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NI Holdings, Inc. - Quarter Report: 2022 September (Form 10-Q)



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, 2022

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

(State or other jurisdiction of

incorporation or organization)

81-2683619

(IRS Employer

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 and post such files). Yes  No ☐

Indicate by checkmark 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

 

 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 checkmark 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, 2022 was 21,122,367. No preferred shares are issued or outstanding.




TABLE OF CONTENTS

 

 

FORWARD-LOOKING STATEMENTS

1

Part I. - FINANCIAL INFORMATION

3

Item 1. - Financial Statements

3

Consolidated Balance Sheets – September 30, 2022 (Unaudited) and December 31, 2021

3

Consolidated Statements of Operations (Unaudited) – Three Months and Nine Months Ended September 30, 2022 and 2021

4

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Three Months and Nine Months Ended September 30, 2022 and 2021

5

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) – Three Months and Nine Months Ended September 30, 2022 and 2021

6

Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended September 30, 2022 and 2021

8

Notes to Unaudited Consolidated Financial Statements

9

Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations

33

Item 3. - Quantitative and Qualitative Disclosures about Market Risk

42

Item 4. - Controls and Procedures

42

Part II. - OTHER INFORMATION

43

Item 1. - Legal Proceedings

43

Item 1A. - Risk Factors

43

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3. - Defaults upon Senior Securities

45

Item 4. - Mine Safety Disclosures

45

Item 5. - Other Information

45

Item 6. - Exhibits

45

Signatures

46

 

ii


Table of Contents

CERTAIN IMPORTANT INFORMATION

Unless the context otherwise requires, as used in this quarterly report on Form 10-Q:

“NI Holdings”, “the Company”, “we”, “us”, and “our” refer to NI Holdings, Inc., together with Nodak Insurance Company and its subsidiaries and its affiliate (Battle Creek Mutual Insurance Company), Direct Auto Insurance Company (acquired August 31, 2018), and Westminster American Insurance Company (acquired January 1, 2020), for periods discussed after completion of the conversion (discussed below), 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 “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. Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Battle Creek is controlled by Nodak Insurance via a surplus note. The terms of the surplus note allow Nodak Insurance to appoint two-thirds of the Battle Creek Board of Directors;  

“Direct Auto” refers to Direct Auto Insurance Company. On August 31, 2018, NI Holdings completed the acquisition of 100% of the common stock of Direct Auto from the private shareholders of Direct Auto, and Direct Auto became a consolidated subsidiary of NI Holdings. Direct Auto is a property and casualty insurance company specializing in non-standard automobile insurance in the state of Illinois;  

“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. On January 1, 2020, NI Holdings completed the acquisition of 100% of the common stock of Westminster from the private shareholder of Westminster, and Westminster became a consolidated subsidiary of NI Holdings. Westminster is a property and casualty insurance company specializing in commercial multi-peril insurance in the Mid-Atlantic states; and  

“Nodak Agency” refers to Nodak Agency, Inc. Nodak Agency is a wholly-owned subsidiary of Nodak Insurance.  

1


Table of Contents

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 COVID-19 or 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 agent 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 rate, 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 Quarterly Report on 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, 2021 (“2021 Annual Report”). The occurrence of any of the risks identified in the Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q or Part I, Item 1A, “Risk Factors” section of the 2021 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


Table of Contents

PART I. - FINANCIAL INFORMATION

Item 1. - Financial Statements

NI Holdings, Inc.

Consolidated Balance Sheets

(dollar amounts in thousands, except par value)

September 30, 2022

December 31, 2021

(Unaudited)

Assets:

Cash and cash equivalents

$

54,277

$

70,623

Fixed income securities, at fair value

294,211

364,651

Equity securities, at fair value

58,377

77,690

Other investments

2,005

2,005

Total cash and investments

408,870

514,969

 

Premiums and agents' balances receivable

102,970

51,452

Deferred policy acquisition costs

29,819

24,947

Reinsurance recoverables on losses

32,990

21,200

Income tax recoverable

11,384

364

Accrued investment income

2,197

2,524

Property and equipment

9,924

9,869

Deferred income taxes

11,975

-

Goodwill and other intangibles

17,368

17,722

Other assets

9,040

8,735

Total assets

$

636,537

$

651,782

 

Liabilities:

Unpaid losses and loss adjustment expenses

$

185,937

$

139,662

Unearned premiums

154,409

127,789

Reinsurance premiums payable

1,549

326

Deferred income taxes

-

5,506

Payable to Federal Crop Insurance Corporation

4,700

4,962

Westminster consideration payable

6,654

13,020

Accrued expenses and other liabilities

32,467

13,104

Total liabilities

385,716

304,369

 

Commitments and contingencies

-

-

 

Shareholders’ equity:

Common stock, $0.01 par value, authorized: 25,000,000 shares;issued: 23,000,000 shares; and outstanding: 2022 – 21,147,681 shares, 2021 – 21,219,808 shares

230

230

Preferred stock, without par value, authorized 5,000,000 shares;no shares issued or outstanding

-

-

Additional paid-in capital

95,980

98,166

Unearned employee stock ownership plan shares

(1,184

)

(1,184

)

Retained earnings

213,231

267,207

Accumulated other comprehensive income (loss), net of income taxes

(31,986

)

5,237

Treasury stock, at cost, 2022 – 1,733,894 shares, 2021 – 1,661,767 shares

(27,508

)

(26,452

)

Non-controlling interest

2,058

4,209

Total shareholders’ equity

250,821

347,413

 

Total liabilities and shareholders’ equity

$

636,537

$

651,782

The accompanying notes are an integral part of these consolidated financial statements.

3


Table of Contents

NI Holdings, Inc.

Consolidated Statements of Operations (Unaudited)

(dollar amounts in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Revenues:

Net premiums earned

$

89,532

$

82,173

$

243,615

$

221,589

Fee and other income

476

501

1,319

1,338

Net investment income

2,035

1,713

5,703

4,959

Net investment gains (losses)

(2,868

)

222

(19,532

)

10,734

Total revenues

89,175

84,609

231,105

238,620

 

Expenses:

Losses and loss adjustment expenses

78,917

65,742

227,641

165,549

Amortization of deferred policy acquisition costs

17,589

12,898

49,456

46,371

Other underwriting and general expenses

5,912

12,450

23,695

23,804

Total expenses

102,418

91,090

300,792

235,724

 

Income (loss) before income taxes

(13,243

)

(6,481

)

(69,687

)

2,896

Income tax expense (benefit)

(3,074

)

(1,622

)

(14,921

)

707

Net income (loss)

(10,169

)

(4,859

)

(54,766

)

2,189

Net income (loss) attributable to non-controlling interest

(184

)

(122

)

(780

)

(99

)

Net income (loss) attributable to NI Holdings, Inc.

$

(9,985

)

$

(4,737

)

$

(53,986

)

$

2,288

 

 

Earnings (loss) per common share:

Basic

$

(0.47

)

$

(0.22

)

$

(2.53

)

$

0.11

Diluted

$

(0.47

)

$

(0.22

)

$

(2.53

)

$

0.11

 

Share data:

Weighted average common shares outstanding used in basic per common share calculations

21,328,383

21,411,654

21,360,151

21,446,192

Plus: Dilutive securities

-

-

-

223,784

Weighted average common shares used in diluted per common share calculations

21,328,383

21,411,654

21,360,151

21,669,976

The accompanying notes are an integral part of these consolidated financial statements.

4


Table of Contents

NI Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(dollar amounts in thousands)

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Attributable

to NI

Holdings, Inc.

Attributable

to Non-

Controlling Interest

Total

Attributable

to NI

Holdings, Inc.

Attributable

to Non-

Controlling Interest

Total

Net income (loss)

$

(9,985

)

$

(184

)

$

(10,169

)

$

(53,986

)

$

(780

)

$

(54,766

)

 

Other comprehensive income (loss), before income taxes:

Holding gains (losses) on investments

(12,319

)

(447

)

(12,766

)

(48,254

)

(1,794

)

(50,048

)

Reclassification adjustment for net realized losses (gains) included in net income (loss)

19

20

39

81

20

101

Other comprehensive income (loss), before income taxes

(12,300

)

(427

)

(12,727

)

(48,173

)

(1,774

)

(49,947

)

Income tax benefit (expense) related to items of other comprehensive income (loss)

2,796

97

2,893

10,950

403

11,353

Other comprehensive income (loss), net of income taxes

(9,504

)

(330

)

(9,834

)

(37,223

)

(1,371

)

(38,594

)

 

Comprehensive income (loss)

$

(19,489

)

$

(514

)

$

(20,003

)

$

(91,209

)

$

(2,151

)

$

(93,360

)

 

 

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Attributable

to NI

Holdings, Inc.

Attributable

to Non-

Controlling Interest

Total

Attributable

to NI

Holdings, Inc.

Attributable

to Non-

Controlling Interest

Total

Net income (loss)

$

(4,737

)

$

(122

)

$

(4,859

)

$

2,288

$

(99

)

$

2,189

 

Other comprehensive income (loss), before income taxes:

Holding gains (losses) on investments

(1,943

)

(58

)

(2,001

)

(5,674

)

(223

)

(5,897

)

Reclassification adjustment for net realized losses (gains) included in net income (loss)

(118

)

(2

)

(120

)

(544

)

(2

)

(546

)

Other comprehensive income(loss), before income taxes

(2,061

)

(60

)

(2,121

)

(6,218

)

(225

)

(6,443

)

Income tax benefit (expense) related to items of other comprehensive income (loss)

433

12

445

1,306

47

1,353

Other comprehensive income (loss), net of income taxes

(1,628

)

(48

)

(1,676

)

(4,912

)

(178

)

(5,090

)

 

Comprehensive income (loss)

$

(6,365

)

$

(170

)

$

(6,535

)

$

(2,624

)

$

(277

)

$

(2,901

)

The accompanying notes are an integral part of these consolidated financial statements.

5


Table of Contents

NI Holdings, Inc.

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(dollar amounts in thousands)

Three Months Ended September 30, 2022

Common

Stock

Additional

Paid-in

Capital

Unearned

Employee

Stock

Ownership

Plan Shares

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss), Net of

Income Taxes

Treasury

Stock

Non-Controlling

Interest

Total Shareholders’ Equity

Balance, beginning of period

$

230

$

96,827

$

(1,184

$

223,217

$

(22,482

)

$

(26,569

)

$

2,572

$

272,611

 

Net income (loss)

-

-

-

(9,985

)

-

-

(184

)

(10,169

)

Other comprehensive income (loss), net of income taxes

-

-

-

-

(9,504

)

-

(330

)

(9,834

)

Purchase of treasury stock

-

-

-

-

-

(939

)

-

(939

)

Share-based compensation

-

(645

)

-

-

-

-

-

(645

)

Issuance of vested award shares

-

(202

)

-

(1

)

-

-

-

(203

)

Balance,end of period

$

230

$

95,980

$

(1,184

)

$

213,231

$

(31,986

)

$

(27,508

)

$

2,058

$

250,821

 

Nine Months Ended September 30, 2022

Common

Stock

Additional

Paid-in

Capital

Unearned

Employee

Stock

Ownership

Plan Shares

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss), Net of

Income Taxes

Treasury

Stock

Non-Controlling

Interest

Total Shareholders’ Equity

Balance, beginning of period

$

230

$

98,166

$

(1,184

)

$

267,207

$

5,237

$

(26,452

)

$

4,209

$

347,413

 

Net income (loss)

-

-

-

(53,986

)

-

-

(780

)

(54,766

)

Other comprehensive income (loss), net of income taxes

-

-

-

-

(37,223

)

-

(1,371

)

(38,594

)

Purchase of treasury stock

-

-

-

-

-

(2,870

)

-

(2,870

)

Share-based compensation

-

406

-

-

-

-

-

406

Issuance of vested award shares

-

(2,592

)

-

10

-

1,814

-

(768

)

Balance, end of period

$

230

$

95,980

$

(1,184

)

$

213,231

$

(31,986

)

$

(27,508

)

$

2,058

$

250,821

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

NI Holdings, Inc.

