security or it is more likely than not the Company will be required to sell the
security before recovery of the amortized cost. For impaired securities the Company intends
to hold, an allowance for credit-related losses is recorded in investment losses when the
Company determines a credit loss has been incurred based on certain factors, such as
adverse conditions, credit rating downgrades, or failure of the issuer to make scheduled
principal or interest payments. The Company relies on its external investment managers
when making this determination. The credit loss recorded is the difference between the
security’s fair value and amortized cost, unless it is determined that a portion of the decline
in value is not related to credit issues. Noncredit losses are recognized in other
comprehensive income (loss) as a change in unrealized gains and losses on investments.

Effective January 1, 2023 for non-public companies, the Financial Accounting Standards
Board (FASB) issued a new accounting standard, Accounting Standards Update (ASU) No.
2016-13 (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses
on Financial Instruments. The new accounting standard introduces the current expected
credit losses methodology (CECL) for estimating allowances for credit losses. The
Company recognizes an allowance for credit losses on AFS debt securities rather than an
other-than-temporary impairment that reduces the cost basis of the investment. See below
for additional disclosures regarding the adoption of ASU 2016-13.

If the Company intends to sell a security or it is more likely than not that it would be required
to sell a security before the recovery of its amortized cost, less any recorded credit loss, it
recognizes an impairment loss in investment related gains (losses), net for the difference
between amortized cost and fair value.

Credit impairments and changes in the allowance for credit losses on fixed maturity
securities are reflected in investment related gains (losses), net, while non-credit
impairment losses are recognized in accumulated other comprehensive income (AOCI).

Page 11
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(d) Investments (Continued)
The Company estimates the amount of the credit loss component of a fixed maturity security
impairment as the difference between amortized cost and the present value of the expected
cash flows of the security. The Company excludes accrued interest from the amortized cost
and the present value of the expected cash flows of the security. The present value is
determined using the best estimate cash flows discounted at the effective interest rate
implicit to the security at the date of purchase or the current yield to accrete an asset-backed
or floating rate security. The techniques and assumptions for establishing the best estimate
cash flows vary depending on the type of security. The asset-backed securities’ cash flow
estimates are based on security-specific facts and circumstances that may include collateral
characteristics, expectations of delinquency and default rates, loss severity and prepayment
speeds and structural support, including subordination and guarantees. This information is
provided by Company investment manager.

The Company writes off uncollectible fixed maturity securities when (1) it has sufficient
information to determine that the issuer of the security is insolvent or (2) it has received
notice that the issuer of the security has filed for bankruptcy, and the collectability of the
asset is expected to be adversely impacted by the bankruptcy.

Certificate of deposits are not considered a debt security and not accounted for as a debt
security under ASC 320, Investments- Debt Securities.

Equity securities with readily determinable fair values are not subject to the CECL
evaluation.

During 2020, the Company formed Global Reach USA, LLC, (Global Reach) to own an
entity that will be a fully-licensed third party administrator to handle health claim
administration and pharmacy administrative services and made a capital investment of
$840,000 representing 50% of the ownership. During 2020, the Company also formed
MYBASEPAY, LLC, (MYBASEPAY) to engage in the provision of back office and payroll
solutions and made a capital investment of $1,682,637 representing 49% of the ownership.
The Company accounts for these investment under the equity method. The Company is
able to exercise significant influence through ownership percentage and through
management representation. The Company adjusted the carrying value of the investments
based upon operating results. Any changes in carrying value of the investments are
reported in net income. As of December 31, 2023 and 2022, the carrying value of the
investments in Global Reach and MYBASEPAY were $2,355,103 and $3,860,714 and
$2,037,519 and $3,125,703, respectively.

Mortgage loans on real estate are stated at the unpaid principal balance. A loan is impaired
when, based on current information and events, it is probable that a creditor will be unable
to collect all amounts due according to the contractual terms of the loan agreement. All
amounts due according to the contractual terms means that both the contractual interest
payments and the contractual principal payments of a loan will be collected as scheduled
in the loan agreement.

Page 12
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(d) Investments (Continued)
When a loan is impaired, impairment is based on a loan's observable market price, or the
fair value of the collateral of the loan, less costs to sell. As of December 31, 2023 and 2022,
and for the years then ended, the Company had no impaired mortgage loans as the
estimated fair value of the collateral less estimated costs to obtain and sell exceeded book
value.

Allowance for credit losses on mortgage loans are based on the aging of the pool of
mortgage with similar characteristics. These pools are revised as conditions change and
new information becomes available. The evaluation also includes the impact of factors like
the loan-to-value ratio, portfolio historical experience, and the guarantee provided by certain
Company officers. When individual loans no longer have similar aging characteristics of the
mortgage loan pool, they are removed from the pool and are evaluated individually for an
allowance.

Any interest accrued or received on the net carrying amount of the impaired loan is included
in net investment income or applied to the principal of the loan, depending on the
assessment of the collectability of the loan. Mortgage loans deemed to be uncollectible are
charged off against the allowance for credit losses and subsequent recoveries, if any, are
credited to the allowance for credit losses. Changes in allowance for credit losses are
reported as a component of interest, dividends, and other. At December 31, 2023 no CECL
allowance was deemed necessary.

(e) Premium Receivable

Premiums are accrued on term life, health, and disability when due during the grace period
while for Cell 2, the reinsurance premiums are accrued in accordance with information
received from the ceding company. For direct premium receivable, management takes into
consideration the grace period and the lapse historical experience including that policy
contract indicates that any policy benefits during the grace period will be paid net of the
premium due. If the policy lapsed, then the premium due as well as the reserve for the
policy are eliminated. Other management estimates for reinsurance premium due include
increased in inforce on existing treaties, lapsed/cancelled premiums given historical
experience, current economic conditions and forecasts, the financial health of specific
ceding companies, and any collateral value provided by the ceding company. Additions to
or releases of the allowance are reported as a component of commissions, professional
fees, insurance, and other expenses, net of commission allowance. Based on the review of
these factors and historical experience, the Company did not believe a provision for credit
losses was necessary as of December 31, 2023.

(f) Deferred Policy Acquisition Costs, Net

Policy acquisition costs, consisting principally of commissions and fees that vary with and
are primarily related to the successful production of new and renewal business have been
deferred. Deferred policy acquisition costs related to traditional life policies are being
amortized using the factor method over the premium-paying period of the related policies
in a manner that will charge each year’s operations in direct proportion to the estimated

Page 13
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(f) Deferred Policy Acquisition Costs, Net (Continued)
receipt of premium revenue over the life of the policies. Premium revenue estimates are
made using the same interest, mortality, and withdrawal assumptions that are used for
computing liabilities for future policy benefits.

Deferred policy acquisition costs relating to variable annuities, universal life, and variable
life policies are being amortized at a constant rate based on the present value of the
estimated gross profit amounts expected to be realized over the life of the policies. Deferred
policy acquisition costs are adjusted to reflect deviations between actual and assumed
experience.
Commission allowances which represent reimbursement for policy acquisition costs
incurred are deferred and presented as a reduction of the related deferred policy acquisition
costs. Deferred commission allowances are amortized in proportion to the related deferred
policy acquisition costs.
The Company reviews the carrying amount of deferred policy acquisition costs on at least
an annual basis. Management considers estimated future gross profits or future premiums,
expected mortality, persistency, and expenses to determine whether the carrying amount
is recoverable.
Any amounts deemed unrecoverable are charged to expense. No amounts were deemed
unrecoverable for any of the Cells or the General Company for the years ended December
31, 2023 and 2022.
(g) Fixed Assets, Net
Fixed Assets are reported at cost, less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful lives of the respective
assets, which range from three to thirty-nine and a half years.
(h) Investments in Life Settlements
The Company has purchased investments in life settlement contracts. Under a life
settlement contract, the Company obtains the rights of being the owner and beneficiary to
an underlying life insurance policy. The Company utilizes the investment method to account
for its investments in life settlement contracts. The carrying value of each contract at
purchase is equal to the cost to purchase the life settlement contract plus all direct external
costs. Periodic maintenance costs, such as premiums, necessary to keep the underlying
policy inforce are capitalized.
Upon death of the insured, a gain is recognized for the excess of the life insurance proceeds
over the carrying amount of the life settlement contract. For the years ended December
31, 2023 and 2022 the amount of $1,271 and $223,775, respectively, were recorded as
gains and are included in the statements of income and retained earnings as a component
of interest, dividends, and other income.

Page 14
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(h) Investments in Life Settlements (Continued)
The Company evaluates the investments in life settlement contracts by periodically testing
each contract for impairment. For purposes of the impairment test, the amount of the sum
of the carrying value plus anticipated undiscounted future premiums plus other capitalized
external costs are compared to the insurance proceeds. If the insurance proceeds are
greater, no impairment is recognized.

