# NI Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [NI Holdings, Inc.](/companies/nodk.md) (CIK 1681206)
- Form: 10-Q
- Filed: 2024-08-08
- Accepted by EDGAR: Aug 8, 2024, 16:06 ET
- Period: 2024-06-30
- Accession: 0001174947-24-000978
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1681206/000117494724000978/nodk-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1681206/000117494724000978/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $87.8m | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $162.3m | us-gaap:Revenues |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $15.8m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $45.6m | us-gaap:GrossProfit |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | −$1.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $306.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$16.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$9.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.77 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.47 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.77 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.47 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 20,970,384 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 20,951,579 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $34.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $630.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-06-30 | $51.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-06-30 | $571.0m | us-gaap:Assets |
| Total liabilities | at 2024-06-30 | $331.5m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $2.4m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-06-30 | $239.4m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 29,914 characters.

The following discussion is intended to provide a more comprehensive review of our operating results and financial condition than can be obtained from reading the unaudited consolidated financial statements alone. Unless otherwise noted, the information in the following discussion is being presented for our continuing operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial Statements.” Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q constitutes forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” included elsewhere in this Form 10-Q. Part I, Item 1A, “Risk Factors” included in our 2023 Annual Report should also be reviewed for a discussion of important factors that could cause actual results to differ materially from the results described, or implied by, the forward-looking statements contained herein.

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

### Financial Highlights

### 2024 Second Quarter Consolidated Results of Continuing Operations

- Net loss of $7,478, or $0.36 per share basic and diluted
- Net premiums earned of $85,169
- Net investment income of $2,523
- Net unfavorable prior year reserve development of $8,382
- Underwriting loss of $11,708
- Combined ratio of 113.7%
- Operating cash flows of $16,707

### 2024 Second Quarter Consolidated Financial Condition

- Total cash and investments of $379,784
- Total assets of $570,987
- Unpaid losses and loss adjustment expenses of $148,527
- Total liabilities of $331,537
- Shareholders’ equity of $239,450

43

### Results of Continuing Operations

Our consolidated net loss from continuing operations was $7,478 for the three months ended June 30, 2024, compared to net loss from continuing operations of $2,576 for the three months ended June 30, 2023. Our consolidated net loss from continuing operations was $543 for the six months ended June 30, 2024, compared to net loss from continuing operations of $762 for the six months ended June 30, 2023.

The major components of revenues and net loss are shown below:

| Revenues: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net premiums earned | $85,169 | $78,835 | $155,053 | $141,706 |
| Fee and other income | 695 | 490 | 1,099 | 751 |
| Net investment income | 2,523 | 1,923 | 5,278 | 3,614 |
| Net investment gains (losses) | (580) | (173) | 876 | 1,230 |
| Total revenues | 87,807 | 81,075 | 162,306 | 147,301 |
| Components of net income (loss): |  |  |  |  |
| Net premiums earned | 85,169 | 78,835 | 155,053 | 141,706 |
| Losses and loss adjustment expenses | 69,358 | 60,077 | 109,502 | 101,202 |
| Amortization of deferred policy acquisition costs and other underwriting and general expenses | 27,519 | 24,259 | 53,041 | 47,064 |
| Underwriting loss | (11,708) | (5,501) | (7,490) | (6,560) |
| Fee and other income | 695 | 490 | 1,099 | 751 |
| Net investment income | 2,523 | 1,923 | 5,278 | 3,614 |
| Net investment gains (losses) | (580) | (173) | 876 | 1,230 |
| Loss from continuing operations before income taxes | (9,070) | (3,261) | (237) | (965) |
| Income tax expense (benefit) | (1,592) | (685) | 306 | (203) |
| Net loss from continuing operations | $(7,478) | $(2,576) | $(543) | $(762) |

### Net Premiums Earned

| Net premiums earned: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Direct premium | $91,500 | $86,622 | $166,899 | $153,292 |
| Assumed premium | 653 | 827 | 804 | 1,403 |
| Ceded premium | (6,984) | (8,614) | (12,650) | (12,989) |
| Total net premiums earned | $85,169 | $78,835 | $155,053 | $141,706 |

Our net premiums earned for the three months ended June 30, 2024, increased $6,334, or 8.0%, compared to the three months ended June 30, 2023. Net premiums earned for the six months ended June 30, 2024, increased $13,347, or 9.4%, compared to the six months ended June 30, 2023.

| Net premiums earned: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Private Passenger Auto | $22,471 | $20,543 | $44,573 | $40,197 |
| Non-Standard Auto | 26,743 | 21,645 | 51,731 | 42,524 |
| Home and Farm | 21,924 | 20,414 | 43,339 | 40,405 |
| Crop | 10,978 | 13,336 | 9,429 | 12,612 |
| All Other | 3,053 | 2,897 | 5,981 | 5,968 |
| Total net premiums earned | $85,169 | $78,835 | $155,053 | $141,706 |

44

Below are comments regarding net premiums earned by business segment:

*Private Passenger Auto –* Net premiums earned for the second quarter of 2024 increased $1,928, or 9.4%, compared to the same period in 2023. Net premiums earned for the first six months of 2024 increased $4,376, or 10.9% from the first six months of 2023. Results were driven by new business growth in North Dakota as well as significant rate increases in North Dakota, South Dakota, and Nebraska, partially offset by lower new business and retention levels in South Dakota and Nebraska as a result of underwriting actions taken to improve profitability.