Unaudited Consolidated Statements of Changes in Shareholders’ Equity

(dollar amounts in thousands)

Three Months Ended September 30, 2021

Common

Stock

Additional

Paid-in

Capital

Unearned

Employee

Stock

Ownership

Plan Shares

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss), Net of

Income Taxes

Treasury

Stock

Non-Controlling

Interest

Total Shareholders’ Equity

Balance, beginning of period

$

230

$

96,729

$

(1,427

)

$

265,816

$

9,556

$

(24,403

)

$

4,438

$

350,939

 

Net income (loss)

-

-

-

(4,737

)

-

-

(122

)

(4,859

)

Other comprehensive income (loss), net of income taxes

-

-

-

-

(1,628

)

-

(48

)

(1,676

)

Purchase of treasury stock

-

-

-

-

-

(944

)

-

(944

)

Share-based compensation

-

516

-

-

-

-

-

516

Issuance of vested award shares

-

-

-

-

-

-

-

-

Balance, end of period

$

230

$

97,245

$

(1,427

)

$

261,079

$

7,928

$

(25,347

)

$

4,268

$

343,976

 

Nine Months Ended September 30, 2021

Common

Stock

Additional

Paid-in

Capital

Unearned

Employee

Stock

Ownership

Plan Shares

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss), Net of

Income Taxes

Treasury

Stock

Non-Controlling

Interest

Total Shareholders’ Equity

Balance, beginning of period

$

230

$

97,911

$

(1,427

)

$

258,741

$

12,840

$

(23,968

$

4,545

$

348,872

 

Net income (loss)

-

-

-

2,288

-

-

(99

)

2,189

Other comprehensive income (loss), net of income taxes

-

-

-

-

(4,912

)

-

(178

)

(5,090

)

Purchase of treasury stock

-

-

-

-

-

(3,211

)

-

(3,211

)

Share-based compensation

-

1,704

-

-

-

-

-

1,704

Issuance of vested award shares

-

(2,370

)

-

50

-

1,832

-

(488

)

Balance, end of period

$

230

$

97,245

$

(1,427

)

$

261,079

$

7,928

$

(25,347

)

$

4,268

$

343,976

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

NI Holdings, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(dollar amounts in thousands)

Nine Months Ended

September 30,

2022

2021

Cash flows from operating activities:

Net income (loss)

$

(54,766

)

$

2,189

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

Net investment losses (gains)

19,532

(10,734

)

Deferred income tax expense (benefit)

(6,128

)

(1,304

)

Depreciation of property and equipment

517

503

Amortization of intangibles

354

354

Share-based compensation

406

1,704

Amortization of deferred policy acquisition costs

49,456

46,371

Deferral of policy acquisition costs

(54,328

)

(47,879

)

Net amortization of premiums and discounts on investments

1,251

1,546

Loss (gain) on sale of property and equipment

(186

)

4

Changes in operating assets and liabilities:

Premiums and agents’ balances receivable

(51,518

)

(33,865

)

Reinsurance premiums receivable / payable

1,223

1,298

Reinsurance recoverables on losses

(11,790

)

(33,968

)

Accrued investment income

327

(72

)

Federal Crop Insurance Corporation receivable / payable

(262

)

(2,716

)

Income tax recoverable / payable

(11,020

)

(3,429

)

Other assets

(305

)

(3,163

)

Unpaid losses and loss adjustment expenses

46,275

73,826

Unearned premiums

26,620

17,736

Accrued expenses and other liabilities

19,662

1,088

Net cash flows from operating activities

(24,680

)

9,489

 

Cash flows from investing activities:

Proceeds from maturities and sales of fixed income securities

68,584

54,492

Proceeds from sales of equity securities

13,598

26,790

Purchases of fixed income securities

(49,444

)

(112,940

)

Purchases of equity securities

(13,715

)

(21,091

)

Purchases of property and equipment

(384

)

(557

)

Proceeds from sale of other investments and other

-

835

Net cash flows from investing activities

18,639

(52,471

)

 

Cash flows from financing activities:

Purchases of treasury stock

(2,870

)

(3,211

)

Installment payment on Westminster consideration payable

(6,667

)

(6,667

)

Issuance of vested award shares

(768

)

(488

)

Net cash flows from financing activities

(10,305

)

(10,366

)

 

Net decrease in cash and cash equivalents

(16,346

)

(53,348

)

 

Cash and cash equivalents at beginning of period

70,623

101,077

 

Cash and cash equivalents at end of period

$

54,277

$

47,729

 

 

Federal and state income taxes paid

$

2,360

$

5,440

 

The accompanying notes are an integral part of these consolidated financial statements.

8


Table of Contents

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 conversion of Nodak Mutual Insurance Company from a mutual to stock form of organization and the creation of a mutual holding company. The conversion was consummated on March 13, 2017. Immediately following the 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 conversion, NI Holdings conducted no business and had no assets or liabilities. As a result of the 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 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. American West began writing policies in 2002 and primarily writes personal auto, homeowners, and farm coverages in South Dakota. American West also writes personal 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 automobile coverage in the states of Nevada, Arizona, North Dakota, and South Dakota.

Battle Creek Mutual Insurance Company

Battle Creek is a property and casualty insurance company writing personal auto, homeowners, and farm coverages solely in the state of Nebraska. Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Because we have concluded that we control Battle Creek, we consolidate the financial statements of Battle Creek, and Battle Creek’s policyholders’ interest in Battle Creek is reflected as a non-controlling interest in shareholders’ equity in our Unaudited Consolidated Balance Sheets and its net income or loss is excluded from net income or loss attributed to NI Holdings in our Unaudited Consolidated Statements of Operations.

Direct Auto Insurance Company

Direct Auto is a property and casualty insurance company licensed in Illinois. Direct Auto began writing non-standard automobile coverage in 2007, and was acquired by NI Holdings on August 31, 2018, via a stock purchase agreement.

Westminster American Insurance Company

Westminster is a property and casualty insurance company licensed in seventeen states and the District of Columbia. Westminster underwrites commercial multi-peril insurance in the states of Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia, and the District of Columbia. Westminster was acquired by NI Holdings on January 1, 2020, via a stock purchase agreement.

9


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

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 are rated “A” Excellent by A.M. Best Company, Inc. (“AM Best”).

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, Direct Auto, and Westminster personnel manage the day-to-day operations of their respective companies.

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 and are unaudited. 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 2021 Annual Report.

The Consolidated Balance Sheet at December 31, 2021, 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 period ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ended December 31, 2022.

Our 2021 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 2021 Annual Report were consistently applied to the Unaudited Consolidated Financial Statements as of and for the nine months ended September 30, 2022 and 2021.

10


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Recent Accounting Pronouncements

As an emerging growth company (“EGC”), we have elected to use the extended transition period for complying with any new or revised financial accounting standards from the Financial Accounting Standards Board (“FASB”) pursuant to Section 13(a) of the Exchange Act. We will lose our EGC status December 31, 2022. The following discussion includes effective dates for both public business entities and EGCs, as well as whether specific guidance may be adopted early.

Not Yet Adopted

In February 2016, the FASB issued new guidance that requires lessees to recognize leases, including operating leases, on the lessee’s Consolidated Balance Sheet, unless a lease is considered a short-term lease. The new guidance also requires entities to make new judgments to identify leases. In July 2018, the FASB issued additional guidance to allow an optional transition method. An entity may apply the new lease guidance at the beginning of the earliest period presented in the financial statements, or at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The new guidance was effective for annual and interim reporting periods beginning after December 15, 2018, for public business entities. For private companies and EGCs, this guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We will adopt this guidance in the fourth quarter of the year ended December 31, 2022, when we lose our EGC status. We do not expect the adoption of this new guidance to have a significant impact on our financial position, results of operations, or cash flows. Upon adoption, the Company will recognize a right of use asset and operating lease liability on its Consolidated Balance Sheet. The cumulative adjustment to retained earnings is not expected to be significant.

In June 2016, the FASB issued a new standard that requires timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance also requires financial institutions and other organizations to use forward-looking information to better form their credit loss estimates. Many of the loss estimation techniques applied prior to adoption of this standard are still permitted, although the inputs to those techniques have changed to reflect the full amount of expected credit losses. Organizations are to continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the guidance requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Finally, the guidance amends the accounting for credit losses on available-for-sale fixed income securities and purchased financial assets with credit deterioration. The guidance was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, for filers with the Securities and Exchange Commission (“SEC”) excluding smaller reporting companies, and EGCs that did not relinquish private company relief. For all other entities, this guidance will be effective for annual reporting periods beginning after December 15, 2022, and interim periods within those fiscal years. We will adopt this guidance in the fourth quarter of the year ended December 31, 2022, when we lose our EGC status. Based on our evaluation, adoption of this new standard will not have a significant impact on our financial position, results of operations, and cash flows.

In December 2019, the FASB issued amended guidance to simplify the accounting for income taxes. The amended guidance was effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, for public business entities. For private companies and EGCs, the amended guidance will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We will adopt this guidance in the fourth quarter of the year ended December 31, 2022, when we lose our EGC status. Based on our evaluation, adoption of this new standard will not have a significant impact on our financial position, results of operations, and cash flows.

On August 16, 2022, the government of the United States of America (“U.S.”) enacted the Inflation Reduction Act (“IRA”) which, among other changes, created a new corporate alternative minimum tax (“AMT”) based on adjusted financial statement income and imposes a 1% excise tax on corporate stock repurchases. The effective date of these provisions is January 1, 2023. The Company is not expected to be subject to the AMT based on its reported GAAP earnings for the past three years. While we periodically repurchase our stock, it is expected that any excise tax incurred on corporate stock repurchases will be recognized as part of the cost basis of the treasury stock acquired and not reported as part of income tax or other expense. Based on our evaluation, the Company does not expect this legislation to have a significant impact on our financial position, results of operations, and cash flows.

