# NI Holdings (NODK) 10-Q SEC filing - Q3 FY2024
- Filed: Nov 7, 2024
- Fiscal quarter: Q3 FY2024
- Calendar quarter: Q3 2024
- Accession: 0001174947-24-001226
- OpenCapital page: https://www.opencapital.sh/filings/0001174947-24-001226
- Markdown URL: https://www.opencapital.sh/filings/0001174947-24-001226.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/1681206/0001174947-24-001226-index.htm
## Filing documents
- [10-Q (nodk-20240930.htm)](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/nodk-20240930.htm)
- [EX-31.1 (ex31-1.htm)](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/ex31-1.htm)
- [EX-31.2 (ex31-2.htm)](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/ex31-2.htm)
- [EX-32 (ex32.htm)](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/ex32.htm)
---
## 10-Q
SEC source: [nodk-20240930.htm](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/nodk-20240930.htm)
**UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**Washington, D.C. 20549**
**FORM 10-Q**
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
**For the quarterly period ended September 30, 2024**
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
**For the transition period from to**
**Commission file number 001-37973**
**NI HOLDINGS, INC.**
**(Exact name of registrant as specified in its
charter)**
| North Dakota | 81-2683619 |
| --- | --- |
| (State or other jurisdiction of | (IRS Employer |
| incorporation or organization) | Identification No.) |
| 1101 First Avenue North Fargo, North Dakota | 58102 |
| (Address of principal executive offices) | (Zip Code) |
(701) 298-4200
Registrant’s telephone number, including
area code
Not applicable
Former name, former address, and former fiscal
year, if changed since last report
Securities registered pursuant to Section 12(b)
of the Securities Exchange Act of 1934:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value per share NODK Nasdaq Capital Market
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. ☒ Yes No☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes No ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
i
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒
The number of shares of Registrant’s common stock outstanding
on October 31, 2024 was 20,648,642. No preferred shares are issued or outstanding.
ii
**TABLE OF CONTENTS**
| [FORWARD-LOOKING STATEMENTS](#a_001) | 2 |
| --- | --- |
| [Part I. - FINANCIAL INFORMATION](#a_002) | 3 |
| [Item 1. - Financial Statements](#a_003) | 3 |
| [Consolidated Balance Sheet – September 30, 2024 (Unaudited) and December 31, 2023](#a_004) | 3 |
| [Consolidated Statements of Operations (Unaudited) – Three Months and Nine Months Ended September 30, 2024 and 2023](#a_005) | 4 |
| [Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Three Months and Nine Months Ended September 30, 2024 and 2023](#a_006) | 5 |
| [Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) – Three Months and Nine Months Ended September 30, 2024 and 2023](#a_007) | 6 |
| [Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended September 30, 2024 and 2023](#a_008) | 8 |
| [Notes to Unaudited Consolidated Financial Statements](#a_009) | 9 |
| [Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations](#a_010) | 45 |
| [Item 3. - Quantitative and Qualitative Disclosures about Market Risk](#a_011) | 54 |
| [Item 4. - Controls and Procedures](#a_012) | 54 |
| [Part II. - OTHER INFORMATION](#a_013) | 55 |
| [Item 1. - Legal Proceedings](#a_014) | 55 |
| [Item 1A. - Risk Factors](#a_015) | 55 |
| [Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds](#a_016) | 56 |
| [Item 3. - Defaults upon Senior Securities](#a_017) | 56 |
| [Item 4. - Mine Safety Disclosures](#a_018) | 56 |
| [Item 5. - Other Information](#a_019) | 57 |
| [Item 6. - Exhibits](#a_020) | 57 |
| [Signatures](#a_021) | 58 |
iii
CERTAIN IMPORTANT INFORMATION
Unless the context otherwise requires, as used in this Quarterly Report
on Form 10-Q (“Form 10-Q”):
- “NI Holdings”, “the Company”, “we”, “us”, and “our” refer to NI Holdings, Inc., together with Nodak Insurance Company and its subsidiaries, Direct Auto Insurance Company, and Westminster American Insurance Company (sold on June 30, 2024), for periods discussed after completion of the conversion, and for periods discussed prior to completion of the conversion refer to Nodak Mutual Insurance Company and all of its subsidiaries and Battle Creek Mutual Insurance Company;
- the “Nodak conversion” refers to the series of transactions consummated on March 13, 2017, by which Nodak Mutual Insurance Company converted from a mutual insurance company to a stock insurance company, as Nodak Insurance Company, and became a wholly-owned subsidiary of NI Holdings, an intermediate stock holding company formed on the date of conversion;
- “Nodak Mutual Group” refers to Nodak Mutual Group, Inc., which is the majority shareholder of NI Holdings;
- “Nodak Mutual” refers to Nodak Mutual Insurance Company, the predecessor company to Nodak Insurance Company prior to the conversion;
- “Nodak Insurance” refers to Nodak Insurance Company or Nodak Mutual Insurance Company interchangeably;
- “members” refers to the policyholders of Nodak Insurance, who are the named insureds under insurance policies issued by Nodak Insurance;
- “Battle Creek” refers to Battle Creek Mutual Insurance Company or Battle Creek Insurance Company interchangeably. Battle Creek Mutual Insurance Company became affiliated with Nodak Insurance in 2011 and, prior to January 2, 2024, was controlled by Nodak Insurance via a surplus note. The terms of the surplus note allowed Nodak Insurance to appoint two-thirds of the Battle Creek Mutual Insurance Company Board of Directors. As of January 2, 2024, the North Dakota Secretary of State approved the conversion of Battle Creek Mutual Insurance Company from a mutual insurance company to a stock insurance company. In accordance with the approved plan of conversion, the name of Battle Creek Mutual Insurance Company became Battle Creek Insurance Company, the surplus note was considered paid in full as of the conversion date, and Battle Creek became a wholly-owned subsidiary of Nodak Insurance;
- “Direct Auto” refers to Direct Auto Insurance Company. Direct Auto is a wholly-owned subsidiary of NI Holdings;
- “American West” refers to American West Insurance Company. American West is a wholly-owned subsidiary of Nodak Insurance;
- “Primero” refers to Primero Insurance Company. Primero is an indirect, wholly-owned subsidiary of Nodak Insurance;
- “Westminster” refers to Westminster American Insurance Company. Westminster was a wholly-owned subsidiary of NI Holdings until it was sold to Scott Insurance Holdings, LLC (“Scott Insurance Holdings”) on June 30, 2024; and
- “Nodak Agency” refers to Nodak Agency, Inc. Nodak Agency is a wholly-owned subsidiary of Nodak Insurance.
1
FORWARD-LOOKING STATEMENTS
This report contains, and management may make, certain “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of
historical facts, may be forward-looking statements. Words such as “may”, “will”, “should”, “likely”,
“anticipates”, “expects”, “intends”, “plans”, “projects”, “believes”,
“views”, “estimates”, and similar expressions are used to identify these forward-looking statements. These statements
include, among other things, the Company’s statements about:
- our anticipated operating and financial performance, business plans, and prospects;
- strategic reviews, capital allocation objectives, dividends, and share repurchases;
- plans for and prospects of acquisitions, dispositions, and other business development activities, and our ability to successfully capitalize on these opportunities;
- the impact of a future pandemic and related economic conditions, including the potential impact on the Company's investments;
- our ability to enter new markets successfully and capitalize on growth opportunities either through acquisitions or the expansion of our distribution network;
- cyclical changes in the insurance industry, competition, and innovation and emerging technologies;
- expectations for impact of, or changes to, existing or new government regulations or laws;
- our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war, and other large-scale crises;
- developments in general economic conditions, domestic and global financial markets, interest rates, unemployment, or inflation, that could affect the performance of our insurance operations and/or investment portfolio; and
- our ability to effectively manage future growth, including additional necessary capital, systems, and personnel.
Given their nature, we cannot assure that any outcome expressed in
these or other forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results
and those anticipated, estimated, implied, or projected. These forward-looking statements may be affected by underlying assumptions that
may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in Part II, Item 1A, “Risk
Factors” of this Form 10-Q and in the Part I, Item 1A, “Risk Factors” section in our Annual Report on Form 10-K for
the year ended December 31, 2023 (“2023 Annual Report”). The occurrence of any of the risks identified in the Part I, Item
1A, “Risk Factors” section of the 2023 Annual Report, or other risks currently unknown, could have a material adverse effect
on our business, financial condition or results of operations, or we may be required to increase our accruals for contingencies. It is
not possible to predict or identify all such factors. Consequently, you should not consider such discussion to be a complete discussion
of all potential risks or uncertainties.
Therefore, you are cautioned not to unduly rely on
forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to update forward-looking statements,
whether as a result of new information, future events or otherwise, except as required by applicable securities law. You are advised,
however, to consult any further disclosures we make on related subjects.
2
**PART I. - FINANCIAL INFORMATION**
## Item 1. - Financial Statements
**NI Holdings, Inc.**
### Consolidated Balance Sheets
_(dollar amounts in thousands, except par value)_
| Line item | September 30, 2024 | December 31, 2023 |
| --- | --- | --- |
| | (Unaudited) | |
| Assets: | | |
| Cash and cash equivalents | $39,102 | $41,037 |
| Fixed income securities, at fair value (net of allowance for expected credit losses of $0 at September 30, 2024 and December 31, 2023) | 306,717 | 289,399 |
| Equity securities, at fair value | 25,578 | 21,983 |
| Other investments | 2,006 | 2,006 |
| Total cash and investments | 373,403 | 354,425 |
| Premiums and agents' balances receivable (net of allowance for expected credit losses of $350 at September 30, 2024 and $394 at December 31, 2023) | 85,315 | 56,154 |
| Deferred policy acquisition costs | 27,471 | 26,790 |
| Reinsurance premiums receivable (payable) | 114 | (1,403) |
| Reinsurance recoverables on losses (net of allowance for expected credit losses of $0 at September 30, 2024 and December 31, 2023) | 14,321 | 6,460 |
| Income tax recoverable | 11,175 | — |
| Accrued investment income | 2,248 | 2,325 |
| Property and equipment, net | 7,548 | 7,452 |
| Deferred income taxes | 5,369 | 9,228 |
| Receivable from Federal Crop Insurance Corporation | 19,605 | 17,404 |
| Goodwill and other intangibles | 2,728 | 2,728 |
| Other assets | 10,600 | 10,866 |
| Assets of discontinued operations | — | 162,457 |
| Total assets | $559,897 | $654,886 |
| Liabilities: | | |
| Unpaid losses and loss adjustment expenses | $159,069 | $119,185 |
| Unearned premiums | 136,880 | 126,100 |
| Income tax payable | — | 147 |
| Accrued expenses and other liabilities | 22,577 | 17,758 |
| Liabilities of discontinued operations | — | 141,297 |
| Total liabilities | 318,526 | 404,487 |
| Shareholders’ equity: | | |
| Common stock, $0.01 par value, authorized: 25,000,000 shares; issued: 23,000,000 shares; and outstanding: 2024 – 20,648,642 shares, 2023 – 20,599,908 shares | 230 | 230 |
| Additional paid-in capital | 95,967 | 96,294 |
| Unearned employee stock ownership plan shares | (698) | (698) |
| Retained earnings | 191,736 | 208,376 |
| Accumulated other comprehensive loss, net of income taxes | (11,566) | (21,384) |
| Treasury stock, at cost, 2024 – 2,281,563 shares, 2023 – 2,330,297 shares | (34,298) | (35,177) |
| Non-controlling interest | — | 2,758 |
| Total shareholders’ equity | 241,371 | 250,399 |
| Total liabilities and shareholders’ equity | $559,897 | $654,886 |
The accompanying notes are an integral part of these consolidated financial
statements.
3
**NI Holdings, Inc.**
### Consolidated Statements of Operations (Unaudited)
_(dollar amounts in thousands, except per share data)_
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Revenues: | | | | |
| Net premiums earned | $83,270 | $76,418 | $238,323 | $218,124 |
| Fee and other income | 491 | 445 | 1,590 | 1,196 |
| Net investment income | 2,811 | 2,121 | 8,089 | 5,735 |
| Net investment gains (losses) | 2,412 | (955) | 3,288 | 275 |
| Total revenues | 88,984 | 78,029 | 251,290 | 225,330 |
| Expenses: | | | | |
| Losses and loss adjustment expenses | 65,100 | 53,157 | 174,602 | 154,359 |
| Amortization of deferred policy acquisition costs | 17,616 | 16,523 | 53,723 | 48,311 |
| Other underwriting and general expenses | 9,724 | 7,330 | 26,658 | 22,606 |
| Total expenses | 92,440 | 77,010 | 254,983 | 225,276 |
| Income (loss) from continuing operations before income taxes | (3,456) | 1,019 | (3,693) | 54 |
| Income tax expense (benefit) | (751) | 214 | (445) | 11 |
| Net income (loss) from continuing operations | (2,705) | 805 | (3,248) | 43 |
| Net income (loss) attributable to non-controlling interest | — | 67 | — | (336) |
| Net income (loss) from continuing operations attributable to NI Holdings, Inc. | (2,705) | 738 | (3,248) | 379 |
| Loss from discontinued operations, net of income taxes | — | (507) | (1,512) | (12,480) |
| Loss on sale of discontinued operations, net of income taxes | — | — | (11,148) | — |
| Net income (loss) | $(2,705) | $231 | $(15,908) | $(12,101) |
| Earnings (loss) per common share from continuing operations: | | | | |
| Basic | $(0.13) | $0.03 | $(0.15) | $0.02 |
| Diluted | $(0.13) | $0.03 | $(0.15) | $0.02 |
| Earnings (loss) per common share: | | | | |
| Basic | $(0.13) | $0.01 | $(0.76) | $(0.57) |
| Diluted | $(0.13) | $0.01 | $(0.76) | $(0.57) |
| Share data: | | | | |
| Weighted average common shares outstanding used in basic per common share calculations | 20,985,213 | 21,111,832 | 20,962,872 | 21,253,168 |
| Dilutive securities | — | 81,690 | — | 68,380 |
| Weighted average common shares used in diluted per common share calculations | 20,985,213 | 21,193,522 | 20,962,872 | 21,321,548 |
The accompanying notes are an integral part of these consolidated financial
statements.
4
**NI Holdings, Inc.**
### Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
_(dollar amounts in thousands)_
| Line item | Three Months Ended September 30, 2024 / Attributable to NI Holdings, Inc. | Three Months Ended September 30, 2024 / Attributable to Non- Controlling Interest | Three Months Ended September 30, 2024 / Total | Nine Months Ended September 30, 2024 / Attributable to NI Holdings, Inc. | Nine Months Ended September 30, 2024 / Attributable to Non- Controlling Interest | Nine Months Ended September 30, 2024 / Total |
| --- | --- | --- | --- | --- | --- | --- |
| Net income (loss) | $(2,705) | — | $(2,705) | $(15,908) | — | $(15,908) |
| Other comprehensive income (loss), before income taxes: | | | | | | |
| Holding gains (losses) on investments | 10,935 | — | 10,935 | 8,165 | — | 8,165 |
| Reclassification adjustment for net realized losses included in net income (loss) | 203 | — | 203 | 243 | — | 243 |
| Other comprehensive income (loss), before income taxes | 11,138 | — | 11,138 | 8,408 | — | 8,408 |
| Income tax (expense) benefit related to items of other comprehensive income (loss) | (2,512) | — | (2,512) | (1,896) | — | (1,896) |
| Other comprehensive income (loss), net of income taxes | 8,626 | — | 8,626 | 6,512 | — | 6,512 |
| Comprehensive income (loss) | $5,921 | — | $5,921 | $(9,396) | — | $(9,396) |
| Line item | Three Months Ended September 30, 2023 / Attributable to NI Holdings, Inc. | Three Months Ended September 30, 2023 / Attributable to Non- Controlling Interest | Three Months Ended September 30, 2023 / Total | Nine Months Ended September 30, 2023 / Attributable to NI Holdings, Inc. | Nine Months Ended September 30, 2023 / Attributable to Non- Controlling Interest | Nine Months Ended September 30, 2023 / Total |
| --- | --- | --- | --- | --- | --- | --- |
| Net income (loss) | $231 | $67 | $298 | $(12,101) | $(336) | $(12,437) |
| Other comprehensive income (loss), before income taxes: | | | | | | |
| Holding gains (losses) on investments | (8,726) | (465) | (9,191) | (6,236) | (327) | (6,563) |
| Reclassification adjustment for net realized losses included in net income (loss) | 8 | — | 8 | 495 | — | 495 |
| Other comprehensive income (loss), before income taxes | (8,718) | (465) | (9,183) | (5,741) | (327) | (6,068) |
| Income tax (expense) benefit related to items of other comprehensive income (loss) | 1,982 | 105 | 2,087 | 1,305 | 74 | 1,379 |
| Other comprehensive income (loss), net of income taxes | (6,736) | (360) | (7,096) | (4,436) | (253) | (4,689) |
| Comprehensive income (loss) | $(6,505) | $(293) | $(6,798) | $(16,537) | $(589) | $(17,126) |
The accompanying notes are an integral part of these consolidated financial
statements.
5
**NI Holdings, Inc.**
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
**(dollar amounts in thousands)**
_Three Months Ended September 30, 2024_
| Line item | Common Stock | Additional Paid-in Capital | Unearned Employee Stock Ownership Plan Shares | Retained Earnings | Accumulated Other Comprehensive Loss, Net of Income Taxes | Treasury Stock | Non-Controlling Interest | Total Shareholders’ Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, July 1, 2024 (As Restated) | $230 | $96,581 | $(698) | $194,441 | $(20,192) | $(34,298) | — | $236,064 |
| Battle Creek demutualization | — | — | — | — | — | — | — | — |
| Net income (loss) | — | — | — | (2,705) | — | — | — | (2,705) |
| Impact of Westminster unrealized investment gains/losses | — | — | — | — | — | — | — | — |
| Other comprehensive income (loss), net of income taxes | — | — | — | — | 8,626 | — | — | 8,626 |
| Purchase of treasury stock | — | — | — | — | — | — | — | — |
| Share-based compensation | — | (614) | — | — | — | — | — | (614) |
| Issuance of vested award shares | — | — | — | — | — | — | — | — |
| Balance, September 30, 2024 | $230 | $95,967 | $(698) | $191,736 | $(11,566) | $(34,298) | — | $241,371 |
_Nine Months Ended September 30, 2024_
| Line item | Common Stock | Additional Paid-in Capital | Unearned Employee Stock Ownership Plan Shares | Retained Earnings | Accumulated Other Comprehensive Loss, Net of Income Taxes | Treasury Stock | Non-Controlling Interest | Total Shareholders’ Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, January 1, 2024 | $230 | $96,294 | $(698) | $208,376 | $(21,384) | $(35,177) | $2,758 | $250,399 |
| Battle Creek demutualization | — | — | — | 3,832 | (1,074) | — | (2,758) | — |
| Net income (loss) | — | — | — | (15,908) | — | — | — | (15,908) |
| Impact of Westminster unrealized investment gains/losses | — | — | — | (4,380) | 4,380 | — | — | — |
| Other comprehensive income (loss), net of income taxes | — | — | — | — | 6,512 | — | — | 6,512 |
| Purchase of treasury stock | — | — | — | — | — | — | — | — |
| Share-based compensation | — | 522 | — | — | — | — | — | 522 |
| Issuance of vested award shares | — | (849) | — | (184) | — | 879 | — | (154) |
| Balance, September 30, 2024 | $230 | $95,967 | $(698) | $191,736 | $(11,566) | $(34,298) | — | $241,371 |
The accompanying notes are an integral part of these consolidated financial
statements.