*Non-Standard Auto –* Net premiums earned for the second quarter of 2024 increased $5,098, or 23.6%, compared to the same period in 2023. Net premiums earned for the first six months of 2024 increased $9,207, or 21.7% from the first six months of 2023. Results were driven by new business growth in Illinois and Arizona as well as significant rate increases in the Chicago market where our non-standard auto business is concentrated, partially offset by lower retention compared to prior year periods.

*Home and Farm –* Net premiums earned for the second quarter of 2024 increased $1,510, or 7.4%, compared to the same period in 2023. Net premiums earned for the first six months of 2024 increased $2,934, or 7.3% from the first six months of 2023. Results were driven by new business growth in North Dakota, rate increases, and increased insured property values, which were primarily the result of higher inflationary factors. These increases were partially offset by lower retention rates and new business levels in Nebraska and South Dakota as a result of underwriting actions taken to improve profitability.

*Crop –* Net premiums earned for the second quarter of 2024, decreased $2,358, or 17.7%, compared to the same period in 2023. Net premiums earned for the first six months of 2024 decreased $3,183, or 25.2% from the first six months of 2023. The year-to-date decrease was driven by lower commodity prices in the current year.

*All Other –* Net premiums earned for the second quarter of 2024, increased $156, or 5.4%, compared to the same period in 2023. Net premiums earned for the first six months of 2024 increased $13, or 0.2%, from the first six months of 2023. Results were drive by rate and insured value increases for the commercial and excess lines of business, partially offset by the continued run-off of our participation in an assumed domestic and international reinsurance pool of business.

### Losses and Loss Adjustment Expenses

| Net losses and loss adjustment expenses: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Direct losses and loss adjustment expenses | $73,350 | $66,211 | $114,869 | $108,164 |
| Assumed losses and loss adjustment expenses | 224 | 67 | 269 | 157 |
| Ceded losses and loss adjustment expenses | (4,216) | (6,201) | (5,636) | (7,119) |
| Total net losses and loss adjustment expenses | $69,358 | $60,077 | $109,502 | $101,202 |

Our net losses and loss adjustment expenses for the three months ended June 30, 2024, increased $9,281, or 15.4%, compared to the three months ended June 30, 2023. Our net losses and loss adjustment expenses for the six months ended June 30, 2024, increased $8,300, or 8.2%, compared to the six months ended June 30, 2023.

| Net losses and loss adjustment expenses: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Private Passenger Auto | $19,929 | $18,867 | $31,222 | $34,493 |
| Non-Standard Auto | 19,313 | 14,139 | 36,182 | 31,177 |
| Home and Farm | 22,026 | 17,915 | 34,207 | 26,634 |
| Crop | 7,311 | 8,210 | 5,754 | 7,435 |
| All Other | 779 | 946 | 2,137 | 1,463 |
| Total net losses and loss adjustment expenses | $69,358 | $60,077 | $109,502 | $101,202 |

| Loss and loss adjustment expenses ratio: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Private Passenger Auto | 88.7% | 91.8% | 70.0% | 85.8% |
| Non-Standard Auto | 72.2% | 65.3% | 69.9% | 73.3% |
| Home and Farm | 100.5% | 87.8% | 78.9% | 65.9% |
| Crop | 66.6% | 61.6% | 61.0% | 59.0% |
| All Other | 25.5% | 32.7% | 35.7% | 24.5% |
| Total loss and loss adjustment expenses ratio | 81.4% | 76.2% | 70.6% | 71.4% |

Below are comments regarding significant changes in the net losses and loss adjustment expenses, and the net loss and loss adjustment expense ratios, by business segment:

*Private Passenger Auto –* The net loss and loss adjustment expense ratio decreased 3.1 percentage points and 15.8 percentage points in the three- and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. These decreases were driven by the earned premium growth as well as lower levels of weather-related losses in the current year due to the mild winter in the Midwest compared to elevated winter weather-related losses in the prior year. Both periods were affected by elevated loss costs due to continued high levels of inflation.

*Non-Standard Auto –* The net loss and loss adjustment expense ratio increased 6.9 percentage points in the three-month period ended June 30, 2024, compared to the same period in 2023. This increase was driven by elevated loss severity as a result of inflationary factors as well as unfavorable prior year loss reserve development. The net loss and loss adjustment expense ratio decreased 3.4 percentage points in the six-month period ended June 30, 2024, compared to the same period in 2023. This decrease was primarily driven by earned premium growth resulting from new business growth and significant rate increases.

*Home and Farm –* The net loss and loss adjustment expense ratio increased 12.7 percentage points and 13.0 percentage points in the three- and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. These increases in net loss and loss adjustment expense ratios were driven by higher non-catastrophe weather-related losses in South Dakota and Nebraska during 2024 compared to the prior year.

*Crop –* The net loss and loss adjustment expense ratio increased 5.0 percentage points and 2.0 percentage points in the three- and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. These increases were driven by slightly less favorable crop growing conditions compared to the prior year.

*All Other –* The net loss and loss adjustment expense ratio decreased 7.2 percentage points in the three-month period ended June 30, 2024, compared to the same period in 2023. This decrease was driven by improved loss experience related to the commercial business. The net loss and loss adjustment expense ratio increased 11.2 percentage points in the six-month period ended June 30, 2024, compared to the same period in 2023. This increase was driven by slightly elevated large loss experience compared to the prior year.

### Underwriting and General Expenses and Expense Ratio

| Underwriting and general expenses: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