For the years ended December 31, 2023 and 2022, no other than temporary impairments
were recorded.

(i) Future Policy Benefits

The provision for future policy benefits for life insurance policies has been provided on a
net level premium basis based on estimated investment yields, withdrawals, mortality, and
other assumptions that were appropriate at the time the policies were issued. Such
estimates are based on industry data.

As the Company reinsures a portion of its risks (see note 4) with unrelated and related
reinsurance companies, it provides for a recoverable amount. Such receivable amounts
are classified as reinsurance recoverable on the accompanying balance sheets.

(j) Claims and Losses Payable

The reserve for unpaid losses and loss adjustment expenses (LAE), for Accident and
Health business written within the General Company and reinsurance business written
within Cell 2, include case-basis estimates of reported losses plus supplemental amounts
for incurred but not reported losses (IBNR) calculated based upon loss projections utilizing
certain actuarial assumptions and studies of the Company's historical loss, experience and
industry statistics. In addition, other significant risk factors are considered. The aggregate
liability for unpaid losses and LAE at year-end represents management's best estimate of
the amount necessary to cover the ultimate cost of claims occurring on or before the
balance sheet dates. Such estimates are necessarily based on assumptions, and while
management believes the amounts are adequate, the ultimate liability may be in excess of
or less than the amount recorded. Estimates of reserves are continually reviewed using
the most current information available. Any resulting adjustments are reflected in current
operations. However, as the business is 100% retroceded, there has been no impact on
a net basis.

(k) Other Policy Fund Liabilities

Other policy fund liabilities represent amounts received from policyholders related to
premiums not yet underwritten or accepted by the Company.

Page 15
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(l) Segregated Accounts

Segregated account investments and liabilities in Cell 1 are maintained for deposits
received under variable life and annuity products sold by the Company, less product
charges, plus or minus investment returns and losses. Under the Company’s variable life
and annuity products, policyholders assume all investment risk. Accordingly, investment
income and investment gains and losses accrued directly to such contract holders and were
not reflected in the Company’s statements of income and retained earnings.

The assets of each account were legally segregated and were not subject to claims that
arise out of any other business of the Company. The segregated account investments and
liabilities are carried at fair value.

(m) Premium Income

Premiums received on term life, health, and disability policies are recognized as revenue
over the premium paying period.

Within Cell 2, the reinsurance premium assumed from other insurers and the premium
ceded pursuant to reinsurance agreements is earned ratably over the terms of the
underlying contracts. The reinsurance premium written and the reinsurance ceded relating
to the unexpired portion of policies inforce at the balance sheet dates are recorded as
reinsurance recoverable unearned premium reserves and unearned premium reserves.

In response to reporting delays associated with broker market business written within Cell
2 and the absence of ceding company reports, earned premiums are estimated using
information provided by the broker as well as management judgment to individual contracts
or homogeneous groups of contracts, as appropriate.

All contracts written within Cell 2 include a simultaneous payment clause under which all
parties agree that claim payments arising under the terms of the policies shall take place at
the same time as the settlement or advance of funds under the Company’s retrocession
contract(s).

(n) Universal Life, Variable Life, and Annuity Product Charges

Premiums received on universal life, variable life, and annuity products are reported as
deposits either within policyholders’ account balances, segregated account liabilities, or
other policy fund liabilities. Charges made against the policy account balances during the
period to cover various expenses are recognized as revenue when earned. Amounts that
represent compensation to the Company for services to be provided in future periods are
reported as unearned policy charges and recognized in income using the same
assumptions and factors used to amortize the related deferred policy acquisition costs.

Page 16
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(o) Reinsurance

As explained in note 4, the Company seeks to reduce the risk of loss that may arise from
significant events that cause unfavorable underwriting results by reinsuring certain levels
of risk with reinsurers.

Amounts recoverable from reinsurers are estimated in a manner consistent with the
provisions of the reinsurance agreement and the establishment of the liability for future
policyholder benefits, including the reserve for claims and loss adjustment expenses. In
preparing the financial statements, management makes estimates of amounts recoverable
from reinsurers, which include consideration of amounts, if any, estimated to be
uncollectible by management based on an assessment of factors, including the credit-
worthiness of the reinsurers, historical losses, and current economic conditions and
forecasts. No amounts were deemed uncollectible for any of the Cells or the General
Company for the years ended December 31, 2023 and 2022, therefore, no CECL
allowance was deemed necessary.

Within Cell 2, some portions of the reinsurance contracts ceded are experience-rated
under which a portion of the premium or commission may vary based on the loss
experience. Due to the nature of the contract, the experience may result in premium due
to or from the reinsured. The net amount of premiums receivable/payable on the
experience-rated contracts is included either in premiums receivable or in unearned
premium in the financial statements. For the years ended December 31, 2023 and 2022
there were no experience-rated adjustments.

(p) Taxation
Under current Cayman Islands’ law, the Company is not obligated to pay any taxes in the
Cayman Islands on either income or capital gains.

The Company has received an undertaking from the Governor in Council pursuant to the
provisions of Section 6 of the Tax Concessions Act, which exempts the Company from any
such Cayman Islands’ taxes at least until the year 2033. The Company has elected to file a
life/non-life insurance company consolidated U.S. federal income tax return, which includes
the results of operations of other affiliates domiciled in the United States of America.

The Financial Accounting Standards Board (“FASB”) provides guidance for how uncertain
tax positions should be recognized, measured, disclosed and presented in the financial
statements. This requires the evaluation of tax positions taken or expected to be taken in
the course of preparing the Company’s tax returns to determine whether the tax positions
are “more-likely-than-not” of being sustained “when challenged” or “when examined” by the
applicable tax authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense and liability in the current year. For
the periods ended December 31, 2023 and 2022 management has determined that there
are no material uncertain tax positions.

Page 17
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(q) Comprehensive Income
The only element of other comprehensive income applicable to the Company is changes in
unrealized gains and losses on securities classified as available-for-sale related to a credit
impairment. Any amount of an available-for-sale debt security’s change in fair value not
recorded as an allowance for credit losses will be recorded in other comprehensive income.
Comprehensive income is a measurement of certain changes in shareholder’s equity that
result from transactions and economic events other than transactions with the shareholder.
For the Company, this consists of changes in unrealized gains and losses on investments
in the fixed maturity portfolio that are used to adjust net income to arrive at comprehensive
income. The cumulative amount of these changes is reported in the balance sheets within
accumulated other comprehensive income.

(r) New Accounting Pronouncements

Changes to the generally accepted accounting principles are established by the FASB in
the form of accounting standards updates to the FASB Accounting Standards
CodificationTM. Accounting standards updates not listed below were assessed and
determined to be either not applicable or are expected to have minimal impact on the
Company’s financial statements.

In December 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740)
Improvements to Income Tax Disclosures. This guidance requires entities to provide
additional information primarily related to the effective tax rate reconciliation and income
taxes paid. Topic 740 applies to all entities subject to income taxes. For public business
entities, the new requirements will be effective for annual periods beginning after December
15, 2024. For entities other than public business entities, the requirements will be effective
for annual periods beginning after December 15, 2025. The guidance will be applied on a
prospective basis with the option to apply the standard retrospectively. Early adoption is
permitted. The Company is currently assessing the impact of this guidance on the
Company’s financial statements and financial statements disclosures.

In March 2023 the FASB issued ASU 2023-01, Leases (Topic 842) Common Control
Arrangements. Topic 842 requires that entities determine whether a related party
arrangement between entities under common control is a lease. If the arrangement is
determined to be a lease, an entity must classify and account for the lease on the same
basis as an arrangement with an unrelated party (on the basis of legally enforceable terms
and conditions). The amendments in this Update provide a practical expedient for private
companies and not-for-profit entities that are not conduit bond obligors to use the written
terms and conditions of a common control arrangement to determine whether a lease exists
and, if so, the classification of and accounting for that lease. The practical expedient may
be applied on an arrangement-by-arrangement basis. The Company adopted Topic 842
effective for the year ended December 31, 2022, which did not have a material impact on
its financial statements or financial statements disclosures. The amendments are effective
for fiscal years beginning after December 15, 2023, with early adoption permitted. The
Company is evaluating the impact of those amendments on its financial statements and
financial statements disclosures.