6
**NI Holdings, Inc.**
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
**(dollar amounts in thousands)**
_Three Months Ended September 30, 2023_
| Line item | Common Stock | Additional Paid-in Capital | Unearned Employee Stock Ownership Plan Shares | Retained Earnings | Accumulated Other Comprehensive Loss, Net of Income Taxes | Treasury Stock | Non-Controlling Interest | Total Shareholders’ Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, July 1, 2023 | $230 | $95,750 | $(941) | $201,518 | $(26,986) | $(31,122) | $1,934 | $240,383 |
| Battle Creek demutualization | — | — | — | — | — | — | — | — |
| Net income (loss) | — | — | — | 231 | — | — | 67 | 298 |
| Impact of Westminster unrealized investment gains/losses | — | — | — | — | — | — | — | — |
| Other comprehensive income (loss), net of income taxes | — | — | — | — | (6,736) | — | (360) | (7,096) |
| Purchase of treasury stock | — | — | — | — | — | (4,057) | — | (4,057) |
| Share-based compensation | — | 409 | — | — | — | — | — | 409 |
| Issuance of vested award shares | — | — | — | — | — | — | — | — |
| Balance, September 30, 2023 | $230 | $96,159 | $(941) | $201,749 | $(33,722) | $(35,179) | $1,641 | $229,937 |
_Nine Months Ended September 30, 2023_
| Line item | Common Stock | Additional Paid-in Capital | Unearned Employee Stock Ownership Plan Shares | Retained Earnings | Accumulated Other Comprehensive Loss, Net of Income Taxes | Treasury Stock | Non-Controlling Interest | Total Shareholders’ Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, January 1, 2023 | $230 | $95,671 | $(941) | $214,121 | $(29,286) | $(28,818) | $2,230 | $253,207 |
| Battle Creek demutualization | — | — | — | — | — | — | — | — |
| Net income (loss) | — | — | — | (12,101) | — | — | (336) | (12,437) |
| Impact of Westminster unrealized investment gains/losses | — | — | — | — | — | — | — | — |
| Other comprehensive income (loss), net of income taxes | — | — | — | — | (4,436) | — | (253) | (4,689) |
| Purchase of treasury stock | — | — | — | — | — | (7,280) | — | (7,280) |
| Share-based compensation | — | 1,310 | — | — | — | — | — | 1,310 |
| Issuance of vested award shares | — | (822) | — | (271) | — | 919 | — | (174) |
| Balance, September 30, 2023 | $230 | $96,159 | $(941) | $201,749 | $(33,722) | $(35,179) | $1,641 | $229,937 |
The accompanying notes are an integral part of these consolidated
financial statements.
7
**NI Holdings, Inc.**
### Consolidated Statements of Cash Flows (Unaudited)
_(dollar amounts in thousands)_
| Line item | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- |
| Cash flows from operating activities: | | |
| Net income (loss) | $(15,908) | $(12,437) |
| Less net income (loss) from discontinued operations, net of income taxes | (1,512) | (12,480) |
| Adjustments to reconcile net income (loss) to net cash flows from operating activities: | | |
| Net investment gains | (3,288) | (275) |
| Deferred income tax expense (benefit) | 1,865 | (3,554) |
| Depreciation of property and equipment | 527 | 466 |
| Amortization of intangibles | — | 32 |
| Share-based compensation | 522 | 1,310 |
| Amortization of deferred policy acquisition costs | 53,723 | 48,311 |
| Deferral of policy acquisition costs | (54,404) | (51,175) |
| Net amortization of premiums and discounts on investments | 494 | 745 |
| Gain on sale of property and equipment | (72) | (44) |
| Changes in operating assets and liabilities: | | |
| Premiums and agents’ balances receivable | (29,161) | (40,275) |
| Reinsurance premiums receivable / payable | (1,517) | (164) |
| Reinsurance recoverables on losses | (7,861) | (2,116) |
| Accrued investment income | 77 | (80) |
| Federal Crop Insurance Corporation receivable / payable | (2,201) | 983 |
| Other assets | 266 | (904) |
| Unpaid losses and loss adjustment expenses | 39,884 | 28,152 |
| Unearned premiums | 10,780 | 20,162 |
| Income tax recoverable / payable | (11,322) | 4,611 |
| Accrued expenses and other liabilities | 4,892 | 364 |
| Net cash flows from operating activities – continuing operations | 3,204 | 6,549 |
| Net cash flows from operating activities – discontinued operations | 10,493 | 2,866 |
| Net cash flows from operating activities – loss on sale of discontinued operations | 17,479 | — |
| Total adjustments | 31,176 | 9,415 |
| Net cash flows from operating activities | 16,780 | 9,458 |
| Cash flows from investing activities: | | |
| Proceeds from maturities and sales of fixed income securities | 37,493 | 21,801 |
| Proceeds from sales of equity securities | 4,978 | 37,685 |
| Purchases of fixed income securities | (46,667) | (39,059) |
| Purchases of equity securities | (5,077) | (9,677) |
| Purchases of property and equipment | (777) | (762) |
| Proceeds from sales of property and equipment | 227 | 129 |
| Proceeds from disposition of Westminster | 12,272 | — |
| Net cash flows from investing activities – continuing operations | 2,449 | 10,117 |
| Net cash flows from investing activities – discontinued operations | 2,878 | (12,138) |
| Net cash flows from investing activities | 5,327 | (2,021) |
| Cash flows from financing activities: | | |
| Purchases of treasury stock | — | (7,280) |
| Pooling (payments) receipts | (10,444) | (27,847) |
| Principal repayments of finance leases | (73) | — |
| Issuance of vested award shares | (154) | (174) |
| Net cash flows from financing activities – continuing operations | (10,671) | (35,301) |
| Net cash flows from financing activities – discontinued operations | 7,058 | 27,847 |
| Net cash flows from financing activities | (3,613) | (7,454) |
| Net change in cash and cash equivalents | 18,494 | (17) |
| (Increase) decrease in cash and cash equivalents – discontinued operations | (20,429) | (18,575) |
| Net increase (decrease) in cash and cash equivalents – continuing operations | (1,935) | (18,592) |
| Cash and cash equivalents at beginning of period – continuing operations | 41,037 | 33,862 |
| Cash and cash equivalents at end of period – continuing operations | $39,102 | $15,270 |
| Federal and state income taxes paid (net of refunds received) | $2,848 | $(940) |
The accompanying notes are an integral part of these consolidated financial
statements.
8
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**1.** **Organization**
NI Holdings is a North Dakota business corporation
that is the stock holding company of Nodak Insurance and became such in connection with the Nodak conversion, whereby Nodak Mutual converted
from a mutual to stock form of organization and the creation of a mutual holding company. The Nodak conversion was consummated on March
13, 2017. Immediately following the Nodak conversion, all of the outstanding shares of common stock of Nodak Insurance were issued to
Nodak Mutual Group, which then contributed the shares to NI Holdings in exchange for 55% of the outstanding shares of common stock of
NI Holdings. Nodak Insurance then became a wholly-owned stock subsidiary of NI Holdings. Prior to completion of the Nodak conversion,
NI Holdings conducted no business and had no assets or liabilities. As a result of the Nodak conversion, NI Holdings became the holding
company for Nodak Insurance and its existing subsidiaries.
These unaudited consolidated financial statements
include the financial position and results of operations of NI Holdings and the following other entities:
***Nodak Insurance Company***
Nodak Insurance is the largest domestic property
and casualty insurance company in North Dakota, offering private passenger auto, homeowners, farmowners, commercial multi-peril, crop
hail, and Federal multi-peril crop insurance coverages through its captive agents in the state.
***Nodak Agency, Inc.***
Nodak Agency is an inactive shell corporation.
***American West Insurance Company***
American West is a property and casualty insurance
company licensed in eight states in the Midwest and Western regions of the United States (“U.S.”). American West began writing
policies in 2002 and primarily writes private passenger auto, homeowners, and farm coverages in South Dakota. American West also writes
private passenger auto coverage in North Dakota, as well as crop hail and Federal multi-peril crop insurance coverages in Minnesota and
South Dakota.
***Primero Insurance Company***
Primero is a wholly-owned subsidiary of Tri-State,
Ltd. Tri-State, Ltd. is an inactive shell corporation 100% owned by Nodak Insurance. Primero is a property and casualty insurance company
writing non-standard auto coverage in the states of Nevada, Arizona, North Dakota, and South Dakota. Primero was acquired by Nodak Insurance
in 2014.
***Battle Creek Insurance Company***
Battle Creek is a property and casualty insurance
company writing private passenger auto, homeowners, and farm coverages solely in the state of Nebraska. Battle Creek became affiliated
with Nodak Insurance in 2011 and, prior to January 2, 2024, was controlled by Nodak Insurance via a surplus note. On January 2, 2024,
Battle Creek issued 300,000 shares of its common stock to Nodak Insurance at a $10.00 per share par value and became a wholly-owned subsidiary
of Nodak Insurance. Because we concluded that we controlled Battle Creek prior to January 2, 2024, we consolidated the financial statements
of Battle Creek, and Battle Creek’s policyholders’ interest in Battle Creek was reflected as a non-controlling interest in
shareholders’ equity in our Consolidated Balance Sheets for NI Holdings (“Consolidated Balance Sheets”) and its net
income or loss was excluded from net income or loss attributed to NI Holdings in our Consolidated Statements of Operations for NI Holdings
(“Consolidated Statements of Operations”). Subsequent to January 2, 2024, Battle Creek is fully consolidated in our Consolidated
Balance Sheets and Consolidated Statements of Operations and, as such, no longer reflected as a non-controlling interest.
***Direct Auto Insurance Company***
Direct Auto is a property and casualty insurance
company licensed in Illinois. Direct Auto began writing non-standard auto coverage in 2007, and was acquired by NI Holdings on August
31, 2018, via a stock purchase agreement.
9
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
***Westminster American Insurance Company***
Westminster is a property and casualty insurance
company licensed in 18 states and the District of Columbia. Westminster is headquartered in Owings Mills, Maryland and underwrites commercial
multi-peril insurance in the states of Delaware, Georgia, Kentucky, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina,
Tennessee, Virginia, West Virginia, and the District of Columbia. Westminster was sold to Scott Insurance Holdings on June 30, 2024. Subsequent
to the date of sale, Westminster is reflected as discontinued operations within our Consolidated Balance Sheets and Consolidated Statements
of Operations. For additional information see Part I, Item 1, Note 19 “Discontinued Operations” of this Quarterly Report on
Form 10-Q.
***Organizational Structure and Credit Ratings***
Nodak Insurance markets and distributes its policies
through its captive agents, while all other companies utilize the independent agent distribution channel. Additionally, all of the Company’s
insurance subsidiary and affiliate companies, excluding Westminster, are rated “A” Excellent by A.M. Best Company, Inc. (“AM
Best”), a global credit rating agency specializing in the insurance industry.
The same executive management team provides oversight
and strategic direction for the entire organization. Nodak Insurance provides common product oversight, pricing practices, and underwriting
standards, as well as underwriting and claims administration, to itself, American West, and Battle Creek. Primero and Direct Auto personnel
manage the day-to-day operations of their respective companies. Westminster personnel managed the day-to-day operations of their company
prior to the date of sale.
**2. Basis of Presentation
and Accounting Policies**
***Basis of Presentation***
The accompanying unaudited consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All material intercompany transactions
and balances have been eliminated. These financial statements should be read in conjunction with the financial statements and notes thereto
included in our 2023 Annual Report.
The Consolidated Balance Sheet at December 31, 2023,
has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes
required by GAAP for complete financial statements.
The preparation of the interim unaudited consolidated
financial statements in conformity with GAAP 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 interim unaudited consolidated financial
statements and the reported amounts of revenues, claims, and expenses during the reporting period. Actual results could differ from those
estimates. Operating results for the interim periods ended September 30, 2024, are not necessarily indicative of the results that may
be expected for the year ended December 31, 2024.
Our 2023 Annual Report describes the accounting policies
and estimates that are critical to the understanding of our results of operations, financial condition, and liquidity. The accounting
policies and estimation processes described in the 2023 Annual Report were consistently applied to the unaudited consolidated financial
statements as of and for the nine months ended September 30, 2024 and 2023.
***Discontinued Operations***
On May 7, 2024, NI Holdings entered into a Stock
Purchase Agreement (“Purchase Agreement”) to sell its subsidiary, Westminster, to Scott Insurance Holdings, a privately owned
Maryland limited liability company. Scott Insurance Holdings is affiliated with John Scott, Sr., the father of the president of Westminster,
John Scott, Jr. The sale closed on June 30, 2024. The Purchase Agreement included a cash purchase price of $10,500, subject to certain
post-closing adjustments, including a post-closing payment to NI Holdings for the amount by which the ending statutory surplus balance
for Westminster exceeded $20,000. The post-closing payment received from Scott Insurance Holdings during the third quarter of 2024 was
$1,772 and has been included as an adjustment to the purchase price for the calculation of the loss on the sale of Westminster. The sale
of Westminster, which represented the majority of our Commercial segment in prior periods, was a strategic shift that has had a major
effect on our operations and financial results. Therefore, Westminster has been reported as discontinued operations in the Consolidated
Balance Sheets, Consolidated Statements of Operations, and Consolidated Statements of Cash Flows for all periods presented in this Form
10-Q. All current and prior periods reflected in this Form 10-Q have been presented as continuing and discontinued operations, unless
otherwise noted. For additional information see Part I, Item 1, Note 19 “Discontinued Operations” of this Form 10-Q.
10
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
***Restatement***
NI Holdings filed Amendment No. 1 to our Quarterly Report on Form 10-Q/A
to amend certain information included in the Company's Quarterly Report on Form 10-Q for the three- and six-month periods ended June 30,
2024, which was filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2024, due to errors resulting from
the incorrect accounting for, and presentation of, the previously announced sale of Westminster. Specifically, the Company failed to record
certain receivables on Westminster’s closing balance sheet as well as the corresponding payable for Nodak Insurance for amounts
owed to Westminster related to the final settlement of the intercompany reinsurance pooling agreement after the date of sale. Failure
to include this receivable in Westminster’s closing net assets and liabilities also caused an understatement of the loss on sale
of discontinued operations, which also understated the Company’s total net loss. The impact of the corrections related to this error
on the consolidated financial statements as of and for the three- and six-month periods ended June 30, 2024, are as follows:
*Consolidated Balance Sheets (Unaudited)*
_As of June 30, 2024_
| Line item | As Reported | Adjustment | As Restated |
| --- | --- | --- | --- |
| Accrued expenses and other liabilities | $24,368 | $3,386 | $27,754 |
| Total liabilities | $331,537 | $3,386 | $334,923 |
| Retained earnings | $197,827 | $(3,386) | $194,441 |
| Total shareholders’ equity | $239,450 | $(3,386) | $236,064 |
### Consolidated Statements of Operations (Unaudited)
| Line item | Three Months Ended June 30, 2024 / As Reported | Three Months Ended June 30, 2024 / Adjustment | Three Months Ended June 30, 2024 / As Restated | Six Months Ended June 30, 2024 / As Reported | Six Months Ended June 30, 2024 / Adjustment | As Restated |
| --- | --- | --- | --- | --- | --- | --- |
| Loss on sale of discontinued operations, net of taxes | $(7,762) | $(3,386) | $(11,148) | $(7,762) | $(3,386) | $(11,148) |
| Net loss | $(16,236) | $(3,386) | $(19,622) | $(9,817) | $(3,386) | $(13,203) |
| Loss per common share: | | | | | | |
| Basic | $(0.77) | $(0.17) | $(0.94) | $(0.47) | $(0.16) | $(0.63) |
| Diluted | $(0.77) | $(0.17) | $(0.94) | $(0.47) | $(0.16) | $(0.63) |
### Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
| Line item | Three Months Ended June 30, 2024 / As Reported | Three Months Ended June 30, 2024 / Adjustment | Three Months Ended June 30, 2024 / As Restated | Six Months Ended June 30, 2024 / As Reported | Six Months Ended June 30, 2024 / Adjustment | As Restated |
| --- | --- | --- | --- | --- | --- | --- |
| Net loss | $(16,236) | $(3,386) | $(19,622) | $(9,817) | $(3,386) | $(13,203) |
| Comprehensive loss | $(16,950) | $(3,386) | $(20,336) | $(11,931) | $(3,386) | $(15,317) |
11
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
### Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
| Line item | As of and for the Three Months Ended June 30, 2024 / As Reported | As of and for the Three Months Ended June 30, 2024 / Adjustment | As of and for the Three Months Ended June 30, 2024 / As Restated | As of and for the Six Months Ended June 30, 2024 / As Reported | As of and for the Six Months Ended June 30, 2024 / Adjustment | As of and for the Six Months Ended June 30, 2024 / As Restated |
| --- | --- | --- | --- | --- | --- | --- |
| Net loss | $(16,236) | $(3,386) | $(19,622) | $(9,817) | $(3,386) | $(13,203) |
| Retained earnings | $197,827 | $(3,386) | $194,441 | $197,827 | $(3,386) | $194,441 |
| Total shareholders’ equity | $239,450 | $(3,386) | $236,064 | $239,450 | $(3,386) | $236,064 |
*Consolidated Statements of Cash Flows (Unaudited)*
_Six Months Ended June 30, 2024_
| Line item | As Reported | Adjustment | As Restated |
| --- | --- | --- | --- |
| Net income (loss) | $(9,817) | $(3,386) | $(13,203) |
| Net cash flows from operating activities – loss on sale of discontinued operations | $15,865 | $3,386 | $19,251 |
| Total adjustments | $43,065 | $3,386 | $46,451 |
The notes to the consolidated financial statements as well as Management’s
Discussion and Analysis of Financial Condition and Results of Operations were also amended as necessary as a result of the restatements
outlined above.