11


Table of Contents

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 as of September 30, 2022, and December 31, 2021, were as follows:

September 30, 2022

Cost or Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair Value

Fixed income securities:

U.S. Government and agencies

$

11,176

$

3

$

(1,042

)

$

10,137

Obligations of states and political subdivisions

62,849

2

(7,476

)

55,375

Corporate securities

138,603

40

(17,863

)

120,780

Residential mortgage-backed securities

42,632

-

(6,238

)

36,394

Commercial mortgage-backed securities

32,355

-

(4,688

)

27,667

Asset-backed securities

45,087

1

(5,199

)

39,889

Redeemable preferred stocks

4,746

-

(777

)

3,969

Total fixed income securities

$

337,448

$

46

$

(43,283

)

$

294,211

December 31, 2021

Cost or Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair Value

Fixed income securities:

U.S. Government and agencies

$

13,118

$

467

$

(87

)

$

13,498

Obligations of states and political subdivisions

84,668

2,979

(353

)

87,294

Corporate securities

144,476

4,214

(1,069

)

147,621

Residential mortgage-backed securities

26,190

266

(300

)

26,156

Commercial mortgage-backed securities

32,878

815

(161

)

33,532

Asset-backed securities

52,604

131

(313

)

52,422

Redeemable preferred stocks

4,008

136

(16

)

4,128

Total fixed income securities

$

357,942

$

9,008

$

(2,299

)

$

364,651

The amortized cost and estimated fair value of fixed income securities by contractual maturity are shown below. Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay these securities.

September 30, 2022

Amortized Cost

Fair Value

Due to mature:

One year or less

$

10,662

$

10,534

After one year through five years

83,431

77,755

After five years through ten years

77,360

65,378

After ten years

41,175

32,625

Mortgage / asset-backed securities

120,074

103,950

Redeemable preferred stocks

4,746

3,969

Total fixed income securities

$

337,448

$

294,211

December 31, 2021

Amortized Cost

Fair Value

Due to mature:

One year or less

$

14,457

$

14,586

After one year through five years

82,429

84,760

After five years through ten years

82,270

84,173

After ten years

63,106

64,894

Mortgage / asset-backed securities

111,672

112,110

Redeemable preferred stocks

4,008

4,128

Total fixed income securities

$

357,942

$

364,651

12


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Fixed income securities with a fair value of $6,650 at September 30, 2022, and $7,977 at December 31, 2021, were deposited with various state regulatory agencies as required by law. The Company has not pledged any assets to secure any obligations.

The investment category and duration of the Company’s gross unrealized losses on fixed income securities 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, 2022

Less than 12 Months

Greater than 12 months

Total

Fair

Value

Unrealized

Losses

Fair

Value

Unrealized

Losses

Fair

Value

 

 

Unrealized

Losses

Fixed income securities:

 

 

 

 

 

 

U.S. Government and agencies

$

7,546

$

(584

)

$

2,227

$

(458

)

$

9,773

$

(1,042

)

Obligations of states and political subdivisions

47,043

(5,250

)

 

7,205

(2,226

)

54,248

(7,476

)

Corporate securities

89,929

(11,092

)

28,951

(6,771

)

118,880

(17,863

)

Residential mortgage-backed securities

24,399

(3,460

)

11,995

(2,778

)

36,394

(6,238

)

Commercial mortgage-backed securities

24,091

(3,841

)

3,303

(847

)

27,394

(4,688

)

Asset-backed securities

28,379

(3,231

)

11,487

(1,968

)

39,866

(5,199

)

Redeemable preferred stocks

3,171

(575

)

798

(202

)

3,969

(777

)

Total fixed income securities

$

224,558

$

(28,033

)

$

65,966

$

(15,250

)

$

290,524

$

(43,283

)

 

December 31, 2021

Less than 12 Months

Greater than 12 months

Total

Fair

Value

Unrealized

Losses

Fair

Value

Unrealized

Losses

Fair

Value

 

 

Unrealized

Losses

Fixed income securities:

 

 

 

 

 

 

U.S. Government and agencies

$

3,125

$

(87

)

$

-

$

-

$

3,125

$

(87

)

Obligations of states and political subdivisions

19,769

(350

)

 

222

(3

)

19,991

(353

)

Corporate securities

46,816

(1,015

)

1,895

(54

)

48,711

(1,069

)

Residential mortgage-backed securities

17,407

(261

)

1,434

(39

)

18,841

(300

)

Commercial mortgage-backed securities

11,287

(160

)

216

(1

)

11,503

(161

)

Asset-backed securities

28,797

(308

)

995

(5

)

29,792

(313

)

Redeemable preferred stocks

1,493

(16

)

-

-

1,493

(16

)

Total fixed income securities

$

128,694

$

(2,197

)

$

4,762

$

(102

)

$

133,456

$

(2,299

)

We frequently review our investment portfolio for declines in fair value. Our process for identifying declines in the fair value of investments that are other-than-temporary involves consideration of several factors. These factors include (i) the time period in which there has been a significant decline in value, (ii) an analysis of the liquidity, business prospects, and overall financial condition of the issuer, (iii) the significance of the decline, and (iv) our intent and ability to hold the investment for a sufficient period of time for the value to recover. When our analysis of the above factors results in the conclusion that declines in fair values are other than temporary, the credit loss component of the impairment is reflected in net income (loss) as a realized loss on investment if the Company does not intend to sell the security, and the remaining portion of the other-than-temporary loss is recognized in other comprehensive income (loss), net of income taxes. If the Company intends to sell the security, or determines that it is more likely than not that it will be required to sell the security prior to recovering its cost or amortized cost basis less any current-period credit losses, the full amount of the other-than-temporary loss is recognized in net income (loss). The Company did not record any other-than-temporary impairments during the three- or nine-month periods ending September 30, 2022, or the year ended December 31, 2021.

13


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Net investment income consisted of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

Fixed income securities

$

2,303

$

2,104

$

6,870

$

6,227

Equity securities

402

275

1,126

820

Real estate

149

156

390

469

Cash and cash equivalents

18

1

30

3

Total gross investment income

2,872

2,536

8,416

7,519

Investment expenses

837

823

2,713

2,560

Net investment income

$

2,035

$

1,713

$

5,703

$

4,959

Net investment gains (losses) consisted of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

Gross realized gains:

Fixed income securities

$

67

$

131

$

118

$

572

Equity securities

1,219

2,674

3,488

9,194

Total gross realized gains

1,286

2,805

3,606

9,766

 

Gross realized losses, excluding other-than-temporary impairment losses:

Fixed income securities

(106

)

(12

)

(219

)

(26

)

Equity securities

(1,097

(60

(1,339

(230

Total gross realized losses, excluding other-than-temporary impairment losses

(1,203

(72

(1,558

(256

 

Net realized gains

83

2,733

2,048

9,510

 

Change in net unrealized gain on equity securities

(2,951

)

(2,511

)

(21,580

)

1,224

Net investment gains (losses)

$

(2,868

)

$

222

$

(19,532

)

$

10,734

14


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

4.Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and 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 I:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level II:

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 II 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 III:

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 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.

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 independent 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 (listed in order of priority for use) 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. The independent pricing service did not use broker quotes in determining any fair values of the Company’s investments at September 30, 2022, or December 31, 2021.

Should the independent pricing service be unable to provide a fair value estimate, 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 we 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 III investment.

The fair value estimates of the Company’s 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.

15


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Management reviews the reasonableness of the pricing provided by the independent pricing service by employing various analytical procedures. Management reviews all securities to identify recent downgrades, significant changes in pricing, and pricing anomalies on individual securities relative to other similar securities. This will include looking for relative consistency across securities in common sectors, durations, and credit ratings. This review will also include all fixed income securities rated lower than “A” by Moody’s Investors Service, Inc. or Standard & Poor’s Financial Services LLC. 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 pricing service. In its review, management did not identify any such discrepancies and no adjustments were made to the estimates provided by the pricing service for the nine-month period ended September 30, 2022, or the year ended December 31, 2021. The classification within the fair value hierarchy is then confirmed based on the final conclusions from the pricing review.

The valuation of cash equivalents and equity securities are generally based on Level I inputs, which use the market-approach valuation technique. The valuation of our fixed income securities generally incorporates significant Level II inputs using the market and income approach techniques. We may assign a lower level to inputs typically considered to be Level II based on our assessment of liquidity and relative level of uncertainty surrounding inputs. There were no assets or liabilities classified at Level III at September 30, 2022, or December 31, 2021.

The following tables set forth our assets which are measured at fair value on a recurring basis by the level within the fair value hierarchy in which fair value measurements fall:

September 30, 2022

Total

Level I

Level II

Level III

Fixed income securities:

U.S. Government and agencies

$

10,137

$

-

$

10,137

$

-

Obligations of states and political subdivisions

55,375

-

55,375

-

Corporate securities

120,780

-

120,780

-

Residential mortgage-backed securities

36,394

-

36,394

-

Commercial mortgage-backed securities

27,667

-

27,667

-

Asset-backed securities

39,889

-

39,889

-

Redeemable preferred stock

3,969

-

3,969

-

Total fixed income securities

294,211

-

294,211

-

 

Equity securities:

Common stock

56,569

56,569

-

-

Non-redeemable preferred stock

1,808

1,808

-

-

Total equity securities

58,377

58,377

-

-

 

Cash equivalents

26,357

26,357

-

-

Total assets at fair value

$

378,945

$

84,734

$

294,211

$

-

16


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

December 31, 2021

Total

Level I

Level II

Level III

Fixed income securities:

U.S. Government and agencies

$

13,498

$

-

$

13,498

$

-

Obligations of states and political subdivisions

87,294

-

87,294

-

Corporate securities

147,621

-

147,621

-

Residential mortgage-backed securities

26,156

-

26,156

-

Commercial mortgage-backed securities

33,532

-

33,532

-

Asset-backed securities

52,422

-

52,422

-

Redeemable preferred stock

4,128

-

4,128

-

Total fixed income securities

364,651

-

364,651

-

 

Equity securities:

Common Stock

75,143

75,143

-

-

Non-redeemable preferred stock

2,547

2,547

-

-

Total equity securities

77,690

77,690

-

-

 

Cash equivalents

45,741

45,741

-

-

Total assets at fair value

$

488,082

$

123,431

$

364,651

$

-

There were no liabilities measured at fair value on a recurring basis at September 30, 2022, or December 31, 2021.

5.Reinsurance

The Company cedes and assumes certain premiums and losses to and from various companies and associations under a variety of reinsurance agreements. The Company seeks to limit the maximum net loss that can arise from large risks or risks in concentrated areas of exposure through use of these agreements, either on an automatic basis under general reinsurance contracts known as treaties or through facultative contracts on substantial individual risks. Reinsurance contracts do not relieve the Company from its obligation to policyholders.

During the nine-month period ended September 30, 2022, the Company retained the first $15,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $125,000 in excess of its $15,000 retained risk. The Company experienced multiple severe weather events during the second quarter of 2022 which have continued to develop during the third quarter of 2022 and resulted in an accrual for reinsurance recoveries at September 30, 2022.

During the year ended December 31, 2021, the Company retained the first $10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $117,000 in excess of its $10,000 retained risk. The Company experienced one catastrophe event during the second quarter of 2021 in excess of the retention level.

The Company actively monitors and evaluates the financial condition of the reinsurers and develops estimates of the uncollectible amounts due from reinsurers. Such estimates are made based on periodic evaluation of balances due from reinsurers, 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 from reinsurers by entering into reinsurance arrangements only with reinsurers that have strong credit ratings and statutory surplus above certain levels. The Company’s reinsurance recoverables on paid and unpaid losses were due from reinsurance companies with AM Best ratings of “A” or higher.