Page 18
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(r) New Accounting Pronouncements (Continued)
In December 2022 the FASB issued ASU 2022-05, Financial Services – Insurance (Topic
944) Transition for Sold Contracts. This guidance amends the transition guidance in ASU
2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the
Accounting for Long-Duration Contracts. The amendment allows an insurance entity to
make an accounting policy election to not apply ASU 2018-12 to contracts or legal entities
sold or disposed of before the effective date, and in which the insurance entity has no
significant continuing involvement with the derecognized contracts. An insurance entity is
permitted to apply the policy election on a transaction-by-transaction basis to each sale or
disposal transaction. An insurance entity is required to disclose whether it has chosen to
apply this accounting policy election and provide a qualitative description of the sale or
disposal transactions to which the accounting policy election is applied. The Company does
not currently intend to apply this accounting policy election. The new guidance is effective
for fiscal years beginning after December 15, 2024, and interim periods within fiscal years
beginning after December 15, 2025, with early adoption permitted.

In June 2022, the FASB issued Accounting Standard Update 2022-03 Fair Value
Measurement (Topic 820) Fair Value Measurement of Equity Securities Subject to
Contractual Sale Restrictions. The amendments in this Update clarify that a contractual
restriction on the sale of an equity security is not considered part of the unit of account of
the equity security and, therefore, is not considered in measuring fair value. The
amendments also clarify that an entity cannot, as a separate unit of account, recognize and
measure a contractual sale restriction. The amendments in this Update also require the
following disclosures for equity securities subject to contractual sale restrictions: The fair
value of equity securities subject to contractual sale restrictions reflected in the balance
sheet, the nature and remaining duration of the restriction(s), and the circumstances that
could cause a lapse in the restriction(s). The new guidance is effective for fiscal years
beginning after December 15, 2024, with early adoption permitted. The Company is
evaluating the impact of those amendments on its financial statements and financial
statements disclosures.

In March 2022, the FASB issued Accounting Standard Update 2022-02 Financial
Instruments—Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage
Disclosures. This ASU eliminates the accounting guidance for Troubled Debt
Restructurings (“TDR”) for creditors and adds enhanced disclosure requirements for certain
refinancings and restructurings by creditors made to borrowers experiencing financial
difficulty. The new guidance is effective for fiscal years beginning after December 15, 2022,
with early adoption permitted. The Company adopted ASC 326 standard as of January 1,
2023, which did not have a material impact on its financial statements or financial
statements disclosures.

In August 2018, the FASB issued a new standard, ASU 2018-12, Financial Services –
Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration
Contracts. Amended by ASU 2019-09, Financial Services – Insurance (Topic 944):
Effective Date, issued in October 2019, and ASU 2020-11, Financial Services – Insurance
(Topic 944): Effective Date and Early Application, issued in November 2020. The ASU

Page 19
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(2) Significant Accounting Policies (Continued)

(r) New Accounting Pronouncements (Continued)
provides for targeted improvements to the accounting for long-duration contracts. The new
standard is only applicable for insurers and reinsurers. This new standard has very
significant impact to the accounting for long duration contracts. There are four major
changes in the new standard, which include: (1) the calculation of the liability of future policy
benefits, (2) a simplified amortization method for deferred acquisition costs, (3) recording
market risk benefits at fair value, and (4) enhanced disclosures. The new guidance was
originally effective for fiscal years beginning after December 15, 2021 and interim periods
within fiscal years beginning after December 15, 2022, with early adoption permitted. In
November 2019, the FASB affirmed its decision to defer the effective date to start effective
for fiscal years beginning after December 15, 2023 and interim periods within fiscal years
beginning after December 15, 2024. In November 2020, the FASB affirmed its decision to
defer the effective date to start effective for fiscal years beginning after December 15, 2024
and interim periods within fiscal years beginning after December 15, 2025. Early application
of this amendment is permitted. The Company is currently assessing the impact of the
guidance but anticipates that the guidance will likely have a significant impact on the
Company’s financial statements and financial statements disclosures.

In June 2016, the FASB issued Accounting Standard Update (ASU) 2016-13, Financial
Instruments – Credit Losses (Topic 326), which amended the existing impairment guidance
of Financial Instruments. The amendment adds to U.S. GAAP an impairment model, known
as current expected credit loss (“CECL”) model that is based on expected losses rather
than incurred losses. For traditional and other receivables, held-to-maturity debt securities,
loans and other instruments entities will be required to use the new forward-looking
”expected loss” model that generally will result in earlier recognition of allowance for losses.
For available-for-sale debt securities with unrealized losses, entities will measure credit
losses similar to what they do currently, except the losses will be recognized as allowances
rather than reduction to the amortized cost of the securities. This guidance is effective for
fiscal years and interim periods within those fiscal years beginning after December 15,
2022, with early adoption permitted. The guidance will be adopted through a cumulative-
effect adjustment to retained earnings as of the beginning of the first reporting period in
which the guidance is effective (that is, a modified-retrospective approach). The Company
adopted ASC 326 standard effective January 1, 2023, which did not have a material impact
on its financial statements or financial statement disclosures.

(s) Reclassifications
Certain 2022 financial statement amounts have been reclassified to conform to 2023
presentation.

Page 20
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(3) Investments
Equity Securities
The fair values of equity fund investments and equity securities in the General Company and
Cell 1 at December 31, 2023 and 2022 are as follows:

December 31, 2023

General
Company Cell 1
UBS Irl Select Money Market Fund USD $ 5,887,312 $ 5,157,752
Fidelity Blue Chip Growth Fund 3,955,300 3,465,156
Fidelity Growth Company Fund 3,885,760 3,404,233
UBS (Lux) Equity SICAV - USA Growth 2,236,581 1,959,423
Fidelity Select Biotechnology Fund 1,720,647 1,507,423
Vanguard Mid-Cap Index Fund Admiral Shares 1,666,577 1,460,054
Man AHL Diversified 1,038,082 909,442
UBS (Lux) EQUITY SICAV - Global Opportunity Unconstrained 835,656 732,100
UBS Strategy Fund - Growth 736,026 644,817
UBS Strategy Fund - Balanced 719,713 630,525
Fidelity Diversified International Fund 696,087 609,828
UBS (Lux) Bond SICAV - USD High Yield 564,427 494,482
Vanguard Capital Opportunity Fund Admiral Shares 431,716 378,218
UBS Strategy Fund - Yield 423,316 370,858
Fidelity Europe Fund 407,872 357,329
UBS Equity Fund - Greater China 290,700 254,677
Fidelity Capital and Income Fund 258,927 226,840
UBS Equity Global Emerging Markets Opportunity 234,962 205,846
UBS (Lux) Equity Fund - European Opportunity 189,954 166,414
UBS Equity Fund - Fixed 109,979 96,351
UBS Key Selection Sicav-Global Allocation 89,897 78,757
Total Mutual Funds $ 26,379,491 $ 23,110,525

AmFam VC Fund IV 1,053,947 -

$ 27,433,438 $ 23,110,525

Page 21
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(3) Investments (Continued)

December 31, 2022
General
Company Cell 1
UBS Irl Select Money Market Fund USD $ 5,026,506 $ 5,007,898
Fidelity Growth Company Fund 2,373,692 2,364,905
Fidelity Blue Chip Growth Fund 2,292,634 2,284,147
Fidelity Select Biotechnology Fund 1,435,304 1,429,990
Vanguard Mid-Cap Index Fund Admiral Shares 1,316,862 1,311,986
UBS (Lux) Equity SICAV - USA Growth 1,288,267 1,283,498
Man AHL Diversified 985,839 982,189
UBS (Lux) EQUITY SICAV - Global Opportunity Unconstrained 666,612 664,144
UBS (Lux) Strategy Fund Growth Sustainable 661,389 658,941
UBS (Lux) Strategy Fund Balanced Sustainable 567,666 565,564
Fidelity Diversified International Fund 517,796 515,879
UBS (Lux) Bond SICAV - USD High Yield 424,509 422,937
UBS (Lux) Strategy Fund Yield Sustainable 348,016 346,728
Fidelity Europe Fund 313,547 312,386
Vanguard Capital Opportunity Fund Admiral Shares 311,666 310,513
UBS Equity Fund - Greater China 271,413 270,408
Fidelity Capital and Income Fund 206,423 205,658
UBS (Lux) Equity SICAV Global Emerging Market Opportunity 177,180 176,525
UBS (Lux) Equity Fund - European Opportunity 138,210 137,699
UBS (Lux) Strategy Fund Fixed Income Sustainable 74,616 74,338
UBS (Lux) Key Selection Sicav Global Alllocation 73,269 72,998
$ 19,471,416 $ 19,399,331

Proceeds from the sale of investments in equity funds were $1,919,776 and $5,305,427 during
2023 and 2022, respectively. There were no gains (losses) recognized during 2023 and 2022 on
securities sold.
During 2020, the Company invested the amount of $2,522,637 in the stock of two joint ventures.
At December 31, 2023 and 2022 the carrying value of these investments were $6,215,817 and
$5,163,222, respectively, which is included in the General Company’s balance sheets.