***Recent Accounting Pronouncements***
*Adopted*
For information regarding accounting pronouncements
that the Company adopted during the periods presented, see Item II, Part 8, Note 2 “Recent Accounting Pronouncements” section
of the 2023 Annual Report.
*Not Yet Adopted*
Improvements to Reportable Segment Disclosures – In
November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance related to improving disclosures for reportable
segments primarily through enhanced disclosures about significant segment expenses that are provided to the chief operating decision maker
(“CODM”). This guidance also requires disclosure of the title and position of the CODM and an explanation of how the CODM
uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments
in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after
December 15, 2024. We are currently evaluating the impact of the new standard on our consolidated financial statements, which is expected
to result in enhanced disclosures.
Improvements to Income Tax Disclosures – In December
2023, the FASB issued guidance related to improving income tax disclosures. This guidance requires that an entity, on an annual basis,
disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The guidance is intended
to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update are effective for annual
periods beginning after December 15, 2024. We are currently evaluating the impact of the new standard on our consolidated financial statements,
which is expected to result in enhanced disclosures.
12
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**3. Investments**
The amortized cost and estimated fair value of fixed income securities,
presented on a consolidated basis, including both continuing and discontinued operations, as of September 30, 2024, and December 31, 2023,
were as follows:
_September 30, 2024_
| Line item | Cost or Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | |
| U.S. Government and agencies | $11,061 | — | $225 | $(157) | $11,129 |
| Obligations of states and political subdivisions | 49,093 | — | 577 | (3,721) | 45,949 |
| Corporate securities | 121,047 | — | 1,182 | (5,513) | 116,716 |
| Residential mortgage-backed securities | 49,700 | — | 362 | (3,409) | 46,653 |
| Commercial mortgage-backed securities | 30,249 | — | 200 | (2,470) | 27,979 |
| Asset-backed securities | 56,765 | — | 810 | (2,768) | 54,807 |
| Redeemable preferred stocks | 3,737 | — | — | (253) | 3,484 |
| Total fixed income securities | $321,652 | — | $3,356 | $(18,291) | $306,717 |
_December 31, 2023_
| Line item | Cost or Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | |
| U.S. Government and agencies | $10,998 | — | — | $(736) | $10,262 |
| Obligations of states and political subdivisions | 55,769 | — | 408 | (4,716) | 51,461 |
| Corporate securities | 152,630 | — | 442 | (10,856) | 142,216 |
| Residential mortgage-backed securities | 66,362 | — | 180 | (5,379) | 61,163 |
| Commercial mortgage-backed securities | 33,532 | — | 148 | (4,241) | 29,439 |
| Asset-backed securities | 52,692 | — | 142 | (3,805) | 49,029 |
| Redeemable preferred stocks | 4,747 | — | — | (586) | 4,161 |
| Total fixed income securities | $376,730 | — | $1,320 | $(30,319) | $347,731 |
13
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The reconciliation of the amortized cost and estimated fair value of
fixed income securities for continuing and discontinued operations as of September 30, 2024, and December 31, 2023, were as follows:
_September 30, 2024_
| Line item | Cost or Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | |
| Continuing operations | $321,652 | — | $3,356 | $(18,291) | $306,717 |
| Discontinued operations | — | — | — | — | — |
| Total fixed income securities | $321,652 | — | $3,356 | $(18,291) | $306,717 |
_December 31, 2023_
| Line item | Cost or Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | |
| Continuing operations | $313,182 | — | $1,116 | $(24,899) | $289,399 |
| Discontinued operations | 63,548 | — | 204 | (5,420) | 58,332 |
| Total fixed income securities | $376,730 | — | $1,320 | $(30,319) | $347,731 |
The amortized cost and estimated fair value of fixed income securities
by contractual maturity, presented on a consolidated basis, including both continuing and discontinued operations, are shown below. Actual
maturities could differ from contractual maturities because issuers may have the right to call or prepay these securities.
_September 30, 2024_
| Line item | Amortized Cost | Fair Value |
| --- | --- | --- |
| Due to mature: | | |
| One year or less | $4,864 | $4,809 |
| After one year through five years | 60,604 | 59,189 |
| After five years through ten years | 74,235 | 71,361 |
| After ten years | 41,498 | 38,435 |
| Mortgage / asset-backed securities | 136,714 | 129,439 |
| Redeemable preferred stocks | 3,737 | 3,484 |
| Total fixed income securities | $321,652 | $306,717 |
_December 31, 2023_
| Line item | Amortized Cost | Fair Value |
| --- | --- | --- |
| Due to mature: | | |
| One year or less | $9,612 | $9,436 |
| After one year through five years | 75,794 | 72,602 |
| After five years through ten years | 86,185 | 79,281 |
| After ten years | 47,806 | 42,620 |
| Mortgage / asset-backed securities | 152,586 | 139,631 |
| Redeemable preferred stocks | 4,747 | 4,161 |
| Total fixed income securities | $376,730 | $347,731 |
Fixed income securities with a fair value of $5,856 at September
30, 2024, and $6,403 at December 31, 2023, were deposited with various state regulatory agencies as required by law. The Company has not
pledged any assets to secure any obligations.
14
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The investment category and duration of the Company’s gross
unrealized losses on fixed income securities, presented on a consolidated basis, including both continuing and discontinued operations,
are shown below. Investments with unrealized losses are categorized with a duration of greater than 12 months when all positions of a
security have continually been in a loss position for at least 12 months.
_September 30, 2024_
| Line item | Less than 12 Months / Fair Value | Less than 12 Months / Unrealized Losses | Greater than 12 months / Fair Value | Greater than 12 months / Unrealized Losses | Total / Fair Value | Total / Unrealized Losses |
| --- | --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | | |
| U.S. Government and agencies | — | — | $4,495 | $(157) | $4,495 | $(157) |
| Obligations of states and political subdivisions | 1,477 | (17) | 30,062 | (3,704) | 31,539 | (3,721) |
| Corporate securities | 499 | — | 78,737 | (5,513) | 79,236 | (5,513) |
| Residential mortgage-backed securities | — | — | 25,185 | (3,409) | 25,185 | (3,409) |
| Commercial mortgage-backed securities | — | — | 20,032 | (2,470) | 20,032 | (2,470) |
| Asset-backed securities | 250 | — | 21,761 | (2,768) | 22,011 | (2,768) |
| Redeemable preferred stocks | — | — | 3,484 | (253) | 3,484 | (253) |
| Total fixed income securities | $2,226 | $(17) | $183,756 | $(18,274) | $185,982 | $(18,291) |
_December 31, 2023_
| Line item | Less than 12 Months / Fair Value | Less than 12 Months / Unrealized Losses | Greater than 12 months / Fair Value | Greater than 12 months / Unrealized Losses | Total / Fair Value | Total / Unrealized Losses |
| --- | --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | | |
| U.S. Government and agencies | — | — | $9,018 | $(736) | $9,018 | $(736) |
| Obligations of states and political subdivisions | 5,239 | (359) | 36,194 | (4,357) | 41,433 | (4,716) |
| Corporate securities | 8,018 | (93) | 110,117 | (10,763) | 118,135 | (10,856) |
| Residential mortgage-backed securities | 12,054 | (104) | 33,341 | (5,275) | 45,395 | (5,379) |
| Commercial mortgage-backed securities | 2,678 | (5) | 23,713 | (4,236) | 26,391 | (4,241) |
| Asset-backed securities | 4,463 | (18) | 30,200 | (3,787) | 34,663 | (3,805) |
| Redeemable preferred stocks | — | — | 4,161 | (586) | 4,161 | (586) |
| Total fixed income securities | $32,452 | $(579) | $246,744 | $(29,740) | $279,196 | $(30,319) |
15
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The reconciliation for continuing and discontinued operations
by duration of the Company’s gross unrealized losses on fixed income securities are shown below.
_September 30, 2024_
| Line item | Less than 12 Months / Fair Value | Less than 12 Months / Unrealized Losses | Greater than 12 months / Fair Value | Greater than 12 months / Unrealized Losses | Total / Fair Value | Total / Unrealized Losses |
| --- | --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | | |
| Continuing operations | $2,226 | $(17) | $183,756 | $(18,274) | $185,982 | $(18,291) |
| Discontinued operations | — | — | — | — | — | — |
| Total fixed income securities | $2,226 | $(17) | $183,756 | $(18,274) | $185,982 | $(18,291) |
_December 31, 2023_
| Line item | Less than 12 Months / Fair Value | Less than 12 Months / Unrealized Losses | Greater than 12 months / Fair Value | Greater than 12 months / Unrealized Losses | Total / Fair Value | Total / Unrealized Losses |
| --- | --- | --- | --- | --- | --- | --- |
| Fixed income securities: | | | | | | |
| Continuing operations | $24,049 | $(509) | $211,367 | $(24,390) | $235,416 | $(24,899) |
| Discontinued operations | 8,403 | (70) | 35,377 | (5,350) | 43,780 | (5,420) |
| Total fixed income securities | $32,452 | $(579) | $246,744 | $(29,740) | $279,196 | $(30,319) |
We, along with our investment advisor, frequently
review our investment portfolio for declines in fair value that could be indicative of credit losses. Beginning on December 31, 2022,
credit losses are recognized through an allowance account. We consider a number of factors when determining if an allowance for credit
losses is necessary, including payment and default history, credit spreads, credit ratings and rating actions, and probability of default.
We determine the credit loss component of fixed income investments by utilizing discounted cash flow modeling to determine the present
value of the security and comparing the present value with the amortized cost of the security. We did not recognize any credit losses
for fixed income securities at the time of adoption of the new credit loss accounting standard and have not recognized any credit losses
for fixed income securities since adoption of the credit loss standard. Therefore, there were no beginning or ending balances of credit
losses during the nine months ended September 30, 2024 or the year ended December 31, 2023. See Item II, Part 8, Note 3 “Summary
of Significant Accounting Policies” section of the 2023 Annual Report for additional information.
Net investment income for continuing and discontinued operations
consisted of the following:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Fixed income securities | $3,025 | $2,362 | $8,521 | $6,828 |
| Equity securities | 215 | 295 | 638 | 743 |
| Real estate | 83 | 98 | 272 | 293 |
| Cash and cash equivalents | 389 | 118 | 1,258 | 217 |
| Total gross investment income | 3,712 | 2,873 | 10,689 | 8,081 |
| Investment expenses | 901 | 752 | 2,600 | 2,346 |
| Net investment income – continuing operations | 2,811 | 2,121 | 8,089 | 5,735 |
| Net investment income – discontinued operations | — | 629 | 1,419 | 1,759 |
| Net investment income | $2,811 | $2,750 | $9,508 | $7,494 |
16
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
Net investment gains (losses) for continuing and discontinued
operations consisted of the following:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Gross realized gains: | | | | |
| Fixed income securities | — | — | $9 | — |
| Equity securities | 272 | 689 | 653 | 13,707 |
| Total gross realized gains | 272 | 689 | 662 | 13,707 |
| Gross realized losses, excluding credit impairment losses: | | | | |
| Fixed income securities | (203) | (5) | (218) | (445) |
| Equity securities | (24) | (175) | (481) | (1,216) |
| Total gross realized losses, excluding credit impairment losses | (227) | (180) | (699) | (1,661) |
| Net realized gains (losses) | 45 | 509 | (37) | 12,046 |
| Change in net unrealized gains on equity securities | 2,367 | (1,464) | 3,325 | (11,771) |
| Net investment gains (losses) – continuing operations | 2,412 | (955) | 3,288 | 275 |
| Net investment gains (losses) – discontinued operations | — | (272) | 116 | (260) |
| Net investment gains (losses) | $2,412 | $(1,227) | $3,404 | $15 |
**4. Fair Value
Measurements**
The Company uses fair value measurements to record fair value
adjustments to certain assets to determine fair value disclosures. Investment securities available for sale are recorded at fair value
on a recurring basis. Additionally, from time to time, we may be required to record other assets or liabilities at fair value on a nonrecurring
basis. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of
individual assets. Accounting guidance on fair value measurements and disclosures establishes a fair value hierarchy that prioritizes
the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows:
*Level 1:* Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
*Level 2*: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 includes fixed income securities with quoted prices that are traded less frequently than exchange traded instruments. Valuation techniques include matrix pricing which is a mathematical technique used widely in the industry to value fixed income securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.
*Level 3*: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).
The Company bases its fair values on the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is
our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements,
in accordance with the fair value hierarchy. Fair value measurements for assets where there exists limited or no observable market data
and, therefore, are based primarily upon the estimates of the Company or other third-parties, are often calculated based on the characteristics
of the asset, the economic and competitive environment, and other such factors. Management uses its best judgment in estimating the fair
value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique. Therefore, for
substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts which could have
been realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective
period-end and have not been re-evaluated or updated for purposes of our consolidated financial statements subsequent to those respective
dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different
than the amounts reported at each period-end. Additionally, changes in the underlying assumptions used, including discount rates and estimates
of future cash flows, could significantly affect the results of current or future valuations.
17
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The Company uses quoted values and other data provided by an independent
pricing service in its process for determining fair values of its investments. The evaluations of such pricing services represent an exit
price and a good faith opinion as to what a buyer in the marketplace would pay for a security in a current sale. This pricing service
provides us with one quote per instrument. For fixed income securities that have quoted prices in active markets, market quotations are
provided. For fixed income securities that do not trade on a daily basis, the independent pricing service prepares estimates of fair value
using a wide array of observable inputs including relevant market information, benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The observable market inputs that the Company’s independent pricing service utilizes may include
benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers,
and other reference data on markets, industry, and the economy. Additionally, the independent pricing service uses an option-adjusted
spread model to develop prepayment and interest rate scenarios.
Should the independent pricing service be unable to provide a
fair value estimate, we would first attempt to obtain a fair value estimate from our third-party investment advisor who utilizes different
independent pricing services. If unsuccessful, we would attempt to obtain a non-binding fair value estimate from a number of broker-dealers
and would review this estimate in conjunction with a fair value estimate reported by an independent business news service or other sources.
In instances where only one broker-dealer provides a fair value for a fixed income security, we would use that estimate. In instances
where the Company would be able to obtain fair value estimates from more than one broker-dealer, we would review the range of estimates
and select the most appropriate value based on the facts and circumstances. Should neither the independent pricing service nor a broker-dealer
provide a fair value estimate, we would develop a fair value estimate based on cash flow analyses and other valuation techniques that
utilize certain unobservable inputs. Accordingly, the Company classifies such a security as a Level 3 investment.
The fair value estimates of our investments provided by the independent
pricing service at each period-end were utilized, among other resources, in reaching a conclusion as to the fair value of its investments.
Management reviews the reasonableness of the pricing provided
by the independent pricing service by employing various analytical procedures. We also use information from our third-party investment
advisor who utilizes different independent pricing services to further validate the reasonableness of the valuation of our fixed income
portfolio. If, after this review, management does not believe the pricing for any security is a reasonable estimate of fair value, then
it will seek to resolve the discrepancy through discussions with the independent pricing service. In its review, management did not identify
any such discrepancies and no adjustments were made to the estimates provided by the independent pricing service for the three or nine
months ended September 30, 2024, or the year ended December 31, 2023. The classification within the fair value hierarchy is then confirmed
based on the final conclusions from the pricing review.
The valuation of money market accounts and equity securities are
generally based on Level 1 inputs, which use the market-approach valuation technique. The valuation of certain cash equivalents and our
fixed income securities generally incorporates significant Level 2 inputs using the market and income approach techniques. We may assign
a lower level to inputs typically considered to be Level 2 based on our assessment of liquidity and relative level of uncertainty surrounding
inputs. There were no assets or liabilities classified at Level 3 at September 30, 2024, or December 31, 2023.
18
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The following tables, presented on a consolidated basis, including
both continuing and discontinued operations, set forth our assets which are measured on a recurring basis by the level within the fair
value hierarchy in which fair value measurements fall:
_September 30, 2024_
| Line item | Total | Level 1 | Level 2 | Level 3 |
| --- | --- | --- | --- | --- |
| Fixed income securities: | | | | |
| U.S. Government and agencies | $11,129 | — | $11,129 | — |
| Obligations of states and political subdivisions | 45,949 | — | 45,949 | — |
| Corporate securities | 116,716 | — | 116,716 | — |
| Residential mortgage-backed securities | 46,653 | — | 46,653 | — |
| Commercial mortgage-backed securities | 27,979 | — | 27,979 | — |
| Asset-backed securities | 54,807 | — | 54,807 | — |
| Redeemable preferred stock | 3,484 | — | 3,484 | — |
| Total fixed income securities | 306,717 | — | 306,717 | — |
| Equity securities: | | | | |
| Common stock | 25,578 | 25,578 | — | — |
| Non-redeemable preferred stock | — | — | — | — |
| Total equity securities | 25,578 | 25,578 | — | — |
| Money market accounts and cash equivalents | 12,643 | 12,643 | — | — |
| Total assets at fair value | $344,938 | $38,221 | $306,717 | — |
_December 31, 2023_
| Line item | Total | Level 1 | Level 2 | Level 3 |
| --- | --- | --- | --- | --- |
| Fixed income securities: | | | | |
| U.S. Government and agencies | $10,262 | — | $10,262 | — |
| Obligations of states and political subdivisions | 51,461 | — | 51,461 | — |
| Corporate securities | 142,216 | — | 142,216 | — |
| Residential mortgage-backed securities | 61,163 | — | 61,163 | — |
| Commercial mortgage-backed securities | 29,439 | — | 29,439 | — |
| Asset-backed securities | 49,029 | — | 49,029 | — |
| Redeemable preferred stock | 4,161 | — | 4,161 | — |
| Total fixed income securities | 347,731 | — | 347,731 | — |
| Equity securities: | | | | |
| Common stock | 25,890 | 25,890 | — | — |
| Non-redeemable preferred stock | 1,877 | 1,877 | — | — |
| Total equity securities | 27,767 | 27,767 | — | — |
| Money market accounts and cash equivalents | 25,596 | 19,412 | 6,184 | — |
| Total assets at fair value | $401,094 | $47,179 | $353,915 | — |
19
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The following tables are a reconciliation for both continuing and
discontinued operations of the presentation of our assets which are measured on a recurring basis by the level within the fair value hierarchy
in which fair value measurements fall:
_September 30, 2024_
| Line item | Total | Level 1 | Level 2 | Level 3 |
| --- | --- | --- | --- | --- |
| Fixed income securities: | | | | |
| Continuing operations | $306,717 | — | $306,717 | — |
| Discontinued operations | — | — | — | — |
| Total fixed income securities | 306,717 | — | 306,717 | — |
| Equity securities: | | | | |
| Continuing operations | 25,578 | 25,578 | — | — |
| Discontinued operations | — | — | — | — |
| Total equity securities | 25,578 | 25,578 | — | — |
| Money market accounts and cash equivalents | | | | |
| Continuing operations | 12,643 | 12,643 | — | — |
| Discontinued operations | — | — | — | — |
| Total money market accounts and cash equivalents | 12,643 | 12,643 | — | — |
| Total assets at fair value | $344,938 | $38,221 | $306,717 | — |
_December 31, 2023_
| Line item | Total | Level 1 | Level 2 | Level 3 |
| --- | --- | --- | --- | --- |
| Fixed income securities: | | | | |
| Continuing operations | $289,399 | — | $289,399 | — |
| Discontinued operations | 58,332 | — | 58,332 | — |
| Total fixed income securities | 347,731 | — | 347,731 | — |
| Equity securities: | | | | |
| Continuing operations | 21,983 | 21,983 | — | — |
| Discontinued operations | 5,784 | 5,784 | — | — |
| Total equity securities | 27,767 | 27,767 | — | — |
| Money market accounts and cash equivalents | | | | |
| Continuing operations | 16,239 | 16,239 | — | — |
| Discontinued operations | 9,357 | 3,173 | 6,184 | — |
| Total money market accounts and cash equivalents | 25,596 | 19,412 | 6,184 | — |
| Total assets at fair value | $401,094 | $47,179 | $353,915 | — |
There were no liabilities measured at fair value on a recurring
basis at September 30, 2024, or December 31, 2023.
