On September 1, 2009, American Life was issued a certificate of authority to conduct life insurance business in the State of Nebraska. Initial capital and surplus contributed to American Life was approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. As of the end of 2014, the surplus contributed to American Life was $9.6 million, capital and surplus of American Life at that date was approximately $2.9 million. In 2014 and 2013, American Life generated approximately $2.9 million and $3.0 million in premium revenue, respectively, when combined with the operating results of Old Reliance Insurance Company, a company acquired by American Life in August 2011 as described below.
The Company was a development stage company until American Life commenced insurance operations in 2009. We have incurred significant net losses since inception in 2003 totaling approximately $21.1 million through December 31, 2014. These losses have resulted primarily from costs incurred while raising capital and establishing American Life. We expect to continue to incur significant operating losses until we achieve a volume of in-force life insurance policies that provides premiums that are sufficient to cover our operating expenses.
On August 5, 2014, Great Plains and Security Capital were merged into Midwest Holding Inc. Great Plains’ wholly owned subsidiary, Great Plains Life, along with any remaining assets of Great Plains and Security Capital were transferred. Great Plains Life was contributed to American Life via a surplus contribution and became a wholly owned subsidiary of American Life.
During the third quarter of 2014, we sold our investment in Northern Plains for $1,136,000. We had a basis of $85,000 in the investment and an equity carrying value of $1,045,188.
Premium revenue: Premium revenue for 2014 declined to $4,007,810 compared to $4,331,329 in 2013 due primarily to the accounting treatment for renewal premiums on our Accumulator Product as well as slowdowns in new business produced in 2014. We recognize 100% of the first year payments received for our Accumulator life insurance products as premiums earned when due. In subsequent years, 50% of the payments received on the Accumulator life insurance products are applied toward the traditional life insurance premium. The other 50% of the payments received are applied towards the annuity premium which is recognized as deposits to policyholder account balances and included in future insurance policy benefits rather than revenues. Premiums on our other insurance products are recognized as earned when due. Production of new life premium slowed during 2014 because regulatory approval of American Life’s new life insurance products took an extraordinary amount of time, as well as changes in field management that delayed product sales. Management believes these delays have been overcome and expects production to increase as we enter 2015, particularly as the newly developed life products are introduced to the field in the first quarter of 2015.
Net Loss: The significant increase in net loss year-to-date was primarily attributable to lower revenue, including a decline in premium revenue, increased claims and expenses, along with losses incurred by entities acquired by us, and by the costs associated with the Exchange Agreement and state examinations.