The net change in unrealized gains from equity securities was recorded as a component of
interest, dividends, and other income, was $5,623,774 for the General Company and $2,134,404
for Cell 1 during the year ended December 31, 2023 and unrealized losses of $4,030,038 for
General Company and $2,178,535 for Cell 1 during the year ended December 31, 2022.

Page 22
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(3) Investments (Continued)

Fixed Maturity Securities
Fixed maturity securities are stated at fair value. Investment in fixed maturity securities at
December 31, 2023 and 2022 totaled $76,376,778 and $52,097,142, respectively, which is
composed of certificates of deposit with an original maturity greater than three months. During
2023 and 2022 there were no impairment losses recorded.

Certificates of deposit are not considered a debt security and not accounted for as a debt security
under CECL.

Mortgage Loans
Mortgage loans on real estate are stated at the unpaid principal balance. Investment in mortgage
loans at December 31, 2023 and 2022 totaled $41,879,649 and $29,399,423, respectively.
During 2023 and 2022, there were no impairment losses recorded, there were no taxes,
assessments, or any amounts advanced and not included in the mortgage loan.

A mortgage loan is considered to be impaired when, based on the current information and events,
it is probable that the Company will be unable to collect all amounts due according to the
contractual terms of the mortgage agreement. Management reviewed each loan that is past due
and determined that there was no impairment to mortgage loans as of December 31, 2023. This
analysis included evaluating the appraisal value, contractual revisions to the underlying loan
agreement, and the net value of the collateral compared to the underlying mortgage loan
investment. Although all available and applicable factors are considered in the Company’s
analysis, the loan-to-value ratio is the most critical factor in determining impairment. All mortgage
loan investments are guaranteed by certain Company officers.

The mortgage portfolio is evaluated for CECL based on factors like loan-to-value ratio, portfolio
historical experience, current economic conditions and forecasts, and the guarantee provided by
certain Company Officers. Based on such evaluation at December 31, 2023 no CECL allowance
was deemed necessary.

The maximum percentage of any one loan to the value (LTV) of the security at the time of the
loan as of December 31, 2023 and 2022 was 60%.

Interest income is accrued on the principal amount of the mortgage loan based on its contractual
interest rate. The Company accrues interest on loans until it is probable the Company will not
receive interest or the loan is 90 days past due.

Page 23
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(3) Investments (Continued)

An aging analysis of the mortgage loans including interest receivable at December 31, 2023 and
2022 follows:

Residential Commercial Total

December 31, 2023

(a) Current (1-30 days) $ 21,868,584 8,566,535 $ 30,435,119

(b) 31-60 Days past due 1,224,426 — 1,224,426
(c) 61-90 Days past due 1,037,595 — 1,037,595
(d) 91-180 Days past due 1,305,000 8,040,000 9,345,000

$ 25,435,605 $ 16,606,535 $ 42,042,140

December 31, 2022

(a) Current (1-30 days) $ 17,821,950 $ 5,291,982 $ 23,113,932

(b) 31-60 Days past due — — —
(c) 61-90 Days past due — — —
(d) 91-180 Days past due 1,709,473 4,682,950 6,392,423

$ 19,531,423 $ 9,974,932 $ 29,506,355

Interest receivable on mortgage loans are reported as a component of other assets in the General
Company’s balance sheets. Interest receivable were $162,491 and $106,932 at December 31,
2023 and 2022, respectively.

Page 24
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(3) Investments (Continued)

A detail of the mortgage loans and the lending rates as of December 31, along with the fair value
of the collateral measured as of the loan origination date is as follows:

2023 2022

Collateral Collateral
Rate or Interest Book Value Fair Value Book Value Fair Value
Mortgage Residential
9.50% $ 2,880,000 $ 4,800,000 $ - $ -
9.00% 10,741,400 21,695,000 10,636,473 21,370,000
8.00% 10,000,000 19,250,000 8,800,000 18,000,000
5.50% 1,665,299 8,500,000 - -
25,286,699 54,245,000 19,436,473 39,370,000

Mortgage Commercial
10.00% 1,560,000 2,600,000 - -
9.00% 15,032,950 27,050,000 8,552,950 14,850,000
8.50% - - 1,410,000 2,350,000
16,592,950 29,650,000 9,962,950 17,200,000

Net Mortgage $ 41,879,649 $ 83,895,000 $ 29,399,423 $ 56,570,000

Hedging
The Company used a hedging strategy during the years ended December 31, 2023 and 2022 to
mitigate certain risks associated with the Best Indexed Universal Life product. Financial
instruments used for this specific purpose were equity and index options that were traded on the
Chicago Board Options Exchange. At the end of each month, the Company purchases hedge
investments based upon Best Indexed Universal Life premium volume. In December of each
year, the Company stops purchasing hedge investments and by December 31, all hedge
investments are sold and the gain (loss) on the options is recorded as realized.

The net realized gain (loss) on equity and index options totaled $19,663,378 and ($11,868,215)
for the years ended December 31, 2023 and 2022, respectively, and is reported as a component
of interest, dividends, and other investment income in the accompanying statements of income
and retained earnings. The Company held no options as of December 31, 2023 and 2022.

(4) Reinsurance
General Company and Variable Annuities (Cell 1)

In the ordinary course of business, the Company purchases reinsurance from several unaffiliated
reinsurance companies and from one affiliated company, Best Meridian Insurance Company.
Amounts recoverable from reinsurers are estimated in a manner consistent with the liability
associated with the reinsured business. The recoverability of these assets depends on the
reinsurers’ ability to perform under the reinsurance agreements. The company evaluates and

Page 25
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(4) Reinsurance (Continued)

monitors the financial condition and concentrations of credit risk associated with its reinsurers, in
order to minimize its exposure to reinsurer insolvencies. No allowance for uncollectible amounts
has been established since the amounts receivable from reinsurers are deemed to be collectible.
Based on such evaluation and in the historical experience with the pool of reinsurers, at
December 31, 2023 no CECL allowance was deemed necessary.

The Company remains contingently liable in the event that any reinsurer is unable to meet their
obligations for existing paid and unpaid losses recoverable under the Company’s reinsurance
agreements.

The Company retains $100,000 per life on universal life, variable life, and term life policies. For
the health business the Company cedes 100% of the exposure to Best Meridian Insurance
Company.

Total ceded premium to Best Meridian Insurance Company on the health and life business was
$72,628,431 and $11,689,500 in 2023 and $74,663,633 and $10,623,722 in 2022, respectively.
Ceded premiums and reinsurance recoveries are reported separately on the Company’s
statement of income and retained earnings.

Beginning in 2020, the Company started providing life and health reinsurance to unaffiliated
insurance companies that purchase reinsurance through the broker market. The primary
exposures are from facultative proportional reinsurance contracts. The Company retrocedes
100% of the risk to unaffiliated reinsurers that are available through the broker market. The
Company is subject to loss and credit risk with respect to the reinsurers with whom they deal
because buying reinsurance does not relieve the Company of their liability to the ceding company.
If the reinsurers are not capable of fulfilling their financial obligations to the Company, the
Company’s insurance losses would increase. The Company mitigates against these losses by
establishing a Counterparty Default Risk Reviewing Committee to assist in its oversight
responsibilities with respect to reinsurers that are going to be working with the organization.

In response to reporting delays associated with broker market business and the absence of
ceding company reports, earned premiums are estimated using information provided by the
broker as well as management judgment to individual contracts or homogeneous groups of
contracts, as appropriate. The majority of the contracts include a simultaneous payment clause
under which all parties agree that payments hereon shall take place only at the same time as the
settlement or advance of funds under the Company’s retrocession contract(s).

Page 26
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(4) Reinsurance (Continued)

Reinsurance recoverable including unearned premium reserves and rating by reinsurer as of December 31,
2023 is as follows:
General A. M. Best
Reinsurer Company Cell 1 Rating
Best Meridian Insurance Company $ 85,311,768 9,369 A-
Reinsurance Group of America, Inc. 4,248,359 231,600 A+
Scor Global Life Reinsurance Company of Delaware 3,200,196 442,298 A
MAPFRE Re Compañía de Reaseguros, S.A. 2,967,095 2,206 A
Hannover Life Reassurance
Company of America 210,936 11,889 A+
American United Life Insurance Company 166,267 8,331 A+
Partner Reinsurance Europe SE 82,843 — A+
Others 18,468,402 —
$ 114,655,866 $ 705,693

Reinsurance recoverable including unearned premium reserves and rating by reinsurer as of December 31,
2022 is as follows:
General A. M. Best
Reinsurer Company Cell 1 Rating
Best Meridian Insurance Company $ 79,329,820 69,192 A-
Reinsurance Group of America, Inc. 4,626,468 308,122 A+
Scor Global Life Reinsurance Company of Delaware 3,661,317 529,596 A
MAPFRE Re Compañía de Reaseguros, S.A. 2,927,285 4,523 A
Hannover Life Reassurance
Company of America 827,411 84,995 A+
American United Life Insurance Company 190,284 — A+
Partner Reinsurance Europe SE 19,521 — A+
Others 19,277,464 —

$ 110,859,570 $ 996,428

Page 27
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(4) Reinsurance (Continued)

Non-life and Health (Cell 2)

Beginning in 2018, the Company started providing property and casualty reinsurance to
unaffiliated insurance companies that purchase reinsurance through the broker market. The
primary exposures are from facultative proportional, quota share, catastrophe, and excess of loss
reinsurance contracts. The Company retrocedes 100% of the risk to unaffiliated reinsurers that
are available through the broker market. The Company is subject to loss and credit risk with
respect to the reinsurers with whom they deal because buying reinsurance does not relieve the
Company of their liability to the ceding company. If the reinsurers are not capable of fulfilling their
financial obligations to the Company, the Company’s insurance losses would increase. The
Company mitigates against these losses by establishing a Counterparty Default Risk Reviewing
Committee to assist in its oversight responsibilities with respect to reinsurers that are going to be
working with the organization. Based on such evaluation and in the historical experience with the
pool of reinsurers, at December 31, 2023 no CECL allowance was deemed necessary.