17


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

A reconciliation of direct to net premiums on both a written and an earned basis is as follows:

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Premiums Written

Premiums Earned

Premiums Written

Premiums Earned

Direct premium

$

81,147

$

102,173

$

301,642

$

269,823

Assumed premium

680

2,460

5,767

6,012

Ceded premium

(10,765

)

(15,101

)

(36,600

)

(32,220

)

Net premiums

$

71,062

$

89,532

$

270,809

$

243,615

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Premiums Written

Premiums Earned

Premiums Written

Premiums Earned

Direct premium

$

68,905

$

93,740

$

266,877

$

249,542

Assumed premium

1,316

1,336

6,342

6,300

Ceded premium

(3,495

)

(12,903

)

(36,812

)

(34,253

)

Net premiums

$

66,726

$

82,173

$

236,407

$

221,589

A reconciliation of direct to net losses and loss adjustment expenses is as follows:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Direct losses and loss adjustment expenses

 

$

94,446

 

 

$

87,453

 

 

$

250,611

 

 

$

201,630

 

Assumed losses and loss adjustment expenses

 

 

868

 

 

 

2,308

 

 

 

2,413

 

 

 

5,216

 

Ceded losses and loss adjustment expenses

 

 

(16,397

)

 

 

(24,019

)

 

 

(25,383

)

 

 

(41,297

)

Net losses and loss adjustment expenses

 

$

78,917

 

 

$

65,742

 

 

$

227,641

 

 

$

165,549

 

If 100% of our ceded reinsurance was cancelled as of September 30, 2022, or December 31, 2021, no ceded commissions would need to be returned to the reinsurers. Reinsurance contracts are typically effective from January 1 through December 31 each year.

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 shows the deferred policy acquisition costs and asset reconciliation:

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Balance, beginning of period

 

$

30,917

 

 

$

29,657

 

 

$

24,947

 

 

$

23,968

 

Deferral of policy acquisition costs

 

 

16,491

 

 

 

8,717

 

 

 

54,328

 

 

 

47,879

 

Amortization of deferred policy acquisition costs

 

 

(17,589

)

 

 

(12,898

)

 

 

(49,456

)

 

 

(46,371

)

Balance, end of period

 

$

29,819

 

 

$

25,476

 

 

$

29,819

 

 

$

25,476

 

18


Table of Contents

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:

Nine Months Ended September 30,

2022

2021

Balance, beginning of period:

Liability for unpaid losses and loss adjustment expenses

$

139,662

$

105,750

Reinsurance recoverables on losses

21,200

8,710

Net balance, beginning of period

118,462

97,040

 

Incurred related to:

Current year

234,823

172,443

Prior years

(7,182

)

(6,894

)

Total incurred

227,641

165,549

 

Paid related to:

Current year

141,810

86,251

Prior years

51,346

39,440

Total paid

193,156

125,691

 

Balance, end of period:

Liability for unpaid losses and loss adjustment expenses

185,937

179,576

Reinsurance recoverables on losses

32,990

42,678

Net balance, end of period

$

152,947

$

136,898

During the nine months ended September 30, 2022, the Company’s reported incurred losses and loss adjustment expenses included $7,182 of net favorable development on prior accident years, primarily attributable to Battle Creek and American West. During the nine months ended September 30, 2021, the Company’s incurred reported losses and loss adjustment expenses included $6,894 of net favorable development on prior accident years, primarily attributable to Nodak Insurance, Direct Auto, and American West.

Increases and decreases are generally the result of ongoing analysis of loss development trends. As additional information becomes known regarding individual claims, original estimates are increased or decreased accordingly.

8.Property and Equipment

Property and equipment consisted of the following:

September 30, 2022

December 31, 2021

Estimated Useful Life

Cost:

Land

$

1,403

$

1,403

indefinite

Building and improvements

14,160

14,193

1040 years

Electronic data processing equipment

1,565

1,518

57 years

Furniture and fixtures

2,919

2,885

57 years

Automobiles

1,310

1,228

23 years

Gross cost

21,357

21,227

 

Accumulated depreciation

(11,433

)

(11,358

)

Total property and equipment, net

$

9,924

$

9,869

Depreciation expense was $174 and $162 for the three months ended September 30, 2022 and 2021, respectively, and $517 and $503 for the nine months ended September 30, 2022 and 2021, respectively.

19


Table of Contents

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 the carrying amount of the Company’s goodwill by segment:

September 30, 2022

December 31, 2021

Non-standard auto from acquisition of Primero

$

2,628

$

2,628

Commercial from acquisition of Westminster

6,756

6,756

Total

$

9,384

$

9,384

Other Intangible Assets

The following table presents the carrying amount of the Company’s other intangible assets:

September 30, 2022

Gross Carrying Amount

Accumulated Amortization

Net

Subject to amortization:

Trade names

$

748

$

340

$

408

Distribution network

6,700

1,024

5,676

Total subject to amortization

7,448

1,364

6,084

 

Not subject to amortization:

State insurance licenses

1,900

-

1,900

Total

$

9,348

$

1,364

$

7,984

December 31, 2021

Gross Carrying Amount

Accumulated Amortization

Net

Subject to amortization:

Trade names

$

748

$

265

$

483

Distribution network

6,700

745

5,955

Total subject to amortization

7,448

1,010

6,438

Not subject to amortization:

State insurance license

1,900

-

1,900

Total

$

9,348

$

1,010

$

8,338

Amortization expense was $118 and $118 for the three months ended September 30, 2022 and 2021, respectively, and $354 and $354 for the nine months ended September 30, 2022 and 2021, respectively.

Other intangible assets that have finite lives, including trade names and distribution networks, are amortized over their useful lives. As of September 30, 2022, the estimated amortization of other intangible assets with finite lives for the next five years and thereafter is as follows:

Year ending December 31,

Amount

2022 (three months remaining)

$

118

2023

455

2024

422

2025

422

2026

422

Thereafter

4,245

Total other intangible assets with finite lives

$

6,084

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Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

10.Related Party Transactions

Intercompany Reinsurance Pooling Arrangement

Effective January 1, 2020, all of our insurance subsidiary and affiliate companies entered into an intercompany reinsurance pooling agreement. This agreement was finalized, approved, and implemented during the fourth quarter of 2020, retroactive to the January 1 effective date. 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.

In connection with the pooling agreement, the quota share agreement between Battle Creek and Nodak Insurance was cancelled. As a result, the Company’s consolidated financial position and results of operations are impacted by the portion of Battle Creek’s underwriting results that are allocated to the policyholders of Battle Creek rather than the shareholders of NI Holdings. For the nine months ended September 30, 2022, and the year ended December 31, 2021, the pooling share percentages by insurance company were:

Pool Percentage

Nodak Insurance Company

66.0

%

American West Insurance Company

7.0

%

Primero Insurance Company

3.0

%

Battle Creek Mutual Insurance Company

2.0

%

Direct Auto Insurance Company

13.0

%

Westminster American Insurance Company

9.0

%

Total

100.0

%

 North Dakota Farm Bureau

We were 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 $397 and $370 during the three months ended September 30, 2022 and 2021, respectively, and $1,141 and $1,102 for the nine months ended September 30, 2022 and 2021, respectively. Royalty amounts payable of $74 and $113 were accrued as a liability to the NDFB at September 30, 2022, and December 31, 2021, 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 (“RBC”) requirements that may further affect their ability to pay dividends. Our insurance subsidiaries statutory capital and surplus at December 31, 2021, exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements, by a significant margin.

The amount available for payment of dividends from Nodak Insurance to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $21,493 based upon the surplus of Nodak Insurance at December 31, 2021. 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 Nodak Insurance 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, 2022, or the year ended December 31, 2021.

Direct Auto was 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 2022 without the prior approval of the North Dakota Insurance Department is $3,796 based upon the surplus of Direct Auto at December 31, 2021. No dividends were declared or paid by Direct Auto during the nine months ended September 30, 2022, or the year ended December 31, 2021.

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Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Westminster was re-domesticated from Maryland 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 Westminster to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $2,471 based upon the surplus of Westminster at December 31, 2021. No dividends were declared or paid by Westminster during the nine months ended September 30, 2022, or the year ended December 31, 2021.

Battle Creek Mutual Insurance Company

The following tables illustrates the impact of including Battle Creek in our Unaudited Consolidated Balance Sheets and Statements of Operations prior to intercompany eliminations:

September 30,

2022

December 31,

2021

Assets:

Cash and cash equivalents

$

9,003

$

4,398

Investments

8,339

10,610

Premiums and agents’ balances receivable

5,696

5,038

Deferred policy acquisition costs

596

499

Reinsurance recoverables on losses (2)

6,094

10,173

Accrued investment income

43

51

Property and equipment

323

325

Pooling receivable (1)

277

-

Deferred income taxes

774

142

Other assets

53

52

Total assets

$

31,198

$

31,288

 

Liabilities:

Unpaid losses and loss adjustment expenses

$

6,675

$

2,937

Unearned premiums

3,088

2,544

Notes payable (1)

3,000

3,000

Pooling payable (1)

-

5,580

Reinsurance losses payable (2)

11,558

12,754

Accrued expenses and other liabilities

4,819

264

Total liabilities

29,140

27,079

 

Equity:

Non-controlling interest

2,058

4,209

Total equity

2,058

4,209

 

Total liabilities and equity

$

31,198

$

31,288

 

(1)

Amount fully eliminated in consolidation.

(2)

Amount partially eliminated in consolidation.

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Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

Revenues:

Net premiums earned

$

1,790

$

1,499

$

4,872

$

4,594

Fee and other income (expenses)

(1

)

(6

)

(8

)

(8

)

Net investment income (loss)

(8

)

17

32

40

Total revenues

1,781

1,510

4,896

4,626

 

Expenses:

Losses and loss adjustment expenses

1,579

1,179

4,553

3,448

Amortization of deferred policy acquisition costs

352

258

989

927

Other underwriting and general expenses

89

209

363

356

Total expenses

2,020

1,646

5,905

4,731

 

Income (loss) before income taxes

(239

)

(136

)

(1,009

)

(105

)

Income tax expense (benefit)

(55

)

(14

)

(229

)

(6

)

Net income (loss)

$

(184

)

$

(122

)

$

(780

)

$

(99

)

 

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. Westminster also sponsors a separate 401(k) plan. The Company reported expenses related to the 401(k) plans totaling $167 and $178 during the three months ended September 30, 2022 and 2021, respectively, and $502 and $525 during the nine months ended September 30, 2022 and 2021, respectively.

Nodak Insurance also contributes an additional elective amount of employee compensation as a profit-sharing contribution for eligible employees that is invested in a portfolio of investments directed by the Company. The reported expenses related to this profit-sharing contribution were $216 and $165 during the three months ended September 30, 2022 and 2021, respectively, and $648 and $704 during the nine months ended September 30, 2022 and 2021, 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 (“ERISA”) over the key executives’ allowable 401(k) contribution. The plan also allows employee-directed deferral of key executive’s compensation or incentive payments. The Company reported expenses related to this plan totaling $23 and $21 during the three months ended September 30, 2022 and 2021, respectively, and $150 and $588 during the nine months ended September 30, 2022 and 2021, respectively.

In connection with our initial public offering (“IPO”) in March 2017, the Company established an Employee Stock Ownership Plan (the “ESOP”). The ESOP is intended to be an employee stock ownership plan within the meaning of Internal Revenue Code Section 4975(e)(7) and invests solely in common stock of the Company.