**5. Reinsurance**
***External Reinsurance***
The Company’s consolidated financial statements reflect
the effects of assumed and ceded reinsurance transactions. Assumed reinsurance refers to the acceptance of certain insurance risks that
other insurance companies have underwritten. Ceded reinsurance involves transferring certain insurance risks (along with the related written
and earned premiums) the Company has underwritten to other insurance companies who agree to share these risks. The Company reinsures a
portion of the risks it underwrites, through these ceded reinsurance agreements, in order to control its exposure to losses. Our ceded
reinsurance is placed either on an automatic basis under general reinsurance contracts known as treaties or through facultative contracts
placed on substantial individual risks. These contracts do not relieve the Company from its obligations to policyholders. Treaty reinsurance
contracts are typically effective from January 1 through December 31 each year.
20
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
During the nine-month period ended September 30, 2024, the
Company maintained property catastrophe reinsurance protection covering $133,000 in excess of a $20,000 retention. With the exception
of Westminster, a per risk excess of loss treaty provides coverage of $4,000 in excess of $1,000 for property risks and $11,000 in excess
of $1,000 for casualty risks. For Westminster, a per risk excess of loss treaty provided coverage of $3,000 in excess of $2,000 for property
risks and $10,000 in excess of $2,000 for casualty risks until July 1, 2024. Additionally, a property per-risk facultative contract is
in place to provide coverage up to $20,000 in excess of $5,000 per property. Aggregate stop loss reinsurance agreements are also in place
for both crop hail and multi-peril crop coverage. The crop hail aggregate attaches at a 100% net loss ratio providing 50 points of cover.
The multi-peril crop aggregate attaches at a 105% net loss ratio providing 45 points of cover. In addition to the aggregate covers, underlying
multi-peril crop reinsurance is provided through the Federal Crop Insurance Corporation (“FCIC”).
Effective July 1, 2024, the Company’s reinsurance
contracts were modified to exclude any Westminster losses occurring on or after that date, while maintaining all other existing limits,
retentions, and attachment points.
For the year ended December 31, 2023, the Company’s
catastrophe retention and retention limit were consistent with those for the nine-month period ended September 30, 2024. In addition,
limits, retentions, and attachment points in our other reinsurance contracts were also consistent with those for the nine-month period
ended September 30, 2024 (with the exception of Westminster for which per risk excess of loss treaties provided coverage of $4,000 in
excess of $1,000 for property risks and $11,000 in excess of $1,000 for casualty risks).
The Company actively monitors and evaluates the financial
condition of the reinsurers and develops estimates of the uncollectible amounts due from reinsurers. Beginning on December 31, 2022, credit
losses are recognized through an allowance account developed using a new credit loss model (current expected credit losses or “CECL”).
See the Part II, Item 8, Note 2 “Recent Accounting Pronouncements” section of the 2023 Annual Report for additional information.
Credit loss estimates are made based on periodic evaluation of balances due from reinsurers, changes in reinsurer credit standing, judgments
regarding reinsurers’ solvency, known disputes, reporting characteristics of the underlying reinsured business, historical experience,
current economic conditions, and the state of reinsurer relations in general. Collection risk is mitigated by entering into reinsurance
arrangements only with reinsurers that have strong credit ratings and statutory surplus above certain levels. At September 30, 2024, and
December 31, 2023, management has concluded that it is not necessary to record an allowance for expected credit losses related to reinsurance
recoverables. All of our significant reinsurance partners are rated “A-” (Excellent) or better by AM Best, and there is no
history of write-offs.
A reconciliation of direct to net premiums on both a written
and an earned basis, presented on a consolidated basis, including both continuing and discontinued operations, is as follows:
| Line item | Three Months Ended September 30, 2024 / Premiums Written | Three Months Ended September 30, 2024 / Premiums Earned | Three Months Ended September 30, 2023 / Premiums Written | Three Months Ended September 30, 2023 / Premiums Earned |
| --- | --- | --- | --- | --- |
| Direct premium | $67,704 | $90,125 | $81,223 | $104,540 |
| Assumed premium | 189 | 1,880 | 175 | 2,045 |
| Ceded premium | (5,451) | (8,735) | (10,773) | (15,815) |
| Net premiums | $62,442 | $83,270 | $70,625 | $90,770 |
| Line item | Nine Months Ended September 30, 2024 / Premiums Written | Nine Months Ended September 30, 2024 / Premiums Earned | Nine Months Ended September 30, 2023 / Premiums Written | Nine Months Ended September 30, 2023 / Premiums Earned |
| --- | --- | --- | --- | --- |
| Direct premium | $310,849 | $296,107 | $316,029 | $296,176 |
| Assumed premium | 2,666 | 2,684 | 3,014 | 3,448 |
| Ceded premium | (31,523) | (29,412) | (39,671) | (37,081) |
| Net premiums | $281,992 | $269,379 | $279,372 | $262,543 |
21
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The reconciliations of the Company’s direct to net premiums
on both a written and an earned basis for the current and comparable prior year quarter, segregated between continuing and discontinued
operations, are shown below.
| Line item | Three Months Ended September 30, 2024 / Premiums Written | Three Months Ended September 30, 2024 / Premiums Earned | Three Months Ended September 30, 2023 / Premiums Written | Three Months Ended September 30, 2023 / Premiums Earned |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Direct premium | $67,704 | $90,125 | $67,917 | $85,600 |
| Assumed premium | 189 | 1,880 | 175 | 2,045 |
| Ceded premium | (5,451) | (8,735) | (6,236) | (11,227) |
| Net premiums | $62,442 | $83,270 | $61,856 | $76,418 |
| Line item | Three Months Ended September 30, 2024 / Premiums Written | Three Months Ended September 30, 2024 / Premiums Earned | Three Months Ended September 30, 2023 / Premiums Written | Three Months Ended September 30, 2023 / Premiums Earned |
| --- | --- | --- | --- | --- |
| Discontinued operations: | | | | |
| Direct premium | — | — | $13,306 | $18,940 |
| Assumed premium | — | — | — | — |
| Ceded premium | — | — | (4,537) | (4,588) |
| Net premiums | — | — | $8,769 | $14,352 |
The reconciliations of the Company’s direct to net
premiums on both a written and an earned basis for the current year-to-date and comparable prior year-to-date amounts, segregated between
continuing and discontinued operations, are shown below.
| Line item | Nine Months Ended September 30, 2024 / Premiums Written | Nine Months Ended September 30, 2024 / Premiums Earned | Nine Months Ended September 30, 2023 / Premiums Written | Nine Months Ended September 30, 2023 / Premiums Earned |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Direct premium | $269,217 | $257,024 | $261,865 | $238,892 |
| Assumed premium | 2,666 | 2,684 | 3,014 | 3,448 |
| Ceded premium | (22,780) | (21,385) | (26,595) | (24,216) |
| Net premiums | $249,103 | $238,323 | $238,284 | $218,124 |
| Line item | Nine Months Ended September 30, 2024 / Premiums Written | Nine Months Ended September 30, 2024 / Premiums Earned | Nine Months Ended September 30, 2023 / Premiums Written | Nine Months Ended September 30, 2023 / Premiums Earned |
| --- | --- | --- | --- | --- |
| Discontinued operations: | | | | |
| Direct premium | $41,632 | $39,083 | $54,164 | $57,284 |
| Assumed premium | — | — | — | — |
| Ceded premium | (8,743) | (8,027) | (13,076) | (12,865) |
| Net premiums | $32,889 | $31,056 | $41,088 | $44,419 |
A reconciliation of direct to net losses and loss adjustment
expenses, presented on a consolidated basis, including both continuing and discontinued operations, is as follows:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Direct losses and loss adjustment expenses | $69,692 | $71,107 | $212,914 | $237,117 |
| Assumed losses and loss adjustment expenses | 617 | 725 | 886 | 882 |
| Ceded losses and loss adjustment expenses | (5,209) | (8,268) | (15,692) | (38,104) |
| Net losses and loss adjustment expenses | $65,100 | $63,564 | $198,108 | $199,895 |
22
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The reconciliations for current and prior year continuing and
discontinued operations of direct to net losses and loss adjustment expenses is as follows:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Direct losses and loss adjustment expenses | $69,692 | $53,863 | $184,561 | $162,027 |
| Assumed losses and loss adjustment expenses | 617 | 725 | 886 | 882 |
| Ceded losses and loss adjustment expenses | (5,209) | (1,431) | (10,845) | (8,550) |
| Net losses and loss adjustment expenses | $65,100 | $53,157 | $174,602 | $154,359 |
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Discontinued operations: | | | | |
| Direct losses and loss adjustment expenses | — | $17,244 | $28,353 | $75,090 |
| Assumed losses and loss adjustment expenses | — | — | — | — |
| Ceded losses and loss adjustment expenses | — | (6,837) | (4,847) | (29,554) |
| Net losses and loss adjustment expenses | — | $10,407 | $23,506 | $45,536 |
***Intercompany Reinsurance Pooling Arrangement***
Effective January 1, 2020, all of our insurance subsidiary and affiliate
companies entered into an intercompany reinsurance pooling agreement. Nodak Insurance is the lead company of the pool, and assumes the
net premiums, net losses, and underwriting expenses from each of the other five companies. Nodak Insurance then retrocedes balances back
to each company, while retaining its own share of the pool’s net underwriting results, based on individual pool percentages established
in the respective pooling agreement. This arrangement allows each insurance company to rely upon the capacity of the pool’s total
statutory capital and surplus. As a result, they are evaluated by AM Best on a group basis and hold a single combined financial strength
rating, long-term issuer credit rating, and financial size category. Subsequent to the June 30, 2024, date of sale, Westminster is no
longer a member of the pool, and the pooling percentages for the remaining insurance subsidiaries were updated based on their respective
surplus as a percentage of the pool as of December 31, 2023.
23
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**6.** **Deferred Policy Acquisition Costs**
Expenses directly related to successfully acquired insurance policies,
primarily commissions, premium taxes and underwriting costs, are deferred and amortized over the terms of the policies. We update our
acquisition cost assumptions periodically to reflect actual experience, and we evaluate the costs for recoverability. The table below,
presented on a consolidated basis, including both continuing and discontinued operations, shows the deferred policy acquisition costs
and asset reconciliation:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Balance, beginning of period | $31,157 | $34,124 | $34,120 | $29,768 |
| Deferral of policy acquisition costs | 13,930 | 18,415 | 63,000 | 61,938 |
| Amortization of deferred policy acquisition costs | (17,616) | (20,362) | (61,651) | (59,529) |
| Westminster balance disposed in sale | — | — | (7,998) | — |
| Balance, end of period | $27,471 | $32,177 | $27,471 | $32,177 |
The tables for current and prior year continuing and discontinued
operations showing the deferred policy acquisition costs and assets reconciliation are shown below:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Balance, beginning of period | $31,157 | $26,472 | $26,790 | $22,675 |
| Deferral of policy acquisition costs | 13,930 | 15,591 | 54,404 | 51,176 |
| Amortization of deferred policy acquisition costs | (17,616) | (16,523) | (53,723) | (48,311) |
| Balance, end of period | $27,471 | $25,540 | $27,471 | $25,540 |
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Discontinued operations: | | | | |
| Balance, beginning of period | — | $7,652 | $7,330 | $7,093 |
| Deferral of policy acquisition costs | — | 2,824 | 8,596 | 10,762 |
| Amortization of deferred policy acquisition costs | — | (3,839) | (7,928) | (11,218) |
| Westminster balance disposed in sale | — | — | (7,998) | — |
| Balance, end of period | — | $6,637 | — | $6,637 |
24
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**7. Unpaid Losses
and Loss Adjustment Expenses**
Activity in the liability for unpaid losses and loss adjustment
expenses is summarized as follows for both continuing and discontinued operations:
| Line item | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- |
| Balance, beginning of period: | | |
| Liability for unpaid losses and loss adjustment expenses | $217,119 | $190,459 |
| Reinsurance recoverables on losses | 48,969 | 37,575 |
| Net balance, beginning of period | 168,150 | 152,884 |
| Incurred related to: | | |
| Current year | 185,006 | 180,895 |
| Prior years | 13,102 | 19,000 |
| Total incurred | 198,108 | 199,895 |
| Paid related to: | | |
| Current year | 89,330 | 91,979 |
| Prior years | 69,992 | 76,842 |
| Total paid | 159,322 | 168,821 |
| Westminster balances disposed in sale: | | |
| Liability for unpaid losses and loss adjustment expenses | 107,508 | — |
| Reinsurance recoverables on losses | 45,320 | — |
| Net balance, date of sale | 62,188 | — |
| Balance, end of period: | | |
| Liability for unpaid losses and loss adjustment expenses | 159,069 | 240,748 |
| Reinsurance recoverables on losses | 14,321 | 56,790 |
| Net balance, end of period | $144,748 | $183,958 |
During the nine months ended September 30, 2024, the Company’s
incurred reported losses and loss adjustment expenses included $13,102 of net unfavorable development on prior accident years, primarily
attributable to Direct Auto. During the nine months ended September 30, 2023, the Company’s incurred reported losses and loss adjustment
expenses included $19,000 of net unfavorable development on prior accident years, primarily attributable to Direct Auto and Westminster.
Changes in unpaid losses and loss adjustment expense reserves
are generally the result of ongoing analysis of recent loss development trends. As additional information becomes known regarding individual
claims, original estimates are increased or decreased accordingly.
25
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The tables for current and prior year continuing and discontinued
operations showing the liability for unpaid losses and loss adjustment expense are shown below:
| Line item | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- |
| Continuing operations: | | |
| Balance, beginning of period: | | |
| Liability for unpaid losses and loss adjustment expenses | $119,185 | $114,296 |
| Reinsurance recoverables on losses | 6,460 | 8,586 |
| Net balance, beginning of period | 112,725 | 105,710 |
| Incurred related to: | | |
| Current year | 160,891 | 147,849 |
| Prior years | 13,711 | 6,510 |
| Total incurred | 174,602 | 154,359 |
| Paid related to: | | |
| Current year | 83,766 | 79,500 |
| Prior years | 58,813 | 48,823 |
| Total paid | 142,579 | 128,323 |
| Balance, end of period: | | |
| Liability for unpaid losses and loss adjustment expenses | 159,069 | 142,448 |
| Reinsurance recoverables on losses | 14,321 | 10,702 |
| Net balance, end of period | $144,748 | $131,746 |
| Line item | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- |
| Discontinued operations: | | |
| Balance, beginning of period: | | |
| Liability for unpaid losses and loss adjustment expenses | $97,934 | $76,163 |
| Reinsurance recoverables on losses | 42,509 | 28,989 |
| Net balance, beginning of period | 55,425 | 47,174 |
| Incurred related to: | | |
| Current year | 24,115 | 33,046 |
| Prior years | (609) | 12,490 |
| Total incurred | 23,506 | 45,536 |
| Paid related to: | | |
| Current year | 5,564 | 12,479 |
| Prior years | 11,179 | 28,019 |
| Total paid | 16,743 | 40,498 |
| Westminster balances disposed in sale: | | |
| Liability for unpaid losses and loss adjustment expenses | 107,508 | — |
| Reinsurance recoverables on losses | 45,320 | — |
| Net balance, date of sale | 62,188 | — |
| Balance, end of period: | | |
| Liability for unpaid losses and loss adjustment expenses | — | 98,300 |
| Reinsurance recoverables on losses | — | 46,088 |
| Net balance, end of period | — | $52,212 |
26
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**8. Property and
Equipment**
Property and equipment, presented on a consolidated basis,
including both continuing and discontinued operations, consisted of the following:
| Line item | September 30, 2024 | December 31, 2023 | Estimated Useful Life |
| --- | --- | --- | --- |
| Cost: | | | |
| Land | $1,249 | $1,403 | indefinite |
| Building and improvements | 12,377 | 14,538 | 10 – 43 years |
| Electronic data processing equipment | 1,471 | 1,441 | 5 – 7 years |
| Furniture and fixtures | 2,733 | 2,953 | 5 – 7 years |
| Automobiles | 1,265 | 1,319 | 2 – 3 years |
| Gross cost | 19,095 | 21,654 | |
| Accumulated depreciation | (11,547) | (11,757) | |
| Total property and equipment, net | $7,548 | $9,897 | |
Depreciation expense was $186 and $188 for the three months
ended September 30, 2024 and 2023, respectively, and $616 and $558 for the nine months ended September 30, 2024 and 2023, respectively.
Depreciation expense for continuing operations was $186 and $157 for the three months ended September 30, 2024 and 2023, respectively,
and $527 and $466 for the nine months ended September 30, 2024 and 2023, respectively.