Some portions of the reinsurance contracts are experience-rated under which a portion of the
premium or commission may vary based on the loss experience. Due to the nature of the
contract, the experience may result in premium due to or from the reinsured. The net amount of
premiums receivable/payable on the experience-rated contracts is included either in premiums
receivable or in unearned premium in the financial statements. For the years ended December
31, 2023 and 2022 there were no experience-rated adjustments.

In response to reporting delays associated with broker market business and the absence of
ceding company reports, earned premiums are estimated using information provided by the
broker as well as management judgment to individual contracts or homogeneous groups of
contracts, as appropriate. All contracts include a simultaneous payment clause under which all
parties agree that payments hereon shall take place only at the same time as the settlement or
advance of funds under the Company’s retrocession contract(s). In addition, the Company also
estimates liabilities associated with this accrued premium, such as commissions and incurred but
not reported losses. The Company’s financial statements include the following estimated
balances, gross of retroceded reinsurance, as of December 31:
2023 2022
Unearned premium recoverable $ 37,051,938 $ 25,837,019
Unearned premium $ 37,051,938 $ 25,837,019
Reinsurance recoverable-other $ 186,992,120 $ 159,912,005
Incurred but not reported losses $ 171,862,179 $ 157,469,719
Commission allowance $ 15,129,940 $ 2,442,286

Page 28
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(4) Reinsurance (Continued)

The reinsurance recoverable including unearned premium reserves and reinsurers’ rating by
rating company as of December 31, 2023 is as follows:

Rating Company
Rating A M Best Fitch S&P Global HR Ratings Lloyds Moody's Captive NR Total
A $ 1,083,149 $ $ 1,314 $ $ 14,625,856 $ $ $ $ 15,710,319
A- 3,362,543 3,362,543
A+ 2,429,908 2,429,908
A1 297,201 297,201
B 7,344,592 4,420 7,349,012
B+ 8,976,105 2,914 19,888 8,998,907
B++ 27,384,023 27,384,023
Baa2 73,664 73,664
BB- 85,053 85,053
BBB 96,259 96,259
BBB- 151,169 47,404 198,573
BBB+ 167,162 167,162
B2 20,398,742 20,398,742
HR AAA 2,384,085 2,384,085
Captive 131,854,070 131,854,070
NR * 3,254,537 3,254,537
Grand Total $ 50,747,482 $ 158,503 $ 249,918 $ 2,384,085 $ 14,625,856 $ 20,769,607 $ 131,854,070 $ 3,254,537 $ 224,044,058
* The retro reinsurer is backed by a panel of reinsurers that, in their majority, are rated.

Page 29
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(4) Reinsurance (Continued)

The reinsurance recoverable including unearned premium reserves and reinsurers’ rating by
rating company as of December 31, 2022 is as follows:

Rating Company
Rating A M Best Fitch S&P Global HR Ratings Lloyds Moody's Captive NR Total
A $ 1,540,674 $ 48,370 $ $ $ 816,433 $ $ $ $ 2,405,477
A- 3,680,203 20,726 3,700,929
A+ 2,378,933 31,681 2,410,614
A++ 217,967 217,967
A1 5,052,548 5,052,548
B 5,251,881 5,251,881
B- 40,908 40,908
B+ 17,149,669 1,018,178 18,167,847
B++ 5,997,299 5,997,299
Baa2 887,040 887,040
Baa3 2,910,528 2,910,528
BB 325,553 325,553
BB- 68,891 8,126,368 8,195,259
BBB 212,312 212,312
BBB- 281,805 281,805
HR AAA 4,317,037 4,317,037
Captive 122,379,438 122,379,438
NR * 2,994,582 2,994,582
Grand Total $ 36,257,534 $ 1,460,992 $ 8,672,892 $ 4,317,037 $ 816,433 $ 8,850,116 $ 122,379,438 $ 2,994,582 $ 185,749,024
* The retro reinsurer is backed by a panel of reinsurers that, in their majority, are rated.

(5) Related Party Transactions

The Company entered into a management and service agreement with an affiliated entity, which
provides for a monthly management fee of $15,000 for the years ended December 31, 2023 and
2022. Management and service fees paid to this affiliate amounted to $180,000 for both years
2023 and 2022, which are allocated between the General Company and Cell 1. This management
fee covers various general and administrative expenses paid by the affiliated entity.

The Company entered into a treasury and IT support agreement with an affiliated entity, which
provided for monthly fees of $10,000. This agreement was amended to also provide for the
utilization of the reinsurance division services for additional monthly fees of $100,000. Fees paid
to this affiliate amounted to $1,320,000 for each of the years ended December 31, 2023 and
2022.

The Company entered into a cost allocation and reimbursement agreement with an affiliated
entity for utilization of services for the Life Underwriting, Life Policyholder Services, Accounting,
Actuarial, and Systems Departments for monthly fees of $270,833. For the years ended
December 31, 2023 and 2022 the Company paid to this affiliate the amount of $3,250,000,
respectively.

Page 30
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(5) Related Party Transactions (Continued)

During 2021 the Company began providing Travel Assist plans and entered into management
and service agreements with affiliated entities, which provides fees per total premiums collected.
For the years ended December 31, 2023 and 2022 the Company paid service fees to its affiliates
in the amount of $196,749 and $428,022, respectively.

The Company engages the underwriting and data processing services of an affiliated entity. Fees
paid to this entity amounted to $2,456,276 and $3,087,951 for the years ended December 31,
2023 and 2022, respectively. During 2023, the underwriting and data processing services
charged to the General Company and to Cell 1 were approximately $2,424,574 and $31,702,
respectively. During 2022, the underwriting and data processing services charged to the General
Company and to Cell 1 were approximately $3,052,855 and $35,096, respectively. During both
years, a portion of these fees are accounted for as deferred policy acquisition costs [see note
2(f)].

The Company incurred $123,335 and $154,406 in commissions to an affiliated agency during the
years ended December 31, 2023 and 2022, respectively. The non-level portion of these
commissions is accounted for as deferred policy acquisition costs [see note 2(f)].

The Company assumed 100% of a universal life plan business from an affiliated insurance entity.
Total written and assumed premium on the universal life plan business was $70,560,861 and
$53,451,545 for the years ended December 31, 2023 and 2022, respectively. At December 31,
2023 and 2022 the amount of $126,708,972 and $96,532,520, respectively, is reported as
policyholders’ account balances in the accompanying balance sheets.

The Company's investment in fixed maturity securities serves as the guarantee for the reserve
credit of Best Meridian Insurance Company related to the universal life business reinsured by the
Company.

The Company assumed 81% of a universal life plan business from an affiliated insurance entity.
Total written and assumed premium on the universal life plan business was $3,421,906 and
$1,447,415 for the years ended December 31, 2023 and 2022, respectively. At December 31,
2023 and 2022 the amount of $3,139,349 and $1,048,565, respectively, is reported as
policyholders’ account balances in the accompanying balance sheets.

During 2023 the Company issued a mortgage loan to the President and CEO in the amount of
$1,665,299. The loan is collateralized by the property with a loan to value of 19.6% and an interest
rate of 5.50%.