Upon establishment of the plan, 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.

23


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

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. American West and Battle Creek have no employees.

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 Sheet 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 of $88 and $116 during the three months ended September 30, 2022 and 2021, respectively, related to the ESOP, and $298 and $342 during the nine months ended September 30, 2022 and 2021, respectively.

Through September 30, 2022, and December 31, 2021, the Company had released and allocated 121,575 ESOP shares to participants, with a remainder of 118,425 ESOP shares in suspense at September 30, 2022, and December 31, 2021. Using the Company’s quarter-end market price of $13.36 per share, the fair value of the unearned ESOP shares was $1,582 at September 30, 2022.

12.Line of Credit

Nodak Insurance has a $5,000 line of credit with Wells Fargo Bank, N.A. The terms of the line of credit include a floating interest rate of the bank’s Prime Rate with a floor rate of 3.25%. There were no outstanding amounts during the nine months ended September 30, 2022, or the year ended December 31, 2021. This line of credit is scheduled to expire on May 31, 2023.

13.Income Taxes

At September 30, 2022, and December 31, 2021, we had no unrecognized tax benefits, no accrued interest and penalties, and no significant uncertain tax positions. No interest and penalties were recognized during the nine-month period ended September 30, 2022, or the year ended December 31, 2021.

At September 30, 2022, and December 31, 2021, the Company, other than Battle Creek and Westminster, had no income tax related carryforwards for net operating losses, alternative minimum tax credits, or capital losses.

Battle Creek, which files its income tax returns on a stand-alone basis, had net operating loss carryforwards of $3,215 at December 31, 2021. These net operating loss carryforwards began expiring in 2021 and will continue to expire through 2032.

Westminster had a $2,122 net operating loss carryforward at December 31, 2021. This net operating loss carryforward expires in 2023.

As of September 30, 2022, federal income tax years 2018 through 2020 remain open for examination.

24


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

14.Operating Leases

Primero leases a facility in Spearfish, South Dakota under a non-cancellable operating lease expiring in 2023 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 2024. There were expenses of $102 and $63 related to these leases during the three months ended September 30, 2022 and 2021, respectively, and $239 and $187 related to these leases during the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, we have minimum future commitments under non-cancellable leases for the next five years and thereafter as follows:

Year ending December 31,

Estimated Future

Minimum

Commitments

2022 (three months remaining)

$

96

2023

358

2024

320

2025

286

2026

291

Thereafter

775

Total minimum future commitments

$

2,126

15.Contingencies

We have been named as a defendant in various lawsuits relating to our insurance operations. Contingent liabilities arising from litigation, income taxes, and other matters are not considered to be material to our financial position.

16.Common Stock

Changes in the number of common stock shares outstanding are as follows:

Nine Months Ended September 30,

2022

2021

Shares outstanding, beginning of period

21,219,808

21,318,638

Treasury shares repurchased through stock repurchase authorization

(173,419

)

(168,393

)

Issuance of treasury shares for vesting of restricted stock units

101,292

102,060

Shares outstanding, end of period

21,147,681

21,252,305

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. In addition, the net loss per diluted common share for the three- and nine-month periods ended September 30, 2022, excluded the weighted average effects of 176,037 and 207,424 shares of stock awards, respectively, since the impacts of these potential shares of common stock were anti-dilutive.

On May 4, 2020, 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 year ended December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $7,238 under this authorization. During the nine months ended September 30, 2021, we completed the repurchase of 144,110 shares of our common stock for $2,762 to close out this authorization.

On August 11, 2021, our Board of Directors approved an authorization for the repurchase of up to approximately $5,000 of the Company’s outstanding common stock. During the year ended December 31, 2021, we completed the repurchase of 81,095 shares of our common stock for $1,554 under this authorization. During the three months ended September 30, 2022, we completed the repurchase of 62,175 shares of our common stock for $939. During the nine months ended September 30, 2022, we completed the repurchase of 173,419 shares of our common stock for $2,870.

25


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

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 in addition to the $575 remaining from the August 11, 2021, repurchase authorization as of September 30, 2022. No shares were repurchased as part of the May 9, 2022, authorization during the nine months ended September 30, 2022.

The cost of this treasury stock is a reduction of shareholders’ equity within our Unaudited Consolidated Balance Sheets.

17.Stock Based Compensation

At its 2020 Annual Shareholders’ Meeting, the NI Holdings, Inc. 2020 Stock and Incentive Plan (the “Plan”) was approved by shareholders. The purpose of the Plan is 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.

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 were based on salary and vest 20% per year over a five-year period, while 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:

RSUs

Weighted-Average

Grant-Date

Fair Value

Per Share

Units outstanding and unearned at January 1, 2021

115,780

$

15.27

RSUs granted during 2021

58,700

18.76

RSUs earned during 2021

(66,100

)

15.77

Units outstanding and unearned at December 31, 2021

108,380

16.86

 

RSUs granted during 2022

59,600

17.61

RSUs earned during 2022

(52,620

)

17.39

Units outstanding and unearned at September 30, 2022

115,360

17.00

26


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

The following table shows the impact of RSU activity to the Company’s financial results:

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

RSU compensation expense

$

227

$

226

$

725

$

843

Income tax benefit

(52

)

(47

)

(165

)

(177

)

RSU compensation expense, net of income taxes

$

175

$

179

$

560

$

666

At September 30, 2022, there was $1,043 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 1.94 years.

Performance Stock 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 were based on salary and include a three-year book value cumulative growth target with threshold and stretch goals. 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.

A summary of the Company’s outstanding PSUs is presented below:

PSUs

Weighted-Average

Grant-Date

Fair Value

Per Share

Units outstanding at January 1, 2021

174,600

$

15.15

PSUs granted during 2021 (at target)

64,600

18.64

PSUs earned during 2021

(70,363

)

16.25

Performance adjustment (1)

24,300

16.25

Forfeitures

(2,537

)

16.25

Units outstanding at December 31, 2021

190,600

16.06

 

PSUs granted during 2022 (at target)

61,800

18.10

PSUs earned during 2022

(86,684

)

15.21

Performance adjustment (1)

31,200

15.21

Forfeitures

(6,916

)

15.21

Units outstanding at September 30, 2022

190,000

17.00

(1) Represents the change in PSUs issued based upon the attainment of performance goals established by the Company.

27


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

The following table shows the impact of PSU activity to the Company’s financial results:

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

PSU compensation expense (benefit)

$

(872

)

$

290

$

(349

)

$

861

Income tax expense (benefit)

198

(61

)

79

(181

)

PSU compensation expense (benefit), net of income taxes

$

(674

)

$

229

$

(270

)

$

680

The cost estimates for PSU grants represent initial target awards until the Company can reasonably forecast the financial performance of each PSU award grant. As of September 30, 2022, the compensation expense related to the PSU awards granted during 2020 was decreased due to the Company’s expectation that the threshold performance objective will not be met. The PSU awards granted during 2021 and 2022 continue to represent the initial target awards. The actual number of shares to be issued at the end of each performance period will range from 0% to 150% of the initial target awards.

At September 30, 2022, there was $1,295 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 2.07 years.

18.Segment Information

We have six reportable operating segments, which consist of private passenger auto insurance, non-standard auto insurance, home and farm insurance, crop insurance, commercial insurance, and all other (which primarily consists of assumed reinsurance and our excess liability business). 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, 2022 and 2021.

For purposes of evaluating profitability of the non-standard auto segment, management combines 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 Unaudited Consolidated Statement of Operations or Unaudited Consolidated Balance Sheet to our operating segments. Those line items include investment income, net investment gains (losses), other income excluding non-standard auto insurance fees, and income taxes within the Unaudited Consolidated Statement of Operations. For the Unaudited Consolidated Balance Sheet, those items include cash and investments, property and equipment, other assets, accrued expenses, income taxes recoverable or payable, and shareholders’ equity.

28


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Three Months Ended September 30, 2022

Private

Passenger

Auto

Non-

Standard

Auto

Home and

Farm

Crop

Commercial

All Other

Total

Direct premiums earned

$

20,523

$

17,646

$

22,429

$

20,921

$

19,342

$

1,312

$

102,173

Assumed premiums earned

-

-

-

1,768

-

692

2,460

Ceded premiums earned

(710

)

(67

)

(2,678

)

(8,123

)

(3,458

)

(65

)

(15,101

)

Net premiums earned

19,813

17,579

19,751

14,566

15,884

1,939

89,532

 

Direct losses and loss adjustment expenses

20,969

11,958

34,051

12,040

14,646

782

94,446

Assumed losses and loss adjustment expenses

-

-

-

539

-

329

868

Ceded losses and loss adjustment expenses

(615

)

-

(5,229

)

(5,605

)

(4,834

)

(114

)

(16,397

)

Net losses and loss adjustment expenses

20,354

11,958

28,822

6,974

9,812

997

78,917

 

Gross margin

(541

)

5,621

(9,071

)

7,592

6,072

942

10,615

 

Underwriting and general expenses

5,061

6,399

5,396

343

5,840

462

23,501

Underwriting gain (loss)

(5,602

)

(778

)

(14,467

)

7,249

232

480

(12,886

)

 

Fee and other income

246

476

 

(532

)

Net investment income

2,035

Net investment losses

(2,868

)

Loss before income taxes

(13,243

)

Income tax benefit

(3,074

)

Net loss

(10,169

)

Net loss attributable to non-controlling interest

(184

)

Net loss attributable to NI Holdings, Inc.

$

(9,985

)

 

Operating Ratios:

Loss and loss adjustment expense ratio

102.7%

68.0%

145.9%

47.9%

61.8%

51.4%

88.1%

Expense ratio

25.6%

36.4%

27.3%

2.3%

36.8%

23.8%

26.3%

Combined ratio

128.3%

104.4%

173.2%

50.2%

98.6%

75.2%

114.4%

 

 

Balances at September 30, 2022:

Premiums and agents’ balances receivable

$

21,252

$

17,754

$

9,461

$

42,395

$

11,343

$

765

$

102,970

Deferred policy acquisition costs

5,311

8,992

7,708

436

6,928

444

29,819

Reinsurance recoverables on losses

1,135

-

7,035

8,226

15,763

831

32,990

Goodwill and other intangibles

-

2,773

-

-

14,595

-

17,368

Unpaid losses and loss adjustment expenses

29,821

41,231

31,792

25,244

49,545

8,304

185,937

Unearned premiums

31,331

27,031

44,841

11,071

37,042

3,093

154,409

Payable to Federal Crop Insurance Corporation

-

-

-

4,700

-

-

4,700

29


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Three Months Ended September 30, 2021

Private

Passenger

Auto

Non-

Standard

Auto

Home and

Farm

Crop

Commercial

All Other

Total

Direct premiums earned

$

19,453

$

15,258

$

21,256

$

19,654

$

16,864

$

1,255

$

93,740

Assumed premiums earned

-

-

-

24

-

1,312

1,336

Ceded premiums earned

(962

)

(369

)

(2,481

)

(6,954

)

(2,066

)

(71

)

(12,903

)

Net premiums earned

18,491

14,889

18,775

12,724

14,798

2,496

82,173

 

Direct losses and loss adjustment expenses

17,646

9,620

19,839

27,237

13,058

53

87,453

Assumed losses and loss adjustment expenses

-

-

-

151

-

2,157

2,308

Ceded losses and loss adjustment expenses

(516

)

-

(3,684

)

(14,906

)

(5,288

)

375

(24,019

)

Net losses and loss adjustment expenses

17,130

9,620

16,155

12,482

7,770

2,585

65,742

 

Gross margin

1,361

5,269

2,620

242

7,028

(89

)

16,431

 

Underwriting and general expenses

5,892

6,010

6,627

864

5,257

698

25,348

Underwriting gain (loss)

(4,531

)

(741

)

(4,007

)

(622

)

1,771

(787

)

(8,917

)

 

Fee and other income

301

501

 

(440

)

Net investment income

1,713

Net investment gains

222

Loss before income taxes

(6,481

)

Income tax benefit

(1,622

)

Net loss

(4,859

)

Net loss attributable to non-controlling interest

(122

)

Net loss attributable to NI Holdings, Inc.