Property and equipment for current and prior year continuing
and discontinued operations consisted of the following:
_September 30, 2024_
| | |
| --- | --- |
| Cost: | |
| Continuing operations | $19,095 |
| Discontinued operations | — |
| Total cost | 19,095 |
| Accumulated depreciation | |
| Continuing operations | (11,547) |
| Discontinued operations | — |
| Total accumulated depreciation | (11,547) |
| Total property and equipment, net | $7,548 |
_December 31, 2023_
| | |
| --- | --- |
| Cost: | |
| Continuing operations | $18,756 |
| Discontinued operations | 2,898 |
| Total cost | 21,654 |
| Accumulated depreciation | |
| Continuing operations | (11,304) |
| Discontinued operations | (453) |
| Total accumulated depreciation | (11,757) |
| Total property and equipment, net | $9,897 |
27
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**9. Goodwill and
Other Intangibles**
***Goodwill***
The following table presents, on a consolidated basis, including
both continuing and discontinued operations, the carrying amount of the Company’s goodwill and related impairment by segment:
| Line item | Nine Months Ended September 30, 2024 / Non-Standard Auto | Nine Months Ended September 30, 2024 / Commercial | Nine Months Ended September 30, 2024 / Total | Year Ended December 31, 2023 / Non-Standard Auto | Year Ended December 31, 2023 / Commercial | Year Ended December 31, 2023 / Total |
| --- | --- | --- | --- | --- | --- | --- |
| Goodwill, original recorded value | $2,628 | $6,756 | $9,384 | $2,628 | $6,756 | $9,384 |
| Accumulated impairment losses at the beginning of the period | — | (6,756) | (6,756) | — | — | — |
| Goodwill, beginning of period | 2,628 | — | 2,628 | 2,628 | 6,756 | 9,384 |
| Impairment recognized during the period | — | — | — | — | (6,756) | (6,756) |
| Goodwill, end of period | $2,628 | — | $2,628 | $2,628 | — | $2,628 |
Based on the qualitative analyses performed for the goodwill
related to our Non-Standard Auto segment, we concluded that goodwill was not impaired as of September 30, 2024, or December 31, 2023.
During the fourth quarter of 2023, we performed a quantitative
assessment of the goodwill related to the Westminster acquisition, which was allocated to our Commercial segment, and concluded that
the goodwill was fully impaired as of December 31, 2023, resulting in a non-cash impairment charge of $6,756. See the Part II, Item 8,
Note 10 “Goodwill and Other Intangibles” section of the 2023 Annual Report for additional information.
***Other Intangible Assets***
The following table presents on a consolidated basis, including
both continuing and discontinued operations, the carrying amount of the Company’s other intangible assets:
| September 30, 2024 | Gross Carrying Amount | Accumulated Amortization | Net |
| --- | --- | --- | --- |
| Subject to amortization: | | | |
| Trade names | $248 | $248 | — |
| Distribution network | — | — | — |
| Total subject to amortization | 248 | 248 | — |
| Not subject to amortization: | | | |
| State insurance licenses | 100 | — | 100 |
| Total | $348 | $248 | $100 |
| December 31, 2023 | Gross Carrying Amount | Accumulated Amortization | Net |
| --- | --- | --- | --- |
| Subject to amortization: | | | |
| Trade names | $748 | $448 | $300 |
| Distribution network | 6,700 | 1,489 | 5,211 |
| Total subject to amortization | 7,448 | 1,937 | 5,511 |
| Not subject to amortization: | | | |
| State insurance licenses | 1,900 | — | 1,900 |
| Total | $9,348 | $1,937 | $7,411 |
28
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
The following table presents the current and
prior year continuing and discontinued carrying amounts of the Company’s other intangible assets:
| September 30, 2024 | Gross Carrying Amount | Accumulated Amortization | Net |
| --- | --- | --- | --- |
| Subject to amortization: | | | |
| Continuing operations | $248 | $248 | — |
| Discontinued operations | — | — | — |
| Total subject to amortization | 248 | 248 | — |
| Not subject to amortization | | | |
| Continuing operations | 100 | — | 100 |
| Discontinued operations | — | — | — |
| Total not subject to amortization | $348 | $248 | $100 |
| December 31, 2023 | Gross Carrying Amount | Accumulated Amortization | Net |
| --- | --- | --- | --- |
| Subject to amortization: | | | |
| Continuing operations | $248 | $248 | — |
| Discontinued operations | 7,200 | 1,689 | 5,511 |
| Total subject to amortization | 7,448 | 1,937 | 5,511 |
| Not subject to amortization | | | |
| Continuing operations | 100 | — | 100 |
| Discontinued operations | 1,800 | — | 1,800 |
| Total not subject to amortization | $9,348 | $1,937 | $7,411 |
We determined during our reviews that other indefinite-lived
intangible assets and finite-lived intangible assets were not impaired as of September 30, 2024, or December 31, 2023.
Amortization expense was $0 and $114 for the three months
ended September 30, 2024 and 2023, respectively, and $211 and $349 for the nine months ended September 30, 2024 and 2023, respectively.
Amortization expense for continuing operations was $0 and $8 for the three months ended September 30, 2024 and 2023, respectively, and
$0 and $32 for the nine months ended September 30, 2024 and 2023, respectively.
29
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**10. Royalties,
Dividends, and Affiliations**
***North Dakota Farm Bureau***
Nodak Insurance was organized by the North Dakota Farm Bureau (“NDFB”)
to provide insurance protection for its members. We have a royalty agreement with the NDFB that recognizes the use of their trademark
and provides royalties to the NDFB based on the premiums written on Nodak Insurance’s policies. Royalties paid to the NDFB were
$468 and $426 during the three months ended September 30, 2024 and 2023, respectively, and $1,351 and $1,225 for the nine months ended
September 30, 2024 and 2023, respectively. Royalty amounts payable of $7 and $131 were accrued as a liability to the NDFB at September
30, 2024, and December 31, 2023, respectively.
***Dividends***
State insurance laws require our insurance subsidiaries to maintain
certain minimum capital and surplus amounts on a statutory basis. Our insurance subsidiaries are subject to regulations that restrict
the payment of dividends from statutory surplus and may require prior approval from their domiciliary insurance regulatory authorities.
Our insurance subsidiaries are also subject to risk-based capital requirements that may further affect their ability to pay dividends.
Our insurance subsidiaries statutory capital and surplus at December 31, 2023, exceeded the amount of statutory capital and surplus necessary
to satisfy risk-based capital requirements by a significant margin. For information regarding the availability of subsidiaries to pay
dividends to NI Holdings during 2024, see Item II, Part 8, Note 12 “Related Party Transactions” section of the 2023 Annual
Report.
***Battle Creek***
Prior to January 2, 2024, we consolidated the financial statements
of Battle Creek, and Battle Creek’s policyholders’ interest in Battle Creek was reflected as a non-controlling interest in
shareholders’ equity in our Consolidated Balance Sheets. Subsequent to January 2, 2024, Battle Creek is fully consolidated in our
Consolidated Balance Sheets. The following table discloses the standalone balance sheet of Battle Creek, prior to intercompany eliminations,
to illustrate the impact of including Battle Creek in our December 31, 2023, Consolidated Balance Sheet prior to demutualization:
_December 31, 2023_
| | |
| --- | --- |
| Assets: | |
| Cash and cash equivalents | $2,621 |
| Investments | 15,394 |
| Premiums and agents’ balances receivable | 5,953 |
| Deferred policy acquisition costs | 682 |
| Reinsurance recoverables on losses (2) | 6,918 |
| Accrued investment income | 85 |
| Income tax recoverable | 225 |
| Deferred income taxes | 706 |
| Property and equipment | 306 |
| Other assets | 97 |
| Total assets | $32,987 |
| Liabilities: | |
| Unpaid losses and loss adjustment expenses | $4,276 |
| Unearned premiums | 3,269 |
| Notes payable (1) | 3,000 |
| Pooling payable (1) | 5,932 |
| Reinsurance losses payable (2) | 13,275 |
| Accrued expenses and other liabilities | 477 |
| Total liabilities | 30,229 |
| Equity: | |
| Non-controlling interest | 2,758 |
| Total equity | 2,758 |
| Total liabilities and equity | $32,987 |
(1) Amount fully eliminated in consolidation.
(2) Amount partly eliminated in consolidation.
30
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**11. Benefit Plans**
Nodak Insurance sponsors a 401(k) plan with an automatic and matching
contribution for eligible employees at Nodak Insurance, Primero, and Direct Auto. Nodak Insurance also contributes an additional elective
amount of employee compensation as a profit-sharing contribution for eligible employees. Westminster also sponsored a separate 401(k)
plan until the company was sold on June 30, 2024. American West and Battle Creek have no employees. The Company reported expenses related
to these plans totaling $312 and $656 during the three months ended September 30, 2024 and 2023, respectively, and $1,117 and $1,315 during
the nine months ended September 30, 2024 and 2023, respectively.
All fees associated with the plans are deducted from the
eligible employee accounts.
The Company also offers a non-qualified deferred compensation
plan to key executives of the Company (as designated by the Board of Directors). The Company’s policy is to fund the plan by amounts
that represent the excess of the maximum contribution allowed by the Employee Retirement Income Security Act over the key executives’
allowable 401(k) contribution. The plan also allows employee-directed deferral of key executives’ compensation or incentive payments.
The Company reported expenses related to this plan totaling $27 and $45 during the three months ended September 30, 2024 and 2023, respectively,
and $258 and $257 during the nine months ended September 30, 2024 and 2023, respectively.
In connection with our initial public offering (“IPO”)
in March 2017, the Company established its Employee Stock Ownership Plan (the “ESOP”) within the meaning of Internal Revenue
Code Section 4975(e)(7) and invests solely in common stock of the Company.
Upon establishment of the ESOP, Nodak Insurance loaned $2,400 to the
ESOP’s related trust (the “ESOP Trust”). The ESOP loan was for a period of ten years, bearing interest at the long-term
Applicable Federal Rate effective on the closing date of the offering (2.79% annually). The ESOP Trust used the proceeds of the loan to
purchase shares in our IPO, which resulted in the ESOP Trust owning approximately 1.0% of the Company’s authorized shares. The ESOP
has purchased the shares for investment and not for resale.
The shares purchased by the ESOP Trust in the offering are held in
a suspense account as collateral for the ESOP loan. Nodak Insurance makes semi-annual cash contributions to the ESOP in amounts no smaller
than the amounts required for the ESOP Trust to make its loan payments to Nodak Insurance. While the ESOP makes two loan payments per
year, a pre-determined portion of the shares are released from the suspense account and allocated to participant accounts at the end of
the calendar year. This release and allocation occurs on an annual basis over the ten-year term of the ESOP loan. Nodak Insurance has
a lien on the shares of common stock of the Company held by the ESOP to secure repayment of the loan from the ESOP to Nodak Insurance.
If the ESOP is terminated as a result of a change in control of the Company, the ESOP may be required to pay the costs of terminating
the plan.
It is anticipated that the only assets held by the ESOP will be shares
of the Company’s common stock. Participants in the ESOP cannot direct the investment of any assets allocated to their accounts.
The ESOP participants are employees of Nodak Insurance. The employees of Primero, Direct Auto, and Westminster do not participate in the
ESOP.
Each employee of Nodak Insurance automatically becomes a participant
in the ESOP if such employee is at least 21 years old, has completed a minimum of one thousand hours of service with Nodak Insurance,
and has completed an Eligibility Computation Period. Employees are not permitted to make any contributions to the ESOP. Participants in
the ESOP receive annual reports from the Company showing the number of shares of common stock of the Company allocated to the participants’
accounts and the market value of those shares. The shares are allocated to participants based on compensation as provided for in the ESOP.
In connection with the establishment of the ESOP, the Company created
a contra-equity account on the Consolidated Balance Sheet equal to the ESOP’s basis in the shares. The basis of those shares was
set at $10.00 per share as part of the IPO. As shares are released from the ESOP suspense account, the contra-equity account is credited,
which reduces the impact of the contra-equity account on the Company’s Consolidated Balance Sheets over time. The Company records
compensation expense related to the shares released, equal to the number of shares released from the suspense account multiplied by the
average market value of the Company’s stock during the period.
The Company recognized compensation expense related to the ESOP of
$93 and $81 during the three months ended September 30, 2024 and 2023, respectively, and $269 and $245 during the nine months ended September
30, 2024 and 2023, respectively.
Through September 30, 2024, and December 31, 2023, the Company had
released and allocated 170,205 ESOP shares to participants, with a remainder of 69,795 ESOP shares in suspense at September 30, 2024,
and December 31, 2023. Using the Company’s quarter-end market price of $15.68 per share, the fair value of the unearned ESOP shares
was $1,094 at September 30, 2024.
31
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**12. Line of Credit**
NI Holdings has a $3,000 line of credit with Wells Fargo Bank,
N.A. The terms of the line of credit include a floating interest rate of 2.50% above the daily simple secured overnight financing rate.
There were no outstanding amounts during the nine months ended September 30, 2024, or the year ended December 31, 2023. This line of credit
is scheduled to expire on December 13, 2024.
**13. Income Taxes**
Due to the Battle Creek demutualization, the Company established
a net valuation allowance of $346 against their deferred income tax asset established for net operating loss carryforwards.
At September 30, 2024, and December 31, 2023, we had no unrecognized
income tax benefits, no accrued interest and penalties, and no significant uncertain income tax positions. No interest and penalties were
recognized during the nine-month period ended September 30, 2024, or the year ended December 31, 2023.
Federal income taxes were allocated to discontinued operations
at a 21.1% effective tax rate at the date of sale. Our effective tax rate for continuing operations for the nine months ended September
30, 2024, was 12.0% which was impacted by the $346 valuation allowance on net operating loss carryforwards established as a result of
the Battle Creek demutualization. The effective tax rate, including the loss on the sale of Westminster, was 32.0% for the nine months
ended September 30, 2024.
**14. Leases**
Primero leases a facility in Spearfish, South Dakota under a non-cancellable
operating lease expiring in 2028, and leases a facility in Las Vegas, Nevada on a month-to-month basis. Direct Auto leases a facility
in Chicago, Illinois under a non-cancellable operating lease expiring in 2029. Nodak Insurance leases a facility in Fargo, North Dakota
under a non-cancellable operating lease expiring in 2029. In addition, Nodak Insurance leases server equipment under a non-cancellable
finance lease expiring in 2026.
Effective for the year ended December 31, 2022, the
Company adopted the updated guidance for leases. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” section of
the 2023 Annual Report for additional information. We determine whether a contract is or contains a lease at the inception of the contract.
A contract will be deemed to be or contain a lease if the contract conveys the right to control and directs the use of identified property
or equipment for a period of time in exchange for consideration. We generally must also have the right to obtain substantially all of
the economic benefits from the use of the property and equipment. Lease assets and liabilities are recognized at the lease commencement
date based on the present value of lease payments over the lease term. To determine the present value of lease payments not yet paid,
we estimate incremental borrowing rates based on the floating interest rate on our Line of Credit with Wells Fargo Bank, N.A. at the lease
commencement date, as rates are not implicitly stated in most leases. Lease liabilities are included in accrued expenses and other liabilities
and right-of-use assets are included in other assets in the Consolidated Balance Sheets.
There were expenses of $121 and $98 related to these
leases during the three months ended September 30, 2024 and 2023, respectively, and $365 and $293 during the nine months ended September
30, 2024 and 2023.
32
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
Additional information regarding the Company’s leases are
as follows:
| Line item | As of and For the Three Months Ended September 30, 2024 | As of and For the Three Months Ended September 30, 2023 | As of and For the Nine Months Ended September 30, 2024 | As of and For the Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Operating lease expense | $96 | $98 | $288 | $293 |
| Finance lease cost | | | | — |
| Amortization of right-of-use assets | 20 | — | 60 | — |
| Interest on lease liabilities | 5 | — | 17 | — |
| Finance lease cost | 25 | — | 77 | — |
| Total lease cost | $121 | $98 | $365 | $293 |
| Other information on leases: | | | | |
| Cash payments included in operating cash flows from operating leases | $102 | $103 | $306 | $307 |
| Cash payments included in operating cash flows from finance leases | 5 | — | 17 | — |
| Cash payments included in financing cash flows from finance leases | 25 | — | 73 | — |
| Right-of-use assets obtained in exchange for new operating lease liabilities | — | — | 185 | 247 |
| Right-of-use assets obtained in exchange for new finance lease liabilities | — | — | — | — |
| Weighted average discount rate – operating leases | 4.48% | 3.95% | 4.48% | 3.95% |
| Weighted average discount rate – finance leases | 8.50% | — | 8.50% | — |
| Weighted average remaining lease term in years – operating leases | 4.7 years | 5.6 years | 4.7 years | 5.6 years |
| Weighted average remaining lease term in years – finance leases | 2.1 years | — | 2.1 years | — |
The following table presents the contractual maturities of the Company’s
operating leases for each of the five years in the period ending December 31, 2028, and thereafter, reconciled to the Company’s
operating lease liability at September 30, 2024.
| Year ending December 31, | Operating Leases | Finance Leases | Total |
| --- | --- | --- | --- |
| 2024 (three months remaining) | $97 | $30 | $127 |
| 2025 | 393 | 120 | 513 |
| 2026 | 396 | 100 | 496 |
| 2027 | 401 | — | 401 |
| 2028 | 376 | — | 376 |
| Thereafter | 212 | — | 212 |
| Total undiscounted lease payments | 1,875 | 250 | 2,125 |
| Less: present value adjustment | 178 | 20 | 198 |
| Lease liability at September 30, 2024 | $1,697 | $230 | $1,927 |
**15. Contingencies**
We are, from time to time, party to routine litigation incidental
to the normal course of our business. Based upon information presently available to us, we do not consider any litigation to be material.
However, given the uncertainties attendant to litigation, we cannot assure you that our results of operations and financial condition
will not be materially adversely affected by any litigation. Contingent liabilities arising from litigation, income taxes, and other matters
are not considered to be material to our financial position.
33
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**16.** **Common and Preferred Stock**
***Common Stock***
Changes in the number of common stock shares outstanding
were as follows:
| Line item | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- |
| Shares outstanding, beginning of period | 20,599,908 | 21,076,255 |
| Treasury shares repurchased through stock repurchase authorization | — | (548,549) |
| Issuance of treasury shares for vesting of restricted stock units | 48,734 | 47,887 |
| Shares outstanding, end of period | 20,648,642 | 20,575,593 |
The changes in the number of common shares outstanding excludes certain
non-forfeitable stock award shares that are included in the weighted average common shares outstanding used in basic earnings per common
share calculations. The net loss per diluted common share for the three- and nine-month periods ended September 30, 2024, excluded the
weighted average effects of 134,644 and 125,054 shares, respectively, of stock awards since the impacts of these potential shares of common
stock were anti-dilutive. The net loss per diluted common share for the nine-month period ended September 30, 2023, excluded the weighted
average effects of 68,380 shares of stock awards since the impacts of these potential shares of common stock were anti-dilutive.