Page 31
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(5) Related Party Transactions (Continued)

The following represents the net balances due from (to) affiliates as of December 31, 2023 and
2022:
2023 2022
General General
Company Cell 1 Cell 2 Company Cell 1 Cell 2

BMI Services, Inc. $ 8,472,298 $ (915) $ - $ 7,022,448 $ (1,035) $ -

Business Men's Insurance Corp. 946,116 (396) - 5,402,784 (113) -
Best Meridian Insurance Company (26,427,593) (14,812) - (31,152,222) (10,810) -
Multi Assistance Services, Inc. (467,417) (3,019) - (347,340) - -
BMI Financial Group, Inc. 16,943,102 - 560,697 16,940,466 - (90,386)
Multi Assistance Service Latin America, S.A. 24,657 - - (53,919) - -
BMI Compañía de Seguros, S.A. 1,067,031 - - 710,282 - -
Masecuador, S.A. Ajustador de Siniestros 721 - - 6,730 - -
BMI Compañia de Seguros de Guatemala, S.A. 5,496,547 - - 2,275,884 - -
BMI Colombia Compañia de Seguros de Vida, S.A. 639,886 - - 156,631 - -
Net due from (to) affiliated companies $ 6,695,348 $ (19,142) $ 560,697 $ 961,744 $ (11,958) $ (90,386)

(6) Deferred Policy Acquisition Costs

Activity in deferred policy acquisition costs for the year ended December 31, 2023, is summarized
as follows:

General
Company Cell 1

Balance at January 1 $ 172,686,709 $ 6,861,047

Deferred policy acquisition costs
Commissions 35,953,690 8,736
Actuarial adjustments 1,295,878 124,481
Changes in traditional life (factor method) 1,081,208 —

Balance at December 31 $ 211,017,485 $ 6,994,264

Page 32
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(6) Deferred Policy Acquisition Costs (Continued)

Activity in deferred policy acquisition costs for the year ended December 31, 2022, is summarized
as follows:

General
Company Cell 1

Balance at January 1 $ 145,176,958 $ 8,038,079

Deferred policy acquisition costs
Commissions 33,441,066 16,409
Actuarial adjustments (7,461,704) (1,193,441)
Changes in traditional life (factor method) 1,530,389 —

Balance at December 31 $ 172,686,709 $ 6,861,047

As discussed in note 2(f), the Company reports deferred policy acquisition costs related to
traditional life business under the factor method. Accordingly, the capitalization and amortization
components of the change in deferred policy acquisition costs are not presented. The actuarial
adjustment related to Cell 1 is composed of amortization of $553,718 and $1,923,678 and
credited interest of $678,199 and $730,237 in 2023 and 2022, respectively. The actuarial
adjustment related to General Company is composed of amortization of $8,064,282 and
$14,852,790 and credited interest of $9,360,160 and $7,391,086 in 2023 and 2022, respectively,
for the Universal Life policies and Deferred Annuities.

During the year ended December 31, 2022, the Company extended for an additional year the
increase of COI’s and premium loads with a 5% COI increase after April 1, 2024. The effect of
these changes in assumptions was charged to operations in the year of the change. The change
in assumptions had the effect of increasing earnings before income taxes in 2022 by
approximately $2,821,175 and affected universal life products charges and amortization of
deferred policy acquisition costs.

During the year ended December 31, 2023, the Company increased the initial accumulated
premium for policies that have a recurrent premium, added projection year surrenders scalars for
policies with cash surrender value greater than zero, and updated the normal COI rates to reflect
that the base COI rates were increased 5% over the 2018 COI rates. The change in assumptions
had the effect of decreasing earnings before income taxes in 2023 by approximately $1,194,159
and affected universal life products charges and amortization of deferred policy acquisition costs.

(7) Segregated Account

The segregated account is designed to provide policyholders with retirement income in the form
of an annuity. Each policyholder will bear the full investment risk of, and receive all the benefits
from, the assets of the segregated account.

Page 33
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(7) Segregated Account (Continued)

The fair values of segregated account investments in Cell 1 at December 31 are as follows:

2023 2022

UBS Irl Select Money Market Fund USD $ 5,364,469 $ 5,559,167

UBS (Lux) Strategy Fund Growth Sustainable 5,046,290 4,394,411
UBS (Lux) Equity SICAV - USA Growth 4,310,138 3,386,534
UBS (Lux) EQUITY SICAV - Global Opportunity Unconstrained 1,779,831 1,910,983
Fidelity Growth Company Fund 1,605,484 1,303,461
Fidelity Blue Chip Growth Fund 1,505,934 1,159,863
UBS (Lux) Bond SICAV - USD High Yield 1,080,872 1,065,782
Man AHL Diversified 1,010,460 1,107,585
UBS (Lux) Strategy Fund Balanced Sustainable 932,224 936,667
Vanguard Mid-Cap Index Fund Admiral Shares 816,293 787,579
Fidelity Select Biotechnology Fund 779,821 781,153
UBS (Lux) Equity Fund - European Opportunity 549,902 540,243
UBS Equity Fund - Greater China 521,527 645,204
UBS (Lux) Strategy Fund Yield Sustainable 465,202 465,713
Fidelity Diversified International Fund 459,964 474,179
UBS (Lux) Equity SICAV Global Emerging Market Opportunity 373,857 410,413
Fidelity Capital and Income Fund 313,128 306,641
UBS (Lux) Strategy Fund Fixed Income Sustainable 267,609 299,484
Fidelity Europe Fund 222,265 247,137
UBS (Lux) Key Selection SICAV Global Alllocation 176,182 174,794
Vanguard Capital Opportunity Fund Admiral Shares 117,262 117,759
Total segregated account investments $ 27,698,714 $ 26,074,752

The Company assesses deposit loads, surrender charges, maintenance, and other
administrative charges on the segregated account periodically. These charges are recognized
as revenue in the period earned.

At December 31, 2023 and 2022, the Company reported dividend income of $176,909 and
$100,757 as a component of interest, dividends and other income. The Company also reported
fund commissions of $63,314 on the segregated account as a component of interest, dividends,
and other income during 2022, there were not fund commissions during 2023.

Page 34
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(8) Fixed Assets, Net

The Company’s fixed assets at December 31 are summarized as follows:

2023 2022

Land $ 3,280,694 $ 3,160,598

Building 5,265,213 5,265,213
Sales illustration software 226,647 226,647
Less accumulated depreciation (1,176,155) (1,042,859)

$ 7,596,399 $ 7,609,599

Depreciation expense on fixed assets during 2023 and 2022 amounted to $133,296 and
$149,265, respectively, and is included in commissions, professional fees, insurance, and other
expenses on the General Company’s statements of income and retained earnings.
The building is leased to an unrelated party for the production of income.
(9) Future Policy Benefits
At December 31, 2023, the provision for future policy benefits, exclusive of segregated account
policies, consists of the following:

General
Company Cell 1 Cell 2

Individual term life insurance $ 50,821,381 $ — $ —

Group life insurance 327 — —
Accident and health insurance 313,025 — —
Variable and universal life 30,235,126 5,085 —
Assumed variable and universal life 17,938,003 — —
Deferred annuity 1,275,077 — —
Property and casualty — — —

Total $ 100,582,939 $ 5,085 $ —

Page 35
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(9) Future Policy Benefits (Continued)

At December 31, 2022 the provision for future policy benefits, exclusive of segregated account
policies, consists of the following:

General
Company Cell 1 Cell 2

Individual term life insurance $ 50,478,825 $ — $ —

Group life insurance 711 — —
Accident and health insurance 626,111 — —
Variable and universal life 18,826,980 5,556 —
Assumed variable and universal life 16,515,311 — —
Deferred annuity 1,499,104 — —
Property and casualty — — —

Total $ 87,947,042 $ 5,556 $ —

Mortality and withdrawal assumptions are based on industry data, company experience, and
actuarial judgment with an allowance for possible unfavorable deviations from expected
experience. Management believes these provisions are adequate to cover the estimated ultimate
liability for future policy benefits. However, the ultimate settlement of future policy benefits may
vary from the amounts recorded in the financial statements. The liability for future policy benefits
reported by Cell 1 represents the future policy benefits attributable to term life insurance riders
on certain variable annuity products. The liability for future policy benefits for variable and
universal life policies reported under General Company represents the future policy benefits
attributable to non-guaranteed policy credits on certain universal life products.