$

(4,737

)

 

Operating Ratios:

Loss and loss adjustment expense ratio

92.6%

64.6%

86.0%

98.1%

52.5%

103.6%

80.0%

Expense ratio

31.9%

40.4%

35.3%

6.8%

35.5%

27.9%

30.8%

Combined ratio

124.5%

105.0%

121.3%

104.9%

88.0%

131.5%

110.8%

 

 

Balances at September 30, 2021:

Premiums and agents’ balances receivable

$

19,531

$

8,789

$

9,246

$

33,376

$

10,737

$

709

$

82,388

Deferred policy acquisition costs

5,234

6,226

7,539

1

6,027

449

25,476

Reinsurance recoverables on losses

1,422

-

2,680

28,824

7,911

1,841

42,678

Receivable from Federal Crop Insurance Corporation

-

-

-

9,362

-

-

9,362

Goodwill and other intangibles

-

2,823

-

-

15,017

-

17,840

Unpaid losses and loss adjustment expenses

26,073

44,114

17,443

50,393

30,547

11,006

179,576

Unearned premiums

29,462

19,489

42,664

9,369

32,930

3,185

137,099

30


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Nine Months Ended September 30, 2022

Private

Passenger

Auto

Non-

Standard

Auto

Home and

Farm

Crop

Commercial

All Other

Total

Direct premiums earned

$

59,648

$

47,665

$

65,312

$

38,612

$

54,733

$

3,853

$

269,823

Assumed premiums earned

-

-

-

2,259

-

3,753

6,012

Ceded premiums earned

(1,830

)

(196

)

(6,393

)

(14,023

)

(9,630

)

(148

)

(32,220

)

Net premiums earned

57,818

47,469

58,919

26,848

45,103

7,458

243,615

 

Direct losses and loss adjustment expenses

52,360

24,582

103,430

25,173

42,791

2,275

250,611

Assumed losses and loss adjustment expenses

-

-

-

781

-

1,632

2,413

Ceded losses and loss adjustment expenses

(442

)

-

(5,938

)

(8,819

)

(9,970

)

(214

)

(25,383

)

Net losses and loss adjustment expenses

51,918

24,582

97,492

17,135

32,821

3,693

227,641

 

Gross margin

5,900

22,887

(38,573

)

9,713

12,282

3,765

15,974

 

Underwriting and general expenses

16,382

19,357

17,425

1,400

16,752

1,835

73,151

Underwriting gain (loss)

(10,482

)

3,530

(55,998

)

8,313

(4,470

)

1,930

(57,177

)

 

Fee and other income

888

1,319

 

4,418

Net investment income

5,703

Net investment losses

(19,532

)

Loss before income taxes

(69,687

)

Income tax benefit

(14,921

)

Net loss

(54,766

)

Net loss attributable to non-controlling interest

(780

)

Net loss attributable to NI Holdings, Inc.

$

(53,986

)

 

Operating Ratios:

Loss and loss adjustment expense ratio

89.8%

51.8%

165.5%

63.8%

72.8%

49.5%

93.5%

Expense ratio

28.3%

40.8%

29.6%

5.2%

37.1%

24.6%

30.0%

Combined ratio

118.1%

92.6%

195.1%

69.0%

109.9%

74.1%

123.5%

31


Table of Contents

NI Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

Nine Months Ended September 30, 2021

Private

Passenger

Auto

Non-

Standard

Auto

Home and

Farm

Crop

Commercial

All Other

Total

Direct premiums earned

$

57,153

$

44,102

$

62,647

$

34,212

$

47,781

$

3,647

$

249,542

Assumed premiums earned

-

-

-

2,108

-

4,192

6,300

Ceded premiums earned

(3,096

)

(1,057

)

(8,045

)

(15,196

)

(6,625

)

(234

)

(34,253

)

Net premiums earned

54,057

43,045

54,602

21,124

41,156

7,605

221,589

 

Direct losses and loss adjustment expenses

45,299

25,910

47,163

49,612

33,016

630

201,630

Assumed losses and loss adjustment expenses

-

-

-

674

-

4,542

5,216

Ceded losses and loss adjustment expenses

(1,010

)

-

(5,168

)

(27,911

)

(7,583

)

375

(41,297

)

Net losses and loss adjustment expenses

44,289

25,910

41,995

22,375

25,433

5,547

165,549

 

Gross margin

9,768

17,135

12,607

(1,251

)

15,723

2,058

56,040

 

Underwriting and general expenses

16,018

16,949

17,311

2,831

15,049

2,017

70,175

Underwriting gain (loss)

(6,250

)

186

(4,704

)

(4,082

)

674

41

(14,135

)

 

Fee and other income

994

1,338

 

1,180

Net investment income

4,959

Net investment gains

10,734

Income before income taxes

2,896

Income tax expense

707

Net income

2,189

Net loss attributable to non-controlling interest

(99

)

Net income attributable to NI Holdings, Inc.

$

2,288

 

Operating Ratios:

Loss and loss adjustment expense ratio

81.9%

60.2%

76.9%

105.9%

61.8%

72.9%

74.7%

Expense ratio

29.6%

39.4%

31.7%

13.4%

36.6%

26.5%

31.7%

Combined ratio

111.5%

99.6%

108.6%

119.3%

98.4%

99.4%

106.4%

32


 

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 the Company’s operating results and financial condition than can be obtained from reading the Unaudited Consolidated Financial Statements alone. 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 Quarterly Report on Form 10-Q constitutes forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” and Part II, Item 1A, “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q. You should also review Part I, Item 1A, “Risk Factors” included in the Company’s 2021 Annual Report for a discussion of important factors, including COVID-19 or a future pandemic, and changing climate conditions, 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 are in thousands.

Results of Operations

The consolidated net loss for the Company was $10,169 for the three months ended September 30, 2022, compared to net loss of $4,859 for the three months ended September 30, 2021. The consolidated net loss for the Company was $54,766 for the nine months ended September 30, 2022, compared to net income of $2,189 for the nine months ended September 30, 2021.

The major components of the Company’s revenues and net income (loss) were as follows:

   

Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
    2022     2021     2022     2021  
Revenues:                                
Net premiums earned   $ 89,532     $ 82,173     $ 243,615     $ 221,589  
Fee and other income     476       501       1,319       1,338  
Net investment income     2,035       1,713       5,703       4,959  
Net investment gains (losses)     (2,868 )     222       (19,532 )     10,734  
Total revenues     89,175       84,609       231,105       238,620  
                                 
Components of net income (loss):                                
Net premiums earned     89,532       82,173       243,615       221,589  
Losses and loss adjustment expenses     78,917       65,742       227,641       165,549  
Amortization of deferred policy acquisition costs and other underwriting and general expenses     23,501       25,348       73,151       70,175  
Underwriting loss     (12,886 )     (8,917 )     (57,177 )     (14,135 )
                                 
Fee and other income     476       501       1,319       1,338  
Net investment income     2,035       1,713       5,703       4,959  
Net investment gains (losses)     (2,868 )     222       (19,532 )     10,734  
Income (loss) before income taxes     (13,243 )     (6,481 )     (69,687 )     2,896  
Income tax expense (benefit)     (3,074 )     (1,622 )     (14,921 )     707  
Net income (loss)   $ (10,169 )   $ (4,859 )   $ (54,766 )   $ 2,189  
                                 

33 

Table of Contents 

 

Net Premiums Earned

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Net premiums earned:                                
Direct premium   $ 102,173     $ 93,740     $ 269,823     $ 249,542  
Assumed premium     2,460       1,336       6,012       6,300  
Ceded premium     (15,101 )     (12,903 )     (32,220 )     (34,253 )
Total net premiums earned   $ 89,532     $ 82,173     $ 243,615     $ 221,589  
                                 

 

The Company’s net premiums earned for the three months ended September 30, 2022, increased $7,359, or 9.0%, compared to the three months ended September 30, 2021. Net premiums earned for the nine months ended September 30, 2022, increased $22,026, or 9.9%, compared to the nine months ended September 30, 2021.

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Net premiums earned:                                
Private passenger auto   $ 19,813     $ 18,491     $ 57,818     $ 54,057  
Non-standard auto     17,579       14,889       47,469       43,045  
Home and farm     19,751       18,775       58,919       54,602  
Crop     14,566       12,724       26,848       21,124  
Commercial     15,884       14,798       45,103       41,156  
All other     1,939       2,496       7,458       7,605  
Total net premiums earned   $ 89,532     $ 82,173     $ 243,615     $ 221,589  

 

Below are comments regarding net premiums earned by business segment:

Private passenger auto – Net premiums earned for the three months ended September 30, 2022, increased $1,322, or 7.1%, compared to the same period in 2021. Net premiums earned for the nine months ended September 30, 2022, increased $3,761, or 7.0%, compared to the same period in 2021. Results were driven by continued new business growth and rate increases in South Dakota and Nebraska.

Non-standard auto – Net premiums earned for the three months ended September 30, 2022, increased $2,690, or 18.1%, compared to the same period in 2021. Net premiums earned for the nine months ended September 30, 2022, increased $4,424, or 10.3%, compared to the same period in 2021. Results were driven by new business growth, increased retention, and rate increases in the Chicago market where our non-standard auto business is concentrated.

Home and farm – Net premiums earned for the three months ended September 30, 2022, increased $976, or 5.2%, compared to the same period in 2021. Net premiums earned for the nine months ended September 30, 2022, increased $4,317, or 7.9%, compared to the same period in 2021. Results were driven by increasing insured property values as a result of using higher inflationary factors in the underwriting of home and farm risks.

Crop – Net premiums earned for the three months ended September 30, 2022, increased $1,842, or 14.5%, compared to the same period in 2021. Net premiums earned for the nine months ended September 30, 2022, increased $5,724, or 27.1%, compared to the same period in 2021. Results were driven by the impact of higher commodity prices on our multi-peril crop insurance direct written premiums. In addition, earned premiums increased as a result of ceding significantly less multi-peril crop insurance business into the Assigned Risk fund in 2022 compared to the prior year.

Commercial – Net premiums earned for the three months ended September 30, 2022, increased $1,086, or 7.3%, compared to the same period in 2021. Net premiums earned for the nine months ended September 30, 2022, increased $3,947, or 9.6%, compared to the same period in 2021. Results were driven by increasing insured values as a result of using higher inflationary factors as well as continued increases in both price and new business premiums.