On May 9, 2022, our Board of Directors approved an
authorization for the repurchase of up to approximately $10,000 of the Company’s outstanding common stock. During the nine months
ended September 30, 2024, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2023, we repurchased
548,549 shares of our common stock for $7,280, under our share repurchase authorization. Included in the cost of treasury stock acquired
pursuant to common share repurchases is the 1% excise tax imposed on common share repurchase activity, net of common share issuances,
as part of the Inflation Reduction Act of 2022. At September 30, 2024, $2,052 remains available under this authorization.
The cost of this treasury stock is a reduction of
shareholders’ equity within our Consolidated Balance Sheets.
***Preferred Stock***
The Company’s Articles of Incorporation provide
authority to issue up to five million shares of preferred stock. No preferred shares are issued or outstanding.
**17.** **Share-Based Compensation**
The NI Holdings, Inc. 2020 Stock and Incentive Plan
(the “Plan”) is designed to promote the interests of the Company and its shareholders by aiding the Company in attracting
and retaining employees, officers, consultants, independent contractors, advisors, and non-employee directors capable of assuring the
future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business
and to afford such persons an opportunity to acquire an ownership interest in the Company, thereby aligning the interests of such persons
with the Company’s shareholders.
The Plan provides for the grant of nonqualified stock
options, incentive stock options, restricted stock units (“RSUs”), stock appreciation rights, dividend equivalents, and performance
share units (“PSUs”) to employees, officers, consultants, advisors, non-employee directors, and independent contractors designated
by the Compensation Committee of the Board of Directors (the “Compensation Committee”). Awards made under the Plan are based
upon, among other things, a participant’s level of responsibility and performance within the Company.
The total aggregate number of shares of common stock
that may be issued under the Plan shall not exceed 1,000,000 shares, subject to adjustments as provided in the Plan. No eligible participant
may be granted any awards for more than 100,000 shares in the aggregate in any calendar year, subject to adjustment in accordance with
the Plan. The aggregate amount payable pursuant to all performance awards denominated in cash to any eligible person in any calendar year
is limited to $1,000 in value. Directors who are not also employees of the Company may not be granted awards denominated in shares that
exceed $150 in any calendar year.
34
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
***Restricted Stock Units***
The Compensation Committee has awarded RSUs to non-employee
directors and select executives. RSUs are promises to issue actual shares of common stock at the end of a vesting period. The RSUs granted
to executives under the Plan are based on salary. RSUs granted prior to 2024 vest equally over a five-year period. Effective for executive
grants in 2024, the RSUs vest equally over a three-year period. The RSUs granted to non-employee directors vest 100% on the date of the
next annual meeting of shareholders following the grant date. Dividend equivalents on RSUs are accrued during the vesting period and paid
in cash at the end of the vesting period but are subject to forfeiture until the underlying shares become vested. Participants do not
have voting rights with respect to RSUs.
The Company recognizes stock-based compensation costs
for RSUs based on the grant date fair value. The compensation costs are normally expensed over the vesting periods to each vesting date;
however, the cost of RSUs granted to executives are expensed immediately if the executive has met certain retirement criteria and the
RSUs become non-forfeitable. Estimated forfeitures are included in the determination of compensation costs. No forfeitures are currently
estimated.
A summary of the Company’s outstanding and
unearned RSUs is presented below:
| Line item | RSUs | Weighted-Average Grant-Date Fair Value Per Share |
| --- | --- | --- |
| Units outstanding and unearned at January 1, 2023 | 115,360 | $17.00 |
| RSUs granted during 2023 | 85,000 | 13.76 |
| RSUs earned during 2023 | (53,780) | 16.32 |
| Units outstanding and unearned at December 31, 2023 | 146,580 | 15.37 |
| RSUs granted during 2024 | 103,600 | 14.45 |
| RSUs earned during 2024 | (69,420) | 14.82 |
| Forfeitures (1) | (80,420) | 15.19 |
| Units outstanding and unearned at September 30, 2024 | 100,340 | 14.95 |
(1) Represents
RSU forfeitures primarily related to the execution of the separation agreement with the former Chief Executive Officer.
The following table shows the impact of RSU activity
to the Company’s financial results:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| RSU compensation expense (benefit) | $(384) | $268 | $383 | $827 |
| Income tax benefit (expense) | 87 | (61) | (87) | (188) |
| RSU compensation expense (benefit), net of income taxes | $(297) | $207 | $296 | $639 |
At September 30, 2024, there was $782 of unrecognized
compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 1.35 years.
***Performance Share Units***
The Compensation Committee has awarded PSUs to select
executives. PSUs are promises to issue actual shares of common stock at the end of a vesting period, if certain performance conditions
are met. The PSUs granted to employees under the Plan are based on salary and, prior to 2024, include a three-year adjusted book value
cumulative growth target with threshold and stretch goals. Effective for grants made in 2024, the performance metric is calculated based
on an adjusted return on equity over a three-year period, with annual resets. They will vest on the third anniversary of the grant date,
subject to the participant’s continuous employment through the vesting date and the level of performance achieved. Dividend equivalents
on PSUs are accrued and paid in cash at the end of the performance period in accordance with the level of performance achieved but are
subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to PSUs.
The Company recognizes stock-based compensation costs
for PSUs based on the grant date fair value over the performance period of the awards. Estimated forfeitures are included in the determination
of compensation costs. The current cost estimates represent the Company’s forecasted performance against cumulative growth targets.
35
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
A summary of the Company’s outstanding PSUs is presented below:
| Line item | PSUs | Weighted-Average Grant-Date Fair Value Per Share |
| --- | --- | --- |
| Units outstanding at January 1, 2023 | 190,000 | $17.00 |
| PSUs granted during 2023 (at target) | 87,400 | 13.85 |
| PSUs earned during 2023 | — | — |
| Performance adjustment (1) | (63,600) | 14.26 |
| Forfeitures | — | — |
| Units outstanding at December 31, 2023 | 213,800 | 16.53 |
| PSUs granted during 2024 (at target) | 79,800 | 14.19 |
| PSUs earned during 2024 | — | — |
| Performance adjustment (1) | (64,600) | 18.64 |
| Forfeitures (2) | (104,800) | 15.24 |
| Units outstanding at September 30, 2024 | 124,200 | 15.01 |
(1) Represents
the change in PSUs issued based upon the attainment of performance goals established by the Company.
(2) Represents
PSU forfeitures primarily related to the execution of the separation agreement with the former Chief Executive Officer.
The following table shows the impact of PSU activity
to the Company’s financial results:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| PSU compensation expense | $(230) | $141 | $139 | $418 |
| Income tax benefit | 52 | (32) | (32) | (95) |
| PSU compensation expense, net of income taxes | $(178) | $109 | $107 | $323 |
The cost estimates for PSU grants represent initial
target awards until we can reasonably forecast the financial performance of each PSU award grant. At the end of the performance period,
we will reflect a performance adjustment, which may be either an increase or decrease from the initial target awards. The actual number
of shares to be issued at the end of the performance period will range from 0% to 150% of the initial target awards. As of December 31,
2023, the previously recognized compensation expense related to the PSU awards granted during 2022 and 2021 was eliminated due to the
Company's expectation that the threshold performance goal will not be met.
At September 30, 2024, there was $796 of unrecognized
compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 2.04 years.
36
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**18. Allowance
for Expected Credit Losses**
***Premiums Receivable***
The following table presents the balances of premiums
and agents’ balances receivable, net of the allowance for expected credit losses as of September 30, 2024, and the changes in the
allowance for expected credit losses for the three and nine months ended September 30, 2024 for continuing and discontinued operations.
| Line item | As of and For the Three Months Ended September 30, 2024 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Three Months Ended September 30, 2024 / Allowance for Expected Credit Losses | As of and For the Three Months Ended September 30, 2023 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Three Months Ended September 30, 2023 / Allowance for Expected Credit Losses |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Balance, beginning of period | $92,831 | $348 | $91,249 | $426 |
| Current period charge for expected credit losses | | 62 | | 43 |
| Write-offs of uncollectible premiums receivable | | (60) | | (53) |
| Balance, end of period | $85,315 | $350 | $87,621 | $416 |
| Line item | As of and For the Nine Months Ended September 30, 2024 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Nine Months Ended September 30, 2024 / Allowance for Expected Credit Losses | As of and For the Nine Months Ended September 30, 2023 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Nine Months Ended September 30, 2023 / Allowance for Expected Credit Losses |
| --- | --- | --- | --- | --- |
| Continuing operations: | | | | |
| Balance, beginning of period | $56,154 | $394 | $47,346 | $417 |
| Current period charge for expected credit losses | | 194 | | 317 |
| Write-offs of uncollectible premiums receivable | | (238) | | (318) |
| Balance, end of period | $85,315 | $350 | $87,621 | $416 |
37
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
| Line item | As of and For the Three Months Ended September 30, 2024 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Three Months Ended September 30, 2024 / Allowance for Expected Credit Losses | As of and For the Three Months Ended September 30, 2023 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Three Months Ended September 30, 2023 / Allowance for Expected Credit Losses |
| --- | --- | --- | --- | --- |
| Discontinued operations: | | | | |
| Balance, beginning of period | — | — | $15,697 | $8 |
| Current period charge for expected credit losses | | — | | 2 |
| Write-offs of uncollectible premiums receivable | | — | | (2) |
| Westminster balances disposed in sale | — | — | — | — |
| Balance, end of period | — | — | $12,004 | $8 |
| Line item | As of and For the Nine Months Ended September 30, 2024 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Nine Months Ended September 30, 2024 / Allowance for Expected Credit Losses | As of and For the Nine Months Ended September 30, 2023 / Premiums and Agents’ Balances Receivable, Net of Allowance for Expected Credit Losses | As of and For the Nine Months Ended September 30, 2023 / Allowance for Expected Credit Losses |
| --- | --- | --- | --- | --- |
| Discontinued operations: | | | | |
| Balance, beginning of period | $17,904 | $8 | $14,827 | $8 |
| Current period charge for expected credit losses | | 4 | | 6 |
| Write-offs of uncollectible premiums receivable | | (4) | | (6) |
| Westminster balances disposed in sale | $16,030 | $(8) | — | — |
| Balance, end of period | — | — | $12,004 | $8 |
38
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**19.** **Discontinued Operations**
On May 7, 2024, we entered into a definitive agreement
to sell our subsidiary, Westminster, to Scott Insurance Holdings, for a cash purchase price of $10,500, as well as a $1,772 post-closing
adjustment pursuant to the purchase agreement, for a net amount of $12,272. The sale closed on June 30, 2024, and we reported an after-tax
loss on the sale of discontinued operations of $11,148. For additional information see Part I, Item 1, Note 2 “Basis of Presentation
and Accounting Policies” of this Form 10-Q.
The assets and liabilities associated with discontinued
operations prior to the closing of the sale have been presented separately in our Consolidated Balance Sheets. The Company’s Consolidated
Statements of Cash Flows presents operating, investing, and financing cash flows of the discontinued operations separately. The major
assets and liability categories were as follows as of the dates indicated:
| Line item | September 30, 2024 | December 31, 2023 |
| --- | --- | --- |
| Assets: | | |
| Cash and cash equivalents | — | $15,656 |
| Fixed income securities, at fair value | — | 58,332 |
| Equity securities, at fair value | — | 5,784 |
| Total cash and investments | — | 79,772 |
| Premiums and agents’ balances receivable | — | 17,904 |
| Deferred policy acquisition costs | — | 7,330 |
| Reinsurance premiums receivable | — | 5,464 |
| Reinsurance recoverables on losses | — | 42,509 |
| Accrued investment income | — | 438 |
| Property and equipment, net | — | 2,445 |
| Deferred income taxes | — | (815) |
| Goodwill and other intangibles | — | 7,311 |
| Other assets | — | 99 |
| Total assets of discontinued operations | — | $162,457 |
| Liabilities: | | |
| Unpaid losses and loss adjustment expenses | — | $97,934 |
| Unearned premiums | — | 38,000 |
| Income tax payable (receivable) | — | (59) |
| Accrued expenses and other liabilities | — | 5,422 |
| Total liabilities of discontinued operations | — | $141,297 |
Summary operating results of discontinued operations
were as follows for the periods indicated:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Revenues: | | | | |
| Net premiums earned | — | $14,352 | $31,056 | $44,419 |
| Fee and other income | — | 10 | 14 | 32 |
| Net investment income | — | 629 | 1,419 | 1,759 |
| Net investment gains (losses) | — | (272) | 116 | (260) |
| Total revenues | — | 14,719 | 32,605 | 45,950 |
| Expenses: | | | | |
| Losses and loss adjustment expenses | — | 10,407 | 23,506 | 45,536 |
| Amortization of deferred policy acquisition costs | — | 3,839 | 7,928 | 11,218 |
| Other underwriting and general expenses | — | 1,364 | 3,088 | 5,039 |
| Total expenses | — | 15,610 | 34,522 | 61,793 |
| Loss before income taxes | — | (891) | (1,917) | (15,843) |
| Income tax benefit | — | (384) | (405) | (3,363) |
| Net loss | — | $(507) | $(1,512) | $(12,480) |
| Loss per common share from discontinued operations: | | | | |
| Basic | — | $(0.02) | $(0.07) | $(0.59) |
| Diluted | — | $(0.02) | $(0.07) | $(0.59) |
39
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
**20.** **Segment Information**
We have five reportable operating segments of our
continuing operations, which consist of Private Passenger Auto, Non-Standard Auto, Home and Farm, Crop, and All Other (which primarily
consists of commercial, assumed reinsurance, and our excess liability business). Prior to the sale of Westminster on June 30, 2024, we
also reported a Commercial segment that consisted primarily of Westminster’s balances and results. Subsequent to the sale, Westminster
is reported as part of discontinued operations, which is not included in our segment information. The commercial business that remains
a part of our continuing operations has been included in the All Other segment for the current and prior periods presented. We operate
only in the U.S., and no single customer or agent provides 10 percent or more of our revenues. The following tables provide available
information of these segments for the three- and nine-month periods ended September 30, 2024 and 2023.
For purposes of evaluating profitability of the Non-Standard
Auto segment, we combine the policy fees paid by the insured with the underwriting gain or loss as its primary measure. As a result, these
fees are allocated to the Non-Standard Auto segment (included in fee and other income) in the tables below. The remaining fee and other
income amounts are not allocated to any segment.
We do not assign or allocate all line items in our
Consolidated Statement of Operations or Consolidated Balance Sheets to our operating segments. Those line items include net investment
income, net investment gains, fee and other income excluding Non-Standard Auto, and income tax expense (benefit) within the Unaudited
Consolidated Statement of Operations. For the Consolidated Balance Sheets, those items include cash and investments, property and equipment,
other assets, accrued expenses and other liabilities, income taxes recoverable or payable, and shareholders’ equity.