(10) Policyholders’ Account Balances

The policyholders’ account balances as of December 31, 2023 and 2022 as well as the changes
during the years then ended are as follows:
2023 2022

Balance, beginning of the year $ 274,920,529 $ 215,293,708

Deposits received 120,415,303 105,147,725
Surrenders paid (6,325,054) (4,027,089)
Universal life and investment-type
product charges (61,102,331) (50,901,478)
Interest credited 2,598,441 12,755,151
Other changes, net (6,788,297) (3,347,488)

Balance, end of year $ 323,718,591 $ 274,920,529

Page 36
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(11) Other Policy Fund Liabilities

Other policy fund liabilities at December 31, 2023 are comprised as follows:

General
Company Cell 1

Premiums not yet underwritten or accepted for

traditional policies $ 141,845 $ —
Deposit received on non-traditional policies not yet applied
and other amounts due 306,082 —
Interest on universal life policies not yet applied 26,230,349 175,194

Total $ 26,678,276 $ 175,194

Other policy fund liabilities at December 31, 2022 are comprised as follows:

General
Company Cell 1

Premiums not yet underwritten or accepted for

traditional policies $ 165,837 $ —
Deposit received on non-traditional policies not yet applied
and other amounts due 290,648 —
Interest on universal life policies not yet applied 1,708,002 —

Total $ 2,164,487 $ —

(12) Information about Financial Instruments with Off-balance Sheet Risk and Financial
Instruments with Concentrations of Credit Risk
The Company is exposed to concentrations of credit risk because of cash deposits concentrated
in several financial institutions. As of December 31, 2023 and 2022, the Company had funds
deposited in these financial institutions totaling $126,816,603 and $119,363,983, respectively,
net of the insurance provided by the Federal Deposit Insurance Corporation (FDIC) and the
Securities Investor Protection Corporation (SIPC). The Company mitigates its exposure to losses
from these cash deposits by monitoring the financial stability of the financial institutions involved.

Page 37
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(13) Income Taxes

Income taxes for the years ended December 31, 2023 and 2022 are summarized as follows:

2023 2022

Current:
Federal expense $ 6,749,764 $ 3,303,773
State 9,462 (8,118)
6,759,226 3,295,655
Deferred:
Federal expense 3,612,450 268,531
Total income taxes $ 10,371,676 $ 3,564,186

Income tax expense for the years ended December 31, 2023 and 2022 differs from “expected”
tax (computed by applying the U.S. federal income tax rate) as a result of the following:
2023 2022

Computed “expected” tax expense $ 9,870,799 $ 3,168,882

Increase (reduction) in income taxes resulting from:
State income tax expense 9,462 9,095
Nondeductible expenses (644,827) 405,173
Other, net 1,136,242 (18,964)
Total $ 10,371,676 $ 3,564,186

Beginning for the year ended December 31, 2021, the Company elected to file a Consolidated
U.S. federal income tax return. The income tax expense was calculated based on the Company’s
net income, adjusted by various items including temporary or permanent differences.
The income taxes provision for the General Company, Cell 1, and Cell 2 for the years ended
December 31, 2023 and 2022 are as follows:

2023 2022

General Company $ 6,796,759 $ 1,387,340

Cell 1 403,790 (420,530)
Cell 2 3,171,127 2,597,376
Total $ 10,371,676 $ 3,564,186

Page 38
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(13) Income Taxes (Continued)

Due to the Company’s election to file a consolidated U.S. federal income tax return, a deferred
tax was established to reflect the tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022, is
presented below:
2023 2022
Deferred tax assets:
Future policy benefits and other policyholder liabilities $ 23,288,991 $ 17,374,768
Net operating loss carryforward 84,708 84,708
Total gross deferred tax assets 23,373,699 17,459,476
Less valuation allowance — —
Net deferred tax assets 23,373,699 17,459,476
Deferred tax liabilities:
Deferred acquisition costs 43,734,842 36,214,552
Investment 3,385,803 1,347,116
Other 33,384 65,688
Total gross deferred tax liabilities 47,154,029 37,627,356
Net deferred tax liability $ (23,780,330) $ (20,167,880)

Management determined that no valuation allowance for deferred tax assets was necessary as
of December 31, 2023 and 2022. The net operating loss of $403,370 for Federal as well as
Florida estate taxes will never expire.
The Company adopted guidance with respect to accounting for uncertainty in income taxes. A
tax position is recognized as a benefit only if it is “more likely than not” that the tax position would
be sustained in a tax examination, with a tax examination being presumed to occur. The amount
recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on
examination. For tax positions not meeting the “more likely than not” test, no tax benefit is
recorded. There were no uncertain tax positions at December 31, 2023 and 2022.
No tax planning strategies were considered in determining if a deferred tax asset was realizable.
Interest and/or penalties related to income tax matters are included as a component of
commissions, professional fees, insurance, and other expenses.

(14) Fair Value Measurements

Included in the investment line item in the financial statements are certain equity fund instruments
carried at fair value.

The fair value of an asset is the amount at which that asset could be bought or sold in a current
transaction between willing parties, that is, other than in a forced or liquidation sale (exit price).
The fair value of a liability is the amount at which that liability could be incurred or settled in a

Page 39
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(14) Fair Value Measurements (Continued)

current transaction between willing parties, that is, other than in a forced or liquidation sale (exit
price).

Fair values are based on quoted market prices when available. When market prices are not
available, fair value is generally estimated using discounted cash flow analyses, incorporating
current market inputs for similar financial instruments with comparable terms and credit quality
(matrix pricing). In instances where there is little or no market activity for the same or similar
instruments, the Company estimates fair value using methods, models and assumptions that
management believes market participants would use to determine a current transaction price.

These valuation techniques involve some level of management estimation and judgement which
becomes significant with increasingly complex instruments or pricing methods. Where
appropriate, adjustments are included to reflect the risk inherent in a particular methodology,
model or input used.

The Company’s financial assets and liabilities carried at fair value have been classified, for
disclosure purposes, based on a hierarchy defined by General Accounting Principles for Fair
Value Measurements and Disclosures. The hierarchy gives the highest ranking to fair values
determined using unadjusted quoted prices in active markets for identical assets and liabilities
(Level 1) and the lowest ranking to fair values determined using methodologies and models with
unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level
input that is significant to its measurement. For example, a Level 3 fair value measurement may
include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels
of the fair value hierarchy are as follows:

• Level 1 – inputs to the valuation methodology are quoted prices available in active markets
for identical investments as of the reporting date. “Blockage discounts” for large holdings of
unrestricted financial instruments where quoted prices are readily and regularly available for
an identical asset or liability in an active market are prohibited;

• Level 2 – inputs to the valuation methodology are other than quoted prices in active markets,
which are either directly or indirectly observable as of the reporting date, and fair value can
be determined through the use of models or other valuation methodologies; and

• Level 3 – inputs to the valuation methodology are unobservable inputs in situations where
there is little or no market activity for the asset or liability and the reporting entity makes
estimates and assumptions related to the pricing of the asset or liability, including
assumptions regarding risk.

Page 40
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(14) Fair Value Measurements (Continued)

The following tables provide information as of December 31, 2023 and 2022 about the Company’s
financial assets and liabilities measured at fair value on a recurring basis.

December 31, 2023

General Company
Level 1 Level 2 Level 3 Total

Assets at fair value:

Investment in fixed maturity securities $ 76,376,778 $ — $ — $ 76,376,778

Investment in equity securities at fair value 26,379,491 1,053,947 — 27,433,438
Total assets at fair value $ 102,756,269 $ 1,053,947 $ — $ 103,810,216

Cell One
Level 1 Level 2 Level 3 Total

Assets at fair value:

Investment in equity funds $ 23,110,525 $ — $ — $ 23,110,525

Segregated account investments 27,698,714 — — 27,698,714
Total assets at fair value $ 50,809,239 $ — $ — $ 50,809,239

Liabilities at fair value:

Segregated account liabilities $ 27,698,714 $ — $ — $ 27,698,714

Total liabilities at fair value $ 27,698,714 $ — $ — $ 27,698,714

Page 41
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(14) Fair Value Measurements (Continued)

December 31, 2022

General Company
Level 1 Level 2 Level 3 Total

Assets at fair value:

Investment in fixed maturity securities $ 52,097,142 $ — $ — $ 52,097,142

Investment in equity securities at fair value 19,471,416 — — 19,471,416
Total assets at fair value $ 71,568,558 $ — $ — $ 71,568,558

Cell One
Level 1 Level 2 Level 3 Total

Assets at fair value:

Investment in equity funds $ 19,399,331 $ — $ — $ 19,399,331

Segregated account investments 26,074,752 — — 26,074,752
Total assets at fair value $ 45,474,083 $ — $ — $ 45,474,083

Liabilities at fair value:

Segregated account liabilities $ 26,074,752 $ — $ — $ 26,074,752

Total liabilities at fair value $ 26,074,752 $ — $ — $ 26,074,752

Fair values and changes in the fair values of separate account assets generally accrue directly
to the policyholders and are not included in the Company’s revenues and expenses or surplus.

Level 1 financial assets and liabilities as of December 31, 2023 and 2022 are as follows:

2023 2022
Financial Assets $ 153,565,508 $ 117,042,641
Financial Liabilities $ 27,698,714 $ 26,074,752

Page 42
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(14) Fair Value Measurements (Continued)

Level 1 assets and liabilities include actively-traded exchange-listed equity funds securities.
Unadjusted quoted prices for these securities are provided to the Company by independent
pricing services. Separate account assets and liabilities in Level 1 primarily include actively-
traded institutional and retail mutual fund investments valued by the respective mutual fund
companies.
The Company has not attempted to independently assess the fair value of the mortgage loan
investments due to cost considerations and instead carries those investments at their unpaid
principal balance.
The carrying value of cash and cash equivalents, investments in fixed maturity securities, policy
loans, accruals, other liabilities, receivables and other financial instruments approximates their
fair value at December 31, 2023 and 2022.