All other – Net premiums earned for the three months ended September 30, 2022, decreased $557, or 22.3%, compared to the same period in 2021. Net premiums earned for the nine months ended September 30, 2022, decreased $147, or 1.9%, compared to the same period in 2021. Results were driven by the Company’s decision to non-renew its participation in an assumed domestic and international reinsurance pool of business as of January 1, 2022.

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Losses and Loss Adjustment Expenses

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Net losses and loss adjustment expenses:                                
Direct losses and loss adjustment expenses   $ 94,446     $ 87,453     $ 250,611     $ 201,630  
Assumed losses and loss adjustment expenses     868       2,308       2,413       5,216  
Ceded losses and loss adjustment expenses     (16,397 )     (24,019 )     (25,383 )     (41,297 )
Total net losses and loss adjustment expenses   $ 78,917     $ 65,742     $ 227,641     $ 165,549  
                                 

 

The Company’s net losses and loss adjustment expenses for the three months ended September 30, 2022, increased $13,175 or 20.0%, compared to the three months ended September 30, 2021. The Company’s net losses and loss adjustment expenses for the nine months ended September 30, 2022, increased $62,092, or 37.5%, compared to the nine months ended September 30, 2021.

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Net losses and loss adjustment expenses:                                
Private passenger auto   $ 20,354     $ 17,130     $ 51,918     $ 44,289  
Non-standard auto     11,958       9,620       24,582       25,910  
Home and farm     28,822       16,155       97,492       41,995  
Crop     6,974       12,482       17,135       22,375  
Commercial     9,812       7,770       32,821       25,433  
All other     997       2,585       3,693       5,547  
Total net losses and loss adjustment expenses   $ 78,917     $ 65,742     $ 227,641     $ 165,549  

 

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Loss and loss adjustment expenses ratio:                                
Private passenger auto     102.7%       92.6%       89.8%       81.9%  
Non-standard auto     68.0%       64.6%       51.8%       60.2%  
Home and farm     145.9%       86.0%       165.5%       76.9%  
Crop     47.9%       98.1%       63.8%       105.9%  
Commercial     61.8%       52.5%       72.8%       61.8%  
All other     51.4%       103.6%       49.5%       72.9%  
Total loss and loss adjustment expenses ratio     88.1%       80.0%       93.5%       74.7%  
                                 

 

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 increased 10.1 percentage points and 7.9 percentage points in the three- and nine-month periods ended September 30, 2022, compared to the same periods in 2021. These increases were driven by elevated loss costs due to continued high levels of inflation and increased weather-related comprehensive losses in Nebraska and South Dakota. We are addressing this increased frequency and severity through recent aggressive underwriting actions and rate increases.

Non-standard auto – The net loss and loss adjustment expense ratio increased 3.4 percentage points in the three-month period ended September 30, 2022, compared to the same period in 2021. This increase was driven by elevated loss costs due to continued high levels of inflation. The net loss and loss adjustment expense ratio decreased 8.4 percentage points in the nine-month period ended September 30, 2022, compared to the same period for 2021 due to successful implementation of various strategic initiatives as well as rate increases taken in early 2022.

Home and farm – The net loss and loss adjustment expense ratio increased 59.9 percentage points and 88.6 percentage points in the three- and nine-month periods ended September 30, 2022, compared to the same periods in 2021. These increases were driven by catastrophe losses in Nebraska and South Dakota that occurred during second quarter of 2022 as well as a catastrophe that occurred during the third quarter of 2022 in North Dakota. The losses from the catastrophe events that occurred during second quarter continued to adversely develop with additional losses being reported during the third quarter. Catastrophe losses, net of reinsurance, for the Home and Farm segment accounted for 73.6 percentage points of the net loss and loss adjustment expense ratio for the three months ended September 30, 2022, and did not have a negative impact for the same period in 2021. Catastrophe losses, net of reinsurance, for the Home and Farm segment accounted for 96.3 percentage points of the net loss and loss adjustment expense ratio for the nine months ended September 30, 2022, compared to 13.5 percentage points for the same period for 2021.

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Crop – The net loss and loss adjustment expense ratio decreased 50.2 percentage points and 42.1 percentage points in the three- and nine-month periods ended September 30, 2022, compared to the same periods in 2021. This improvement was due to more favorable crop growing conditions in 2022 in comparison to the extreme drought conditions faced in 2021.

Commercial – The net loss and loss adjustment expense ratio increased 9.3 percentage points and 11.0 percentage points in the three- and nine-month periods ended September 30, 2022, compared to the same periods in 2021. These increases were driven by increased frequency and severity of fire losses in the Westminster book of business during second quarter of 2022, which continued into the third quarter. Our North Dakota commercial business experienced elevated weather-related losses which also contributed to these loss ratio increases.

All other – The net loss and loss adjustment expense ratio decreased 52.2 percentage points and 23.4 percentage points in the three- and nine-month periods ended September 30, 2022, compared to the same periods for 2021. The decreases were driven by the Company’s decision to non-renew its participation in an assumed domestic and international reinsurance pool of business as of January 1, 2022. The year-to-date loss and loss adjustment expense ratio was also impacted by favorable prior year development in our assumed domestic and international reinsurance pool of business.

Expense Ratio

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Underwriting and general expenses:                                
Amortization of deferred policy acquisition costs   $ 17,589     $ 12,898     $ 49,456     $ 46,371  
Other underwriting and general expenses     5,912       12,450       23,695       23,804  
Total underwriting and general expenses   $ 23,501     $ 25,348     $ 73,151     $ 70,175  
                                 
Expense ratio     26.3%       30.8%       30.0%       31.7%  

 

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 decreased 4.5 percentage points in the three-month period ended September 30, 2022, compared to the same period in 2021. The Company refined its methodology for calculating deferred policy acquisition costs and the related amortization during the third quarter of 2021, which contributed to this decrease and the year-over-year changes in deferred policy acquisition costs and other underwriting and general expenses. The overall expense ratio decreased 1.7 percentage points in the nine-month period ended September 30, 2022, compared to the same period in 2021. The decreases for the three- and nine-month periods ended September 30, 2022, compared to the same periods in 2021, were driven by the impact of the significantly higher multi-peril crop insurance net premiums earned during 2022 in our crop segment, which operates at a significantly lower expense ratio relative to our other segments.   

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Underwriting Gain (Loss) and Combined Ratio

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Underwriting gain (loss):                                
Private passenger auto   $ (5,602 )   $ (4,531 )   $ (10,482 )   $ (6,250 )
Non-standard auto     (778 )     (741 )     3,530       186  
Home and farm     (14,467 )     (4,007 )     (55,998 )     (4,704 )
Crop     7,249       (622 )     8,313       (4,082 )
Commercial     232       1,771       (4,470 )     674  
All other     480       (787 )     1,930       41  
Total underwriting gain (loss)   $ (12,886 )   $ (8,917 )   $ (57,177 )   $ (14,135 )

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Combined ratio:                                
Private passenger auto     128.3%       124.5%       118.1%       111.5%  
Non-standard auto     104.4%       105.0%       92.6%       99.6%  
Home and farm     173.2%       121.3%       195.1%       108.6%  
Crop     50.2%       104.9%       69.0%       119.3%  
Commercial     98.6%       88.0%       109.9%       98.4%  
All other     75.2%       131.5%       74.1%       99.4%  
Combined ratio     114.4%       110.8%       123.5%       106.4%  

 

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 $3,969 or 44.5%, for the three-month period ended September 30, 2022, compared to the same period in 2021. The total underwriting loss increased $43,042, or 304.5%, for the nine-month period ended September 30, 2022, compared to the same period in 2021. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses section above.

The overall combined ratio increased 3.6 percentage points in the three-month period ended September 30, 2022, compared to the same period in 2021. The overall combined ratio increased 17.1 percentage points in the nine-month period ended September 30, 2022, compared to the same period in 2021. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses section above.

Fee and Other Income

The Company had fee and other income of $476 for the three months ended September 30, 2022, compared to $501 for the three months ended September 30, 2021. Fee income attributable to the non-standard auto segment is a key component in measuring its profitability. Fee income on this business decreased to $246 for the three months ended September 30, 2022, from $301 for the three months ended September 30, 2021, due to a reduction in policies that generate fee income.

The Company had fee and other income of $1,319 for the nine months ended September 30, 2022, compared to $1,338 for the nine months ended September 30, 2021. Fee income on the non-standard auto business decreased slightly to $888 for the nine months ended September 30, 2022, from $994 for the nine months ended September 30, 2021, due to a reduction in policies that generate fee income.

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Net Investment Income

The following table sets forth our average cash and invested assets, net investment income, and return on average cash and invested assets for the reported periods:

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Average cash and invested assets   $ 436,714     $ 503,538     $ 468,026     $ 499,226  
Net investment income   $ 2,035     $ 1,713     $ 5,703     $ 4,959  
                                 
Gross return on average cash and invested assets     2.6%       2.0%       2.4%       2.0%  
Net return on average cash and invested assets     1.9%       1.4%       1.6%       1.3%  
                                 

 

Net investment income increased $322 for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Net investment income increased $744 for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. These increases were primarily driven by an increase in the fixed income portfolio average book value (measured at cost or amortized cost), the rising interest rate environment, as well as a higher allocation of invested assets to private placement securities and high dividend yield equities.

The Company’s net return on average cash and invested assets increased year-over-year, driven by a decrease in average cash and invested assets (measured at fair value) as a result of unfavorable market conditions for both fixed income and equity securities as well as higher net investment income.

Net Investment Gains (Losses)

Net investment gains (losses) consisted of the following:

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Gross realized gains   $ 1,286     $ 2,805     $ 3,606     $ 9,766  
Gross realized losses, excluding other-than-temporary impairment losses     (1,203 )     (72 )     (1,558 )     (256 )
Net realized gains     83       2,733       2,048       9,510  
Change in net unrealized gains on equity securities     (2,951 )     (2,511 )     (21,580 )     1,224  
Net investment gains (losses)   $ (2,868 )   $ 222     $ (19,532 )   $ 10,734  

 

The Company had net realized gains of $83 and $2,048 for the three and nine months ended September 30, 2022, compared to gains of $2,733 and $9,510 for the three and nine months ended September 30, 2021. The Company reported no other-than-temporary losses during any of the periods presented.

The Company experienced a decrease in net unrealized gains on equity securities of $2,951 and $21,580 during the three and nine months ended September 30, 2022, respectively, driven by changes in fair value attributable to unfavorable equity markets. The Company experienced a decrease of $2,511 and an increase of $1,224 in net unrealized gains on equity securities during the three and nine months ended September 30, 2021, driven by changes in fair value attributable to volatile equity markets. In addition to the impact of the overall equity markets, the Company’s sales activity (and resulting gains and losses) will impact the level and direction of the change in the net unrealized gain or loss of its equity securities portfolio. During the three and nine months ended September 30, 2022, the Company had net realized gains on its equity securities of $122 and $2,149, respectively, compared to net realized gains of $2,614 and $8,964 during the three and nine months ended September 30, 2021.

The Company’s fixed income securities are classified as available for sale because it 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 losses of $12,727 and $49,946 during the three and nine months ended September 30, 2022, respectively, compared to net unrealized losses of $2,121 and $6,443 during the three and nine months ended September 30, 2021. 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.