40
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
_Three Months Ended September 30, 2024_
| Line item | Private Passenger Auto | Non-Standard Auto | Home and Farm | Crop | All Other | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Direct premiums earned | $23,981 | $23,069 | $26,092 | $13,649 | $3,334 | $90,125 |
| Assumed premiums earned | — | — | — | 1,610 | 270 | 1,880 |
| Ceded premiums earned | (1,369) | (68) | (2,613) | (4,374) | (311) | (8,735) |
| Net premiums earned | 22,612 | 23,001 | 23,479 | 10,885 | 3,293 | 83,270 |
| Direct losses and loss adjustment expenses | 15,300 | 20,504 | 23,248 | 7,588 | 3,052 | 69,692 |
| Assumed losses and loss adjustment expenses | — | — | — | 439 | 178 | 617 |
| Ceded losses and loss adjustment expenses | (1,230) | — | (1,225) | (1,837) | (917) | (5,209) |
| Net losses and loss adjustment expenses | 14,070 | 20,504 | 22,023 | 6,190 | 2,313 | 65,100 |
| Gross margin | 8,542 | 2,497 | 1,456 | 4,695 | 980 | 18,170 |
| Underwriting and general expenses | 7,470 | 10,327 | 7,618 | 1,783 | 142 | 27,340 |
| Underwriting gain (loss) | 1,072 | (7,830) | (6,162) | 2,912 | 838 | (9,170) |
| Fee and other income | | 281 | | | | 491 |
| | | (7,549) | | | | |
| Net investment income | | | | | | 2,811 |
| Net investment gains (losses) | | | | | | 2,412 |
| Loss before income taxes | | | | | | (3,456) |
| Income tax expense (benefit) | | | | | | (751) |
| Net loss | | | | | | (2,705) |
| Net loss attributable to non-controlling interest | | | | | | — |
| Net loss attributable to NI Holdings, Inc. | | | | | | $(2,705) |
| Operating Ratios: | | | | | | |
| Loss and loss adjustment expense ratio | 62.2% | 89.1% | 93.8% | 56.9% | 70.2% | 78.2% |
| Expense ratio | 33.0% | 44.9% | 32.4% | 16.4% | 4.3% | 32.8% |
| Combined ratio | 95.2% | 134.0% | 126.2% | 73.3% | 74.5% | 111.0% |
| Balances at September 30, 2024: | | | | | | |
| Premiums and agents’ balances receivable | $26,863 | $12,076 | $11,043 | $32,751 | $2,582 | $85,315 |
| Deferred policy acquisition costs | 6,636 | 9,279 | 9,620 | 786 | 1,150 | 27,471 |
| Reinsurance recoverables on losses | 2,142 | — | 3,648 | 3,532 | 4,999 | 14,321 |
| Receivable from Federal Crop Insurance Corporation | — | — | — | 19,605 | — | 19,605 |
| Goodwill and other intangibles | — | 2,728 | — | — | — | 2,728 |
| Unpaid losses and loss adjustment expenses | 34,777 | 73,447 | 23,947 | 16,493 | 10,405 | 159,069 |
| Unearned premiums | 38,309 | 28,725 | 54,409 | 8,614 | 6,823 | 136,880 |
41
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
_Three Months Ended September 30, 2023_
| Line item | Private Passenger Auto | Non-Standard Auto | Home and Farm | Crop | All Other | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Direct premiums earned | $22,377 | $21,334 | $23,650 | $15,283 | $2,956 | $85,600 |
| Assumed premiums earned | — | — | — | 1,792 | 253 | 2,045 |
| Ceded premiums earned | (1,142) | (103) | (2,341) | (7,329) | (312) | (11,227) |
| Net premiums earned | 21,235 | 21,231 | 21,309 | 9,746 | 2,897 | 76,418 |
| Direct losses and loss adjustment expenses | 16,148 | 18,838 | 14,611 | 4,899 | (633) | 53,863 |
| Assumed losses and loss adjustment expenses | — | — | — | 558 | 167 | 725 |
| Ceded losses and loss adjustment expenses | 455 | — | (559) | (1,767) | 440 | (1,431) |
| Net losses and loss adjustment expenses | 16,603 | 18,838 | 14,052 | 3,690 | (26) | 53,157 |
| Gross margin | 4,632 | 2,393 | 7,257 | 6,056 | 2,923 | 23,261 |
| Underwriting and general expenses | 6,126 | 8,719 | 6,207 | 1,973 | 828 | 23,853 |
| Underwriting gain (loss) | (1,494) | (6,326) | 1,050 | 4,083 | 2,095 | (592) |
| Fee and other income | | 278 | | | | 445 |
| | | (6,048) | | | | |
| Net investment income | | | | | | 2,121 |
| Net investment gains (losses) | | | | | | (955) |
| Income before income taxes | | | | | | 1,019 |
| Income tax expense (benefit) | | | | | | 214 |
| Net income | | | | | | 805 |
| Net income attributable to non-controlling interest | | | | | | 67 |
| Net income attributable to NI Holdings, Inc. | | | | | | $738 |
| Operating Ratios: | | | | | | |
| Loss and loss adjustment expense ratio | 78.2% | 88.7% | 65.9% | 37.9% | (0.9%) | 69.6% |
| Expense ratio | 28.8% | 41.1% | 29.1% | 20.2% | 28.6% | 31.2% |
| Combined ratio | 107.0% | 129.8% | 95.0% | 58.1% | 27.7% | 100.8% |
| Balances at September 30, 2023: | | | | | | |
| Premiums and agents’ balances receivable | $23,901 | $15,854 | $9,655 | $35,982 | $2,229 | $87,621 |
| Deferred policy acquisition costs | 5,744 | 9,797 | 7,973 | 1,046 | 980 | 25,540 |
| Reinsurance recoverables on losses | 139 | — | 3,918 | 4,676 | 1,969 | 10,702 |
| Receivable from Federal Crop Insurance Corporation | — | — | — | 14,479 | — | 14,479 |
| Goodwill and other intangibles | — | 2,728 | — | — | — | 2,728 |
| Unpaid losses and loss adjustment expenses | 33,124 | 59,663 | 24,489 | 16,614 | 8,558 | 142,448 |
| Unearned premiums | 35,059 | 31,072 | 48,636 | 10,208 | 6,113 | 131,088 |
42
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
_Nine Months Ended September 30, 2024_
| Line item | Private Passenger Auto | Non-Standard Auto | Home and Farm | Crop | All Other | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Direct premiums earned | $70,600 | $74,947 | $75,336 | $26,565 | $9,576 | $257,024 |
| Assumed premiums earned | — | — | — | 2,113 | 571 | 2,684 |
| Ceded premiums earned | (3,415) | (214) | (8,519) | (8,363) | (874) | (21,385) |
| Net premiums earned | 67,185 | 74,733 | 66,817 | 20,315 | 9,273 | 238,323 |
| Direct losses and loss adjustment expenses | 47,608 | 56,687 | 58,604 | 14,542 | 7,120 | 184,561 |
| Assumed losses and loss adjustment expenses | — | — | — | 687 | 199 | 886 |
| Ceded losses and loss adjustment expenses | (2,316) | — | (2,374) | (3,285) | (2,870) | (10,845) |
| Net losses and loss adjustment expenses | 45,292 | 56,687 | 56,230 | 11,944 | 4,449 | 174,602 |
| Gross margin | 21,893 | 18,046 | 10,587 | 8,371 | 4,824 | 63,721 |
| Underwriting and general expenses | 21,327 | 30,892 | 21,561 | 3,494 | 3,107 | 80,381 |
| Underwriting gain (loss) | 566 | (12,846) | (10,974) | 4,877 | 1,717 | (16,660) |
| Fee and other income | | 971 | | | | 1,590 |
| | | (11,875) | | | | |
| Net investment income | | | | | | 8,089 |
| Net investment gains (losses) | | | | | | 3,288 |
| Loss before income taxes | | | | | | (3,693) |
| Income tax expense (benefit) | | | | | | (445) |
| Net loss | | | | | | (3,248) |
| Net loss attributable to non-controlling interest | | | | | | — |
| Net loss attributable to NI Holdings, Inc. | | | | | | $(3,248) |
| Operating Ratios: | | | | | | |
| Loss and loss adjustment expense ratio | 67.4% | 75.9% | 84.2% | 58.8% | 48.0% | 73.3% |
| Expense ratio | 31.7% | 41.3% | 32.3% | 17.2% | 33.5% | 33.7% |
| Combined ratio | 99.1% | 117.2% | 116.5% | 76.0% | 81.5% | 107.0% |
43
### **NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts)**
_Nine Months Ended September 30, 2023_
| Line item | Private Passenger Auto | Non-Standard Auto | Home and Farm | Crop | All Other | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Direct premiums earned | $64,426 | $64,049 | $69,077 | $32,800 | $8,540 | $238,892 |
| Assumed premiums earned | — | — | — | 2,293 | 1,155 | 3,448 |
| Ceded premiums earned | (2,995) | (295) | (7,363) | (12,735) | (828) | (24,216) |
| Net premiums earned | 61,431 | 63,754 | 61,714 | 22,358 | 8,867 | 218,124 |
| Direct losses and loss adjustment expenses | 50,227 | 50,015 | 42,548 | 16,932 | 2,305 | 162,027 |
| Assumed losses and loss adjustment expenses | — | — | — | 558 | 324 | 882 |
| Ceded losses and loss adjustment expenses | 867 | — | (1,862) | (6,363) | (1,192) | (8,550) |
| Net losses and loss adjustment expenses | 51,094 | 50,015 | 40,686 | 11,127 | 1,437 | 154,359 |
| Gross margin | 10,337 | 13,739 | 21,028 | 11,231 | 7,430 | 63,765 |
| Underwriting and general expenses | 18,406 | 26,511 | 18,672 | 4,687 | 2,641 | 70,917 |
| Underwriting gain (loss) | (8,069) | (12,772) | 2,356 | 6,544 | 4,789 | (7,152) |
| Fee and other income | | 748 | | | | 1,196 |
| | | (12,024) | | | | |
| Net investment income | | | | | | 5,735 |
| Net investment gains (losses) | | | | | | 275 |
| Loss before income taxes | | | | | | 54 |
| Income tax expense (benefit) | | | | | | 11 |
| Net income | | | | | | 43 |
| Net loss attributable to non-controlling interest | | | | | | (336) |
| Net income attributable to NI Holdings, Inc. | | | | | | $379 |
| Operating Ratios: | | | | | | |
| Loss and loss adjustment expense ratio | 83.2% | 78.5% | 65.9% | 49.8% | 16.2% | 70.8% |
| Expense ratio | 30.0% | 41.6% | 30.3% | 21.0% | 29.8% | 32.5% |
| Combined ratio | 113.2% | 120.1% | 96.2% | 70.8% | 46.0% | 103.3% |
44
## Item 1A. - Risk Factors
There have been no material changes in our assessment of our risk
factors from those set forth in Part I, Item 1A, “Risk Factors” in our 2023 Annual Report.
55
## Item 2. - Management’s Discussion and
Analysis of Financial Condition and Results of Operations
The following discussion is intended to provide a more comprehensive
review of our operating results and financial condition than can be obtained from reading the unaudited consolidated financial statements
alone. Unless otherwise noted, the information in the following discussion is being presented for our continuing operations. This discussion
should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial
Statements.” Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q constitutes
forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” included elsewhere
in this Form 10-Q. Part I, Item 1A, “Risk Factors” included in our 2023 Annual Report should also be reviewed for a discussion
of important factors that could cause actual results to differ materially from the results described, or implied by, the forward-looking
statements contained herein.
All dollar amounts included in Item 2 herein, except per share data,
are in thousands.
**Financial Highlights**
***2024 Third Quarter Consolidated Results of Continuing Operations***
- Net loss of $2,705, or $0.13 per share basic and diluted
- Net premiums earned of $83,270
- Net investment income of $2,811
- Net unfavorable prior year reserve development of $5,329
- Underwriting loss of $9,170
- Combined ratio of 111.0%
- Operating cash flows of $3,204
***2024 Third Quarter Consolidated Financial Condition***
- Total cash and investments of $373,403
- Total assets of $559,897
- Unpaid losses and loss adjustment expenses of $159,069
- Total liabilities of $318,526
- Shareholders’ equity of $241,371
45
**Results of Continuing Operations**
Our consolidated net loss from continuing operations was $2,705 for
the three months ended September 30, 2024, compared to net income from continuing operations of $805 for the three months ended September
30, 2023. Our consolidated net loss from continuing operations was $3,248 for the nine months ended September 30, 2024, compared to net
income from continuing operations of $43 for the nine months ended September 30, 2023.
The major components of revenues and net loss are shown below:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Revenues: | | | | |
| Net premiums earned | $83,270 | $76,418 | $238,323 | $218,124 |
| Fee and other income | 491 | 445 | 1,590 | 1,196 |
| Net investment income | 2,811 | 2,121 | 8,089 | 5,735 |
| Net investment gains (losses) | 2,412 | (955) | 3,288 | 275 |
| Total revenues | 88,984 | 78,029 | 251,290 | 225,330 |
| Components of net income (loss): | | | | |
| Net premiums earned | 83,270 | 76,418 | 238,323 | 218,124 |
| Losses and loss adjustment expenses | 65,100 | 53,157 | 174,602 | 154,359 |
| Amortization of deferred policy acquisition costs and other underwriting and general expenses | 27,340 | 23,853 | 80,381 | 70,917 |
| Underwriting loss | (9,170) | (592) | (16,660) | (7,152) |
| Fee and other income | 491 | 445 | 1,590 | 1,196 |
| Net investment income | 2,811 | 2,121 | 8,089 | 5,735 |
| Net investment gains (losses) | 2,412 | (955) | 3,288 | 275 |
| Income (loss) from continuing operations before income taxes | (3,456) | 1,019 | (3,693) | 54 |
| Income tax expense (benefit) | (751) | 214 | (445) | 11 |
| Net income (loss) from continuing operations | $(2,705) | $805 | $(3,248) | $43 |
***Net Premiums Earned***
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Net premiums earned: | | | | |
| Direct premium | $90,125 | $85,600 | $257,024 | $238,892 |
| Assumed premium | 1,880 | 2,045 | 2,684 | 3,448 |
| Ceded premium | (8,735) | (11,227) | (21,385) | (24,216) |
| Total net premiums earned | $83,270 | $76,418 | $238,323 | $218,124 |
Our net premiums earned for the three months ended September 30, 2024,
increased $6,852, or 9.0%, compared to the three months ended September 30, 2023. Net premiums earned for the nine months ended September
30, 2024, increased $20,199, or 9.3%, compared to the nine months ended September 30, 2023.
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Net premiums earned: | | | | |
| Private Passenger Auto | $22,612 | $21,235 | $67,185 | $61,431 |
| Non-Standard Auto | 23,001 | 21,231 | 74,733 | 63,754 |
| Home and Farm | 23,479 | 21,309 | 66,817 | 61,714 |
| Crop | 10,885 | 9,746 | 20,315 | 22,358 |
| All Other | 3,293 | 2,897 | 9,273 | 8,867 |
| Total net premiums earned | $83,270 | $76,418 | $238,323 | $218,124 |
46
Below are comments regarding net premiums earned by business segment:
*Private Passenger Auto* **–** Net premiums earned for
the third quarter of 2024 increased $1,377, or 6.5%, compared to the same period in 2023. Net premiums earned for the first nine months
of 2024 increased $5,754, or 9.4% from the first nine months of 2023. Results were driven by new business growth in North Dakota as well
as significant rate increases in North Dakota, South Dakota, and Nebraska, partially offset by lower new business and retention levels
in South Dakota and Nebraska as a result of underwriting actions taken to improve profitability.
*Non-Standard Auto* **–** Net premiums earned for the
third quarter of 2024 increased $1,770, or 8.4%, compared to the same period in 2023. Net premiums earned for the first nine months of
2024 increased $10,979, or 17.2% from the first nine months of 2023. Results were driven by prior period new business growth in Illinois
and Arizona as well as significant rate increases in the Chicago market where our non-standard auto business is concentrated, partially
offset by lower retention compared to prior year periods.
*Home and Farm* **–** Net premiums earned for the third
quarter of 2024 increased $2,170, or 10.2%, compared to the same period in 2023. Net premiums earned for the first nine months of 2024
increased $5,103, or 8.3% from the first nine months of 2023. Results were driven by new business growth in North Dakota, rate increases,
and increased insured property values, which were primarily the result of higher inflationary factors. These increases were partially
offset by lower retention rates and new business levels in Nebraska and South Dakota as a result of underwriting actions taken to improve
profitability.
*Crop* **–** Net premiums earned for the third quarter
of 2024, increased $1,139, or 11.7%, compared to the same period in 2023. Net premiums earned for the first nine months of 2024 decreased
$2,043, or 9.1% from the first nine months of 2023. The increase in the third quarter of 2024 was driven by the recognition during the
prior year quarter of a reduction in the acres insured for the prior year. The year-to-date decrease was driven by lower commodity prices
in the current year.
*All Other* **–** Net premiums earned for the third quarter
of 2024, increased $396, or 13.7%, compared to the same period in 2023. Net premiums earned for the first nine months of 2024 increased
$406, or 4.6%, from the first nine months of 2023. Results were driven by rate and insured value increases for the commercial and excess
lines of business, partially offset by the continued run-off of our participation in an assumed domestic and international reinsurance
pool of business.
***Losses and Loss Adjustment Expenses***
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Net losses and loss adjustment expenses: | | | | |
| Direct losses and loss adjustment expenses | $69,692 | $53,863 | $184,561 | $162,027 |
| Assumed losses and loss adjustment expenses | 617 | 725 | 886 | 882 |
| Ceded losses and loss adjustment expenses | (5,209) | (1,431) | (10,845) | (8,550) |
| Total net losses and loss adjustment expenses | $65,100 | $53,157 | $174,602 | $154,359 |
Our net losses and loss adjustment expenses for the three months ended
September 30, 2024, increased $11,943, or 22.5%, compared to the three months ended September 30, 2023. Our net losses and loss adjustment
expenses for the nine months ended September 30, 2024, increased $20,243, or 13.1%, compared to the nine months ended September 30, 2023.
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Net losses and loss adjustment expenses: | | | | |
| Private Passenger Auto | $14,070 | $16,603 | $45,292 | $51,094 |
| Non-Standard Auto | 20,504 | 18,838 | 56,687 | 50,015 |
| Home and Farm | 22,023 | 14,052 | 56,230 | 40,686 |
| Crop | 6,190 | 3,690 | 11,944 | 11,127 |
| All Other | 2,313 | (26) | 4,449 | 1,437 |
| Total net losses and loss adjustment expenses | $65,100 | $53,157 | $174,602 | $154,359 |
47
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Loss and loss adjustment expenses ratio: | | | | |
| Private Passenger Auto | 62.2% | 78.2% | 67.4% | 83.2% |
| Non-Standard Auto | 89.1% | 88.7% | 75.9% | 78.5% |
| Home and Farm | 93.8% | 65.9% | 84.2% | 65.9% |
| Crop | 56.9% | 37.9% | 58.8% | 49.8% |
| All Other | 70.2% | (0.9%) | 48.0% | 16.2% |
| Total loss and loss adjustment expenses ratio | 78.2% | 69.6% | 73.3% | 70.8% |
Below are comments regarding significant changes in the net losses
and loss adjustment expenses, and the net loss and loss adjustment expense ratios, by business segment:
*Private Passenger Auto* **–** The net loss and loss
adjustment expense ratio decreased 16.0 percentage points and 15.8 percentage points in the three- and nine-month periods ended September
30, 2024, respectively, compared to the same periods in 2023. The decrease in the third quarter of 2024 was driven by improved loss frequency
in Nebraska and South Dakota during the current year quarter. The year-to-date decrease was driven by the improved loss frequency in the
current year quarter as well as lower levels of weather-related losses in the current year due to the mild winter in the Midwest compared
to elevated winter weather-related losses in the prior year. Both periods were positively affected by earned premium growth.
*Non-Standard Auto* **–** The net loss and loss adjustment
expense ratio increased 0.4 percentage points in the three-month period ended September 30, 2024, compared to the same period in 2023.
Although the year-over-year ratios were relatively consistent, the current year quarter was impacted by unfavorable prior year reserve
development related to elevated bodily injury losses. The net loss and loss adjustment expense ratio decreased 2.6 percentage points in
the nine-month period ended September 30, 2024, compared to the same period in 2023. This decrease was primarily driven by earned premium
growth resulting from new business growth and significant rate increases.
*Home and Farm* **–** The net loss and loss adjustment
expense ratio increased 27.9 percentage points and 18.3 percentage points in the three- and nine-month periods ended September 30, 2024,
respectively, compared to the same periods in 2023. These increases in net loss and loss adjustment expense ratios were driven by higher
non-catastrophe weather-related losses in North Dakota and Nebraska during 2024 compared to the prior year partially offset by earned
premium growth in the current year.
*Crop* **–** The net loss and loss adjustment expense
ratio increased 19.0 percentage points and 9.0 percentage points in the three- and nine-month periods ended September 30, 2024, respectively,
compared to the same periods in 2023. These increases were driven by slightly less favorable crop growing conditions compared to the prior
year.
*All Other* **–** The net loss and loss adjustment expense
ratio increased 71.1 percentage points and 31.8 percentage points in the three- and nine-month period ended September 30, 2024, compared
to the same period in 2023. These increases were driven by elevated large loss experience compared to the prior year. The negative loss
and loss adjustment expense ratio for the third quarter of 2023 was the result of an inter-segment reclassification of a large loss during
the quarter.
***Underwriting and General Expenses and Expense Ratio***
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Underwriting and general expenses: | | | | |
| Amortization of deferred policy acquisition costs | $17,616 | $16,523 | $53,723 | $48,311 |
| Other underwriting and general expenses | 9,724 | 7,330 | 26,658 | 22,606 |
| Total underwriting and general expenses | 27,340 | 23,853 | 80,381 | 70,917 |
| Expense Ratio | 32.8% | 31.2% | 33.7% | 32.5% |
The expense ratio is calculated by dividing other underwriting and
general expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company’s
operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio increased 1.6 percentage
points and 1.2 percentage points in the three-and nine-month periods ended September 30, 2024, respectively, compared to the same periods
in 2023. The increase in the amortization of deferred policy acquisition costs is due to higher deferrable costs resulting from significant
premium growth compared to the prior year, including significant growth in the Non-Standard Auto segment which generally pays higher agent
commissions than our other segments. The increase in the other underwriting and general expenses is due to the costs incurred in the current
quarter associated with the execution of the separation agreement with our former Chief Executive Officer.