(15) Lease

The Company, as a lessor, leases commercial real estate for the production of income to
unrelated parties. Real estate owned and leased is stated at cost less accumulated depreciation
and encumbrances, if any.

The typical lease period is fourteen years with renewal options but does not have an option to
purchase the property. Rental income, which is included as a component of interest, dividends,
and other investment income on the statements of income and retained earnings, for the years
ended December 31, 2023 and 2022 was $305,335 and $314,628 respectively. In addition,
certain leases of retail space stipulate that a portion of the income earned is contingent upon the
level of the tenant’s revenues.

Future contractual receipts under non-cancelable operating leasing arrangements for each of the
five years after December 31, 2023 are as follows:

Year ending Operating

December 31: Leases
2024 $ 305,335
2025 305,335
2026 305,335
2027 305,335
2028 305,335
$ 1,526,675

Page 43
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(16) Policy and Contract Claims and Losses

The table below is a reconciliation of beginning and ending claim liabilities balances for accident
and health policies as of December 31, 2023 and 2022 for General Company.

2023 2022

Gross balance, beginning of year $ 10,993,461 $ 9,383,296

Less reinsurance recoverables (10,972,487) (9,333,846)

Net balance, beginning of year 20,974 49,450

Amount incurred, related to:

Current year 324,720 255,772
Prior years 38,057 114,438

Total Incurred 362,777 370,210

Amount paid, related to:

Current year 302,734 234,817
Prior years 59,031 163,869

Total paid 361,765 398,686

Net balance, end of year 21,986 20,974

Plus reinsurance recoverable 11,398,704 10,972,487

Gross balance, end of year $ 11,420,690 $ 10,993,461

Because medical claims liabilities include various actuarially developed estimates, the
Company’s actual medical costs and claims expense may be more or less than the Company’s
previously developed estimates. As a result of changes in estimates of insured events in prior
years, the incurred claims for prior period insured events during 2023 and 2022 were higher due
to unfavorable development of claims liabilities that are attributed to differences in expected cost
per service and utilization trends. Management believes the amount of medical claims liabilities
are reasonable as of December 31, 2023 and 2022.

At December 31, 2023 and 2022 the liability for claims and losses included in the balance sheets
for the General Company contains the amount of $10,095,906 and $10,549,992, respectively, for
life claims. At December 31, 2023 and 2022 the liability for claims and losses included in the
balance sheets for the Cell 1 contains the amount of $109,036 and $131,365, respectively, for
life claims. At December 31, 2023 and 2022, the liability for claims and losses included in the

Page 44
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(16) Policy and Contract Claims and Losses (Continued)

balance sheets for Cell 2 amounted to $171,862,179 and $157,469,719, respectively, for property
and casualty claims.

The following is an analysis of the gross and net provision for claims and loss adjustment
expenses:

2023 2022
General General
Cell 1 Cell 2 Cell 1 Cell 2
Com pany Com pany
Gross
Life claims $ 10,095,906 $ 109,036 $ — $ 10,549,992 $ 131,365 $ —
Accident and health 11,420,690 — — 10,993,461 — —
Property and casualty — — 171,862,179 — — 157,469,719
$ 21,516,596 $ 109,036 $ 171,862,179 $ 21,543,453 $ 131,365 $ 157,469,719

Reinsurance
Life claims $ 62,598,703 $ 674,505 $ — $ 15,182,366 $ 931,630 $ —
Accident and health 11,398,704 — — 10,972,487 — —
Property and casualty — — 171,862,179 — — 157,469,719
$ 73,997,407 $ 674,505 $ 171,862,179 $ 26,154,853 $ 931,630 $ 157,469,719

Net
Life claims $ (52,502,797) $ (565,469) $ — $ (4,632,374) $ (800,265) $ —
Accident and health 21,986 — — 20,974 — —
Property and casualty — — — — — —
$ (52,480,811) $ (565,469) $ — $ (4,611,400) $ (800,265) $ —

Page 45
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(16) Policy and Contract Claims and Losses (Continued)

Losses incurred and paid by category for short-duration contracts, net of reinsurance, are as
follows as of and for the year ended December 31, 2023:

Category 1 - Company Agents Group Health ①

Total of Incurred-
But-Not-Reported
Liabilities Plus Cumulative
Expected Number of
Accident Cumulative Cumulative Development on Reported
Year Incurred Paid Reported Claims Claims

2019 $ 310,596 $ 310,596 $ — 964

2020 171,733 171,733 — 764
2021 721,524 721,524 — 1,269
2022 293,848 293,848 — 973
2023 324,720 302,735 6,869 791

$ 1,822,421 $ 1,800,435 $ 6,869

① 2019 – 2022 unaudited

The following reconciles the above cumulative incurred and paid data to the liability for unpaid
losses as of December 31:
2023

Cumulative incurred losses $ 1,822,421

Less: cumulative paid losses 1,800,435

Unpaid losses from 2019 to 2023 $ 21,986

Reinsurance recoverable 11,398,704

Total reserve balance $ 11,420,690

The Company practice is to consistently recognize the actuarial best estimate of our ultimate
liability for claims, based upon historical experience and other actuarial assumptions.

Page 46
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(In U.S. Dollars)

(16) Policy and Contract Claims and Losses (Continued)

Using generally accepted actuarial reserving techniques, the Company projects its estimate of
ultimate losses and loss expenses at each reporting date. The incurred-but-not-reported reserve
is the difference between the projected ultimate losses and loss expenses incurred and the sum
of case losses and loss expense reserves; and inception-to-date paid losses.

The Company determines the number of reported claims on the basis of loss events. Claims that
are closed without payments of loss are included when determining the number of reported
claims.

For Cell 2 the Company uses information provided by the broker as well as management
judgment to record individual contracts or homogeneous groups of contracts, as appropriate. As
the reinsurance business within Cell 2 is fully reinsured, the net incurred and paid claims were
none. Accordingly, analyses, including the required supplementary information, of these amounts
have not been presented.

(17) Segregated Portfolio Legislation

The assets and liabilities owned by the Company and presented in these financial statements as
attributable to Cell 1 and Cell 2 have been designated and resolved as such by the board of
directors.

The segregated portfolio legislation under which the Company has been established provides for
legal segregation of assets under Cayman Islands’ law. The Company was restructured as a
segregated portfolio company to provide the shareholders and policyholders protection under this
legislation. Where assets of the Company and its segregated portfolios are held outside the
Cayman Islands, no assurance can be given that this legal segregation of assets will be adhered
to.

(18) Contingencies

The Company is involved in various claims and legal actions arising from the ordinary course of
business. In the opinion of management, the ultimate disposition of these matters will not have a
material adverse effect on the Company’s financial position, results of operations or liquidity.

(19) Subsequent Event

The Company has evaluated subsequent events for disclosure and recognition through July 10,
2024, the date on which these financial statements were available to be issued.

Page 47
REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
 BEST MERIDIAN INTERNATIONAL INSURANCE COMPANY SPC
(A Wholly-Owned Subsidiary of BMI Financial Group, Inc.)
INCURRED AND CUMULATIVE PAID LOSSES AND
ALLOCATED LOSS ADJUSTMENT EXPENSES,
NET OF REINSURANCE (UNAUDITED) – SHORT DURATION CONTRACTS
As of and for the Year Ended December 31, 2023
(In U.S. Dollars)

The following is information about incurred and paid claims development for short-duration contracts
as of and for the year ended December 31, 2023, net of reinsurance and by category:

Category 1 – Company Agents Group Health

Incurred Claims, net of reinsurance

Years Ended December 31,

Accident
Year 2019 2020 2021 2022 2023
2019 $ 212,456 $ 327,086 $ 311,300 $ 310,596 $ 310,596
2020 182,753 173,659 171,733 171,733
2021 604,475 721,543 721,524
2022 255,772 293,848
2023 324,720

Total $ 1,822,421

Cumulative Paid Claims, net of reinsurance

Years Ended December 31,

Accident
Year 2019 2020 2021 2022 2023
2019 $ 193,251 $ 302,215 $ 310,596 $ 310,596 $ 310,596
2020 148,791 171,733 171,733 171,733
2021 557,655 721,524 721,524
2022 234,817 293,848
2023 302,734
Total $ 1,800,435
All outstanding liabilities before 2019 -
Liabilities for Claims $ 21,986

See Auditor’s report on required supplementary information. Page 48