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Income (Loss) before Income Taxes

For the three months ended September 30, 2022, the Company had a pre-tax loss of $13,243 compared to a pre-tax loss of $6,481 for the three months ended September 30, 2021. The increase in pre-tax loss was largely attributable to loss development on the significant catastrophe losses in Nebraska and South Dakota that occurred during the second quarter, losses related to a catastrophe in North Dakota that occurred in the third quarter, and the change in net investment gains/losses attributable to the impact of equity markets on the Company’s equity securities portfolio.

For the nine months ended September 30, 2022, the Company had a pre-tax loss of $69,687 compared to pre-tax income of $2,896 for the nine months ended September 30, 2021. The decrease in pre-tax income was largely attributable to the significant catastrophe losses in Nebraska, South Dakota, and North Dakota, along with the change in net investment gains/losses attributable to the impact of equity markets on the Company’s equity securities portfolio.

Income Tax Expense (Benefit)

The Company recorded an income tax benefit of $3,074 for the three months ended September 30, 2022, compared to an income tax benefit of $1,622 for the three months ended September 30, 2021. Our effective tax rate for the third quarter of 2022 was 23.2% compared to an effective tax rate of 25.0% for the third quarter of 2021.

The Company recorded an income tax benefit of $14,921 for the nine months ended September 30, 2022, compared to income tax expense of $707 for the nine months ended September 30, 2021. Our effective tax rate for the first nine months of 2022 was 21.4% compared to an effective tax rate of 24.4% for the first nine months of 2021.

A portion of the effective tax rate is attributable to Illinois state income taxes.

Net Income (Loss)

For the three months ended September 30, 2022, the Company had a net loss before non-controlling interest of $10,169 compared to net loss of $4,859 for the three months ended September 30, 2021. The decrease was largely attributable to the significant catastrophe losses in Nebraska, South Dakota, and North Dakota, along with the change in net investment gains/losses attributable to the impact of equity markets on the Company’s equity securities portfolio.

For the nine months ended September 30, 2022, the Company had a net loss before non-controlling interest of $54,766 compared to net income of $2,189 for the nine months ended September 30, 2021. The decrease was largely attributable to the significant catastrophe losses in Nebraska, South Dakota, and North Dakota, along with the change in net investment gains/losses attributable to the impact of equity markets on the Company’s equity securities portfolio.

Return on Average Equity

For the three months ended September 30, 2022, the Company had annualized return on average equity, after non-controlling interest, of (15.4)% compared to annualized return on average equity, after non-controlling interest, of (5.5)% for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the Company had annualized return on average equity, after non-controlling interest, of (24.3)% compared to annualized return on average equity, after non-controlling interest, of 0.9% for the nine months ended September 30, 2021.

Average equity is calculated as the average between beginning and ending shareholders’ equity, excluding non-controlling interest for the period.

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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. The Company is 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 2021 Annual Report. There have been no changes in our critical accounting policies from December 31, 2021.

Liquidity and Capital Resources

The Company generates sufficient funds from its operations and maintains a high degree of liquidity in its investment portfolio to meet the demands of claim settlements and operating expenses. The primary sources of funds are premium collections, investment earnings, and maturing investments. In 2017, we raised $93,145 in net proceeds from our IPO, which we planned to use for strategic acquisitions.

In 2018, we used $17,000 for the acquisition of Direct Auto, which was paid in cash at closing. On January 1, 2020, we acquired Westminster for $40,000. We paid $20,000 at the time of closing. The terms of the acquisition agreement included payment of the remaining $20,000, subject to certain adjustments, in three equal installments on each of the first and second anniversaries of the closing, and on the first business day of the month preceding the third anniversary of the closing. The first two installments were paid in January 2021 and January 2022. The Company anticipates using the net proceeds from the IPO to satisfy the remaining obligation in December 2022.

We currently anticipate that cash generated from our operations and available from our investment portfolio, along with the remaining IPO net proceeds, will be sufficient to fund our operations for the foreseeable future.

The Company’s philosophy is to provide sufficient cash flows from operations to meet its obligations in order to minimize the forced sales of investments. The Company maintains a portion of its investment portfolio in relatively short-term and highly liquid assets to ensure the availability of funds.

The change in cash and cash equivalents for the nine months ended September 30, 2022 and 2021, were as follows:

    Nine Months Ended September 30,  
    2022     2021  
Net cash flows from operating activities   $ (24,680 )   $ 9,489  
Net cash flows from investing activities     18,639       (52,471 )
Net cash flows from financing activities     (10,305 )     (10,366 )
Net decrease in cash and cash equivalents   $ (16,346 )   $ (53,348 )

 

For the nine months ended September 30, 2022, net cash used by operating activities totaled $24,680 compared to net cash provided by operating activities of $9,489 a year ago. This decrease was primarily driven by higher claim payments related to catastrophe losses during the current year and higher levels of premiums and agents’ balances receivable and federal income tax recoverable.

For the nine months ended September 30, 2022, net cash provided by investing activities totaled $18,639 compared to net cash used by investing activities of $52,471 a year ago. This decrease in cash used was attributable to the significant catastrophe losses in Nebraska and South Dakota during the current quarter, which resulted in more sales of securities to pay losses and less available cash for investment purchases. The decrease was also attributable to the Company investing a higher level of excess cash during the first quarter of 2021.

For the nine months ended September 30, 2022, net cash used by financing activities totaled $10,305 compared to $10,366 a year ago. This decrease was primarily attributable to the Company repurchasing shares of its own common stock for $2,870 during the first nine months of 2022, compared to $3,211 during the first nine months of 2021.

As a standalone entity, and outside of the net proceeds from the IPO, the Company’s principal source of long-term liquidity will be dividend payments from its directly-owned subsidiaries.

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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 capital 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 capital 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.

The amount available for payment of dividends from Nodak Insurance to us during 2022 without the prior approval of the North Dakota Insurance Department is approximately $21,493 based upon the surplus of Nodak Insurance at December 31, 2021. 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, 2022, or the year ended December 31, 2021.

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 us during 2022 without the prior approval of the North Dakota Insurance Department is approximately $3,796 based upon the surplus of Direct Auto at December 31, 2021. No dividends were declared or paid by Direct Auto during the nine months ended September 30, 2022, or the year ended December 31, 2021.

Westminster re-domesticated from Maryland 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 Westminster to us during 2022 without the prior approval of the North Dakota Insurance Department is approximately $2,471 based upon the surplus of Westminster at December 31, 2021. No dividends were declared or paid by Westminster during the nine months ended September 30, 2022, or the year ended December 31, 2021.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Part I, Item 1, Note 2, “Basis of Presentation and Accounting Policies--Recent Accounting Pronouncements” in this Quarterly Report on Form 10-Q.

 

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Item 3. - Quantitative and Qualitative Disclosures about Market Risk

The Company’s assessment of market risk as of September 30, 2022, 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 2021 Annual Report filed with the SEC.

Item 4. - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-15(b)) as of September 30, 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective.

Changes in Internal Controls

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. In addition, when we acquire new businesses, we incorporate our controls and procedures into the acquired business as part of our integration activities. Since 2018, we have invested significant resources to comprehensively document and analyze our system of internal control over financial reporting. We have identified areas requiring improvement, and continue to make selected improvements to processes and controls to address issues identified through this review. These improvements may include such activities as implementing new, more efficient systems, automating manual processes, formalizing policies and procedures, increasing monitoring controls, and updating existing systems. We plan to continue this initiative as well as prepare for the first audit of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002 for the annual period ending December 31, 2022, which may result in changes to our internal control over financial reporting.

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 quarter ended September 30, 2022, to which this report relates that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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Part II. - OTHER INFORMATION

Item 1. - Legal Proceedings

We are party to litigation in the normal course of 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.

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 2021 Annual Report.

 

 

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Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds

All dollar amounts included in Item 2 herein, except per share amounts, are in thousands.

The Company has not sold any unregistered securities within the past three years.

On January 17, 2017, our registration statement on Form S-1 registering our common stock was declared effective by the SEC. On March 13, 2017, the Company completed the IPO of 10,350,000 shares of common stock at a price of $10.00 per share. The Company received net proceeds of $93,145 from the offering, after deducting underwriting discounts and offering expenses. Griffin Financial Group, LLC acted as our placement agent in connection with the IPO.

Direct Auto was acquired on August 31, 2018, with $17,000 of the net proceeds from the IPO.

On January 1, 2020, we acquired Westminster for $40,000. We paid $20,000 at the time of closing. The terms of the acquisition agreement included payment of the remaining $20,000, subject to certain adjustments, in three equal installments on each of the first and second anniversaries of the closing, and on the first business day of the month preceding the third anniversary of the closing. The first two installments were paid in January 2021 and January 2022. The Company anticipates using the net proceeds from the IPO to satisfy the remaining obligation in December 2022.

From time to time, the Company may also repurchase its own stock. These repurchases may be used to satisfy its obligations under the equity incentive plans or may be done for other reasons. To date, the Company has used the net proceeds from the IPO to fund these buyback programs.

There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on January 17, 2017.

On May 4, 2020, 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 year ended December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $7,238 under this authorization. During the nine months ended September 30, 2021, we repurchased an additional 144,110 shares of our common stock for $2,762 to close out this authorization.

On August 11, 2021, our Board of Directors approved an additional authorization for the repurchase of up to approximately $5,000 of the Company’s outstanding common stock. During the year ended December 31, 2021, we completed the repurchase of 81,095 shares of our common stock for $1,554 under this authorization. During the nine months ended September 30, 2022, we completed the repurchase of 173,419 shares of our common stock for $2,870 under this authorization. At September 30, 2022, $575 remains outstanding under this authorization.

On May 9, 2022, our Board of Directors approved an additional authorization for the repurchase of up to approximately $10,000 of the Company’s outstanding common stock.

Share repurchase activity during the three months ended September 30, 2022, is presented below:

Period in 2022   Total Number of
Shares
Purchased
    Average Price
Paid
Per Share
    Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
   

Maximum Dollar Value
of Shares That May Yet
Be Purchased Under the
Plans or Programs (2)

(in thousands)

 
July 1-31, 2022     30,803     $ 16.66       30,803     $ 11,001  
August 1-31, 2022     12,274       14.40       12,274       10,824  
September 1-30, 2022     19,098       13.05       19,098       10,575  
Total     62,175     $ 15.11       62,175     $ 10,575  

 

(1) Shares purchased pursuant to the August 11, 2021 publicly announced share repurchase authorization of up to approximately $5,000 of the Company’s outstanding common stock.    
(2) Maximum dollar value of shares that may yet be purchased consist of up to approximately $575 under the August 11, 2021, publicly announced repurchase authorization and up to approximately $10,000 under the May 9, 2022, publicly announced share repurchase authorization.     

 

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Table of Contents 

Item 3. - Defaults upon Senior Securities

Not Applicable

Item 4. - Mine Safety Disclosures

Not Applicable

Item 5. - Other Information

None

Item 6. - Exhibits

 

Exhibit
Number
 

 

Description

     
     
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)

 

 

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Table of Contents 

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, 2022.

 

   
 

NI HOLDINGS, INC.

 

   
  /s/ Michael J. Alexander
  Michael J. Alexander
 

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)

   

 

 

 

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