48
***Underwriting Gain (Loss) and Combined Ratio***
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Underwriting gain (loss): | | | | |
| Private Passenger Auto | $1,072 | $(1,494) | $566 | $(8,069) |
| Non-Standard Auto | (7,830) | (6,326) | (12,846) | (12,772) |
| Home and Farm | (6,162) | 1,050 | (10,974) | 2,356 |
| Crop | 2,912 | 4,083 | 4,877 | 6,544 |
| All Other | 838 | 2,095 | 1,717 | 4,789 |
| Total underwriting loss | $(9,170) | $(592) | $(16,660) | $(7,152) |
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Combined ratio: | | | | |
| Private Passenger Auto | 95.2% | 107.0% | 99.1% | 113.2% |
| Non-Standard Auto | 134.0% | 129.8% | 117.2% | 120.1% |
| Home and Farm | 126.2% | 95.0% | 116.5% | 96.2% |
| Crop | 73.3% | 58.1% | 76.0% | 70.8% |
| All Other | 74.5% | 27.7% | 81.5% | 46.0% |
| Combined ratio | 111.0% | 100.8% | 107.0% | 103.3% |
Underwriting gain (loss) measures the pre-tax profitability of our
insurance operations. It is derived by subtracting losses and loss adjustment expenses, amortization of deferred policy acquisition costs,
and other underwriting and general expenses from net premiums earned. The combined ratio represents the sum of these losses and expenses
as a percentage of net premiums earned and measures our overall underwriting profit.
The total underwriting loss increased $8,578 for the three-month period
ended September 30, 2024, compared to the same period in 2023. The total underwriting loss increased $9,508 for the nine-month period
ended September 30, 2024, compared to the same period in 2023. These results were driven by the factors discussed in the Loss and Loss
Adjustment Expenses as well as the Underwriting and General Expenses and Expense Ratio sections above.
The overall combined ratio increased 10.2 percentage points in the
three-month period ended September 30, 2024, compared to the same period in 2023. The overall combined ratio increased 3.7 percentage
points in the nine-month period ended September 30, 2024, compared to the same period in 2023. These results were driven by the factors
discussed in the Loss and Loss Adjustment Expenses as well as the Underwriting and General Expenses and Expense Ratio sections above.
***Fee and Other Income***
We had fee and other income of $491 and $1,590 for the three and nine
months ended September 30, 2024, respectively, compared to $445 and $1,196 for the three and nine months ended September 30, 2023, respectively.
Fee income is largely attributable to the Non-Standard Auto segment and is a key component in measuring its profitability. Fee and other
income on this business increased to $281 and $971 for the three and nine months ended September 30, 2024, respectively, from $278 and
$748 for the three and nine months ended September 30, 2023, respectively, driven by growth in this segment.
***Net Investment Income***
The following table shows our average cash and invested assets, net
investment income, and return on average cash and invested assets for the reported periods for continuing operations:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Average cash and invested assets | $376,594 | $322,813 | $367,614 | $331,170 |
| Net investment income | $2,811 | $2,121 | $8,089 | $5,735 |
| Gross return on average cash and invested assets | 3.9% | 3.6% | 3.9% | 3.3% |
| Net return on average cash and invested assets | 3.0% | 2.6% | 2.9% | 2.3% |
49
Net investment income increased $690 for the three months ended September
30, 2024, compared to the three months ended September 30, 2023. Net investment income increased $2,354 for the nine months ended September
30, 2024, compared to the nine months ended September 30, 2023. These increases were primarily driven by the higher interest rate environment
which resulted in higher reinvestment rates in our fixed income portfolio.
Gross and net return on average cash and invested assets increased
year-over-year, primarily driven by the favorable interest rate environment that resulted in significantly higher net investment income
on an increased average balance of fixed income securities as well as cash and cash equivalents (measured at fair value). In addition,
the increase in investments in high dividend yield equities resulted in relatively consistent year-over-year dividend income despite a
reduction in the average equities balance (measured at fair value). The increase in average cash and invested assets was driven by changes
in the fair value of fixed income securities due to the interest rate environment as well as higher operating cash flows during the first
nine months of 2024.
***Net Investment Gains (Losses)***
Net investment gains (losses) consisted of the following:
| Line item | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- | --- | --- |
| Gross realized gains | $272 | $689 | $662 | $13,707 |
| Gross realized losses, excluding credit impairment losses | (227) | (180) | (699) | (1,661) |
| Net realized gains (losses) | 45 | 509 | (37) | 12,046 |
| Change in net unrealized gains on equity securities | 2,367 | (1,464) | 3,325 | (11,771) |
| Net investment gains (losses) | $2,412 | $(955) | $3,288 | $275 |
We had net realized gains of $45 and losses of $37 for the three and
nine months ended September 30, 2024, respectively, compared to net realized gains of $509 and $12,046 for the three and nine months ended
September 30, 2023, respectively. The elevated net realized gains in the nine months ended September 30, 2023, were the result of a strategic
liquidation of a portfolio of equity securities. The gross realized gains from the sale of these securities were largely offset by the
elimination of the unrealized gain position of these securities. No credit impairment losses were reported during any of the periods presented.
We experienced an increase of $2,367 and $3,325 in net unrealized gains
on equity securities during the three and nine months ended September 30, 2024, respectively, attributable to overall favorable equity
markets during the current quarter and year-to-date. We experienced a decrease in net unrealized gains on equity securities of $1,464
and $11,771 during the three and nine months ended September 30, 2023, respectively. The decrease in unrealized gains on equity securities
during the nine months ended September 30, 2023, was driven by the equity portfolio liquidation noted above and the impact of changes
in fair value attributable to equity market volatility.
Our fixed income securities are classified as available for sale because
we will, from time to time, make sales of securities that are not impaired, consistent with our investment goals and policies. The fixed
income portion of the portfolio experienced net unrealized gains of $11,138 and $8,848 during the three and nine months ended September
30, 2024, respectively, compared to net unrealized losses of $8,718 and $5,741 during the three and nine months ended September 30, 2023,
respectively. The changes were primarily the result of changes in U.S. interest rates. The change in the fair value of fixed income securities
is not reflected in net income; rather it is reflected as a separate component (net of income taxes) of other comprehensive income.
***Income (Loss) before Income Taxes***
For the three months ended September 30, 2024, we had a pre-tax loss
of $3,456 compared to a pre-tax income of $1,019 for the three months ended September 30, 2023. The year-over-year change was largely
attributable to higher non-catastrophe weather-related losses for Home and Farm in the states of North Dakota and Nebraska, unfavorable
prior year loss reserve development for Non-Standard Auto, and expenses incurred related to the separation agreement with our former Chief
Executive Officer, partially offset by net earned premium growth, improved loss experience for Private Passenger Auto, and higher net
investment income.
For the nine months ended September 30, 2024, we had a pre-tax loss
of $3,693 compared to pre-tax income of $54 for the nine months ended September 30, 2023. The year-over-year change was largely attributable
to higher non-catastrophe weather-related losses for Home and Farm in the states of North Dakota and Nebraska, unfavorable prior year
loss reserve development for Non-Standard Auto, and expenses incurred related to the separation agreement with our former Chief Executive
Officer, partially offset by net earned premium growth, improved loss experience for Private Passenger Auto, and higher net investment
income.
50
***Income Tax Expense (Benefit)***
We recorded an income tax benefit of $751 for the three months ended
September 30, 2024, compared to an income tax expense of $214 for the three months ended September 30, 2023. Our effective tax rate for
the third quarter of 2024 was 21.7% compared to an effective tax rate of 21.0% for the third quarter of 2023.
We recorded an income tax benefit of $445 for the nine months ended
September 30, 2024, compared to income tax expense of $11 for the nine months ended September 30, 2023. Our effective tax rate for the
first nine months of 2024 (excluding tax effects related to the loss on the sale of Westminster) was 12.0% compared to an effective tax
rate of 20.4% for the first nine months of 2023. The effective tax rate for the first nine months of 2024 was impacted by a $346 valuation
allowance on net operating loss carryforwards established as a result of the Battle Creek demutualization.
***Net Income (Loss)***
For the three months ended September 30, 2024, we had a net loss before
non-controlling interest of $2,705 compared to net income of $805 for the three months ended September 30, 2023. The year-over-year change
was largely attributable to higher non-catastrophe weather-related losses for Home and Farm in the states of North Dakota and Nebraska,
unfavorable prior year loss reserve development for Non-Standard Auto, and expenses incurred related to the separation agreement with
our former Chief Executive Officer, partially offset by net earned premium growth, improved loss experience for Private Passenger Auto,
and higher net investment income.
For the nine months ended September 30, 2024, we had a net loss before
non-controlling interest of $3,248 compared to net income of $43 for the nine months ended September 30, 2023. The year-over-year change
was largely attributable to higher non-catastrophe weather-related losses for Home and Farm in the states of North Dakota and Nebraska,
unfavorable prior year loss reserve development for Non-Standard Auto, and expenses incurred related to the separation agreement with
our former Chief Executive Officer, partially offset by net earned premium growth, improved loss experience for Private Passenger Auto,
and higher net investment income.
***Return on Average Equity***
For the three months ended September 30, 2024, we had annualized return
on average equity, after non-controlling interest, of (4.5)% compared to annualized return on average equity, after non-controlling interest,
of 1.3% for the three months ended September 30, 2023.
For the nine months ended September 30, 2024, we had annualized return
on average equity, after non-controlling interest, of (1.9)% compared to annualized return on average equity, after non-controlling interest,
of 0.2% for the nine months ended September 30, 2023.
Average equity is calculated as the average between beginning and ending
equity, excluding non-controlling interest, for the period.
51
**Critical Accounting Policies**
The preparation of financial statements in accordance with GAAP requires
both the use of estimates and judgment relative to the application of appropriate accounting policies. We are required to make estimates
and assumptions in certain circumstances that affect amounts reported in the unaudited consolidated financial statements and related footnotes.
We evaluate these estimates and assumptions on an ongoing basis based on historical developments, market conditions, industry trends,
and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform
to these estimates and assumptions or that reported results of operations will not be materially and adversely affected by the need to
make accounting adjustments to reflect changes in these estimates and assumptions from time to time. Our critical accounting policies
are more fully described in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations”
presented in our 2023 Annual Report. There have been no changes in our critical accounting policies from December 31, 2023.
**Liquidity and Capital Resources**
We expect to generate sufficient funds from our operations and maintain
a high degree of liquidity in our investment portfolio to meet the demands of claim settlements and operating expenses for the foreseeable
future. Our primary sources of funds are premium collections, investment earnings, and fixed income maturities.
The change in cash and cash equivalents for continuing and discontinued
operations for the nine months ended September 30, 2024 and 2023, were as follows:
| Line item | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
| --- | --- | --- |
| Net cash flows from operating activities | $16,780 | $9,458 |
| Net cash flows from investing activities | 5,327 | (2,021) |
| Net cash flows from financing activities | (3,613) | (7,454) |
| Net change in cash and cash equivalents | $18,494 | $(17) |
For the nine months ended September 30, 2024, net cash provided by
operating activities totaled $16,780 compared to $9,458 a year ago. This change was primarily driven by lower levels of loss and loss
adjustment payments in the current year partially offset by higher levels of tax payments (net of refunds) in the current year.
For the nine months ended September 30, 2024, net cash provided by
investing activities totaled $5,327 compared to net cash used of $2,021 a year ago. This change was primarily attributable to the proceeds
from the sale of Westminster in the current year partially offset by an increase in net cash outflows for investment activities in the
current year.
For the nine months ended September 30, 2024, net cash used by financing
activities totaled $3,613 compared to $7,454 a year ago. This decrease in cash used was attributable to a reduction in share repurchases
in the current year partially offset by the final pooling settlement between Nodak Insurance and Westminster.
As a holding company, a principal source of long-term liquidity will
be dividend payments from our directly-owned subsidiaries.
52
Nodak Insurance is restricted by the insurance laws of North Dakota
as to the amount of dividends or other distributions it may pay to NI Holdings. North Dakota law sets the maximum amount of dividends
that may be paid by Nodak Insurance during any twelve-month period after notice to, but without prior approval of, the North Dakota Insurance
Department. This amount cannot exceed the lesser of (i) 10% of the Company’s surplus as regards policyholders as of the preceding
December 31, or (ii) the Company’s statutory net income for the preceding calendar year (excluding realized investment gains), less
any prior dividends paid during such twelve-month period. In addition, any insurance company other than a life insurance company may carry
forward net income from the preceding two calendar years, not including realized investment gains, less any dividends actually paid during
those two calendar years. Dividends in excess of this amount are considered “extraordinary” and are subject to the approval
of the North Dakota Insurance Department.
There is no amount available for payment of dividends from Nodak Insurance
to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department. Prior to its payment of any dividend,
Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided
to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of
an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if an insurance company
is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity.
No dividends were declared or paid by Nodak Insurance during the nine months ended September 30, 2024, or the year ended December 31,
2023.
Direct Auto re-domesticated from Illinois to North Dakota during 2021
and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Direct Auto
to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $90 as of December 31,
2023. No dividends were declared or paid by Direct Auto during the nine months ended September 30, 2024, or the year ended December 31,
2023.
Westminster re-domesticated from Maryland to North Dakota during 2021
and was subject to the same dividend restrictions as Nodak Insurance. Westminster was sold on June 30, 2024. No dividends were declared
or paid by Westminster to NI Holdings during the nine months ended September 30, 2024, or the year ended December 31, 2023. For additional
information see Part I, Item 1, Note 19 “Discontinued Operations” of this Quarterly Report on Form 10-Q.
53
## Item 3. - Quantitative and Qualitative Disclosures
about Market Risk
The Company’s assessment of market risk as of September 30, 2024,
indicates there have been no material changes in the quantitative and qualitative disclosures from those in Part II, Item 7A, “Quantitative
and Qualitative Disclosures About Market Risk” in our 2023 Annual Report.
## Item 4. - Controls and Procedures
**Evaluation of Disclosure Controls and Procedures**
The Company’s Interim Chief Executive Officer and Chief Financial
Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (“DCPs”),
as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, as of the end of the period covered by this report. As a result of
the material weakness in the Company's internal control over financial reporting ("ICFR") discussed below, the Interim Chief
Executive Officer and Chief Financial Officer have concluded that the Company’s DCPs, as of the end of the period covered by this
report, were not effective in ensuring information required to be disclosed in our periodic reports filed under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such material information
is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required
disclosures. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives
of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, within a company have been detected.
***Material Weakness in Internal Control Over Financial Reporting***
A material weakness is a deficiency, or a combination of deficiencies,
in ICFR, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements
will not be prevented or detected on a timely basis.
As previously disclosed in our Quarterly Report on Form 10-Q/A for
the quarter ended June 30, 2024, the Company did not design and maintain effective controls over its accounting for intercompany reinsurance
pooling activity. Specifically, it lacked an effectively designed internal control related to the evaluation of pooling payable/receivable
balances, including when a pool member is sold. This material weakness resulted in a material error and the restatement of the Company's
consolidated financial statements for the three- and six-month periods ended June 30, 2024. Additionally, this material weakness could
result in misstatements of the aforementioned accounts or disclosures that would result in a material misstatement to the annual or interim
consolidated financial statements that would not be prevented or detected.
***Remediation Plan for Material Weakness***
Upon identification of the material weakness, management developed
a remediation plan, which included designing and implementing a new quarterly intercompany pooling reconciliation and review process
to fully evaluate pooling payable/receivable balances in support of financial reporting for GAAP purposes. The material weakness will
not be considered remediated until the remediation plan has been implemented and there has been sufficient time for the Company to conclude
through testing that the controls are operating effectively. As the Company's management, under the oversight of the Audit Committee,
continues to evaluate and improve the Company's ICFR, management may decide to take additional measures to address control deficiencies
or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures identified. We can offer
no assurance that these initiatives will ultimately have the intended effects.
**Changes in Internal Control over Financial Reporting**
In the ordinary course of business, we periodically review our system
of internal control over financial reporting to identify opportunities to improve our controls and increase efficiency, while ensuring
that we maintain an effective internal control environment. Except for the identified material weakness above, there have not been any
changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
54
Part
II. -
OTHER INFORMATION
## Item 5. - Other Information
***10b5-1 Trading Plans***
During the third quarter of 2024,
none of our directors or executive officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408(a)
of Regulation S-K).
## Item 6. - Exhibits
| Exhibit Number | Description |
| --- | --- |
| 10.1 | Employment Agreement dated August 26, 2024, between the Company and Cindy L. Launer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A (File No. 001-37973) filed August 26, 2024). |
| 10.2 | Separation Agreement, dated September 16, 2024, between NI Holdings, Inc. and Michael J. Alexander (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-37973) filed September 19, 2024). |
| 31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Linkbase Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
57
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 7, 2024.
NI HOLDINGS, INC.
/s/ Cindy L. Launer
Cindy L. Launer
Interim President and Chief Executive Officer
*(Principal Executive Officer)*
/s/ Seth C. Daggett
Seth C. Daggett
Chief Financial Officer
*(Principal Financial Officer and Principal Accounting Officer)*
58
---
## EX-31.1
SEC source: [ex31-1.htm](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/ex31-1.htm)
**Exhibit 31.1**
CERTIFICATION OF PERIODIC REPORT UNDER SECTION
302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Cindy L. Launer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NI Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
November 7, 2024 /s/ Cindy L. Launer
Cindy L. Launer
Interim President and Chief Executive Officer
(*Principal Executive Officer*)
59
---
## EX-31.2
SEC source: [ex31-2.htm](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/ex31-2.htm)
Exhibit 31.2
CERTIFICATION OF PERIODIC REPORT UNDER SECTION
302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Seth C. Daggett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NI Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
November 7, 2024 /s/ Seth C. Daggett
Seth C. Daggett
Chief Financial Officer
(*Principal Financial Officer*)
60
---
## EX-32
SEC source: [ex32.htm](https://www.sec.gov/Archives/edgar/data/1681206/000117494724001226/ex32.htm)
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of NI Holdings, Inc. (the “Company”)
on Form 10-Q for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
we, Cindy L. Launer, Interim President and Chief Executive Officer, and Seth C. Daggett, Chief Financial Officer, of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to our knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
November 7, 2024 /s/ Cindy L. Launer
Cindy L. Launer
Interim President and Chief Executive Officer
(*Principal Executive Officer*)
November 7, 2024 /s/ Seth C. Daggett
Seth C. Daggett
Chief Financial Officer
(*Principal Financial Officer*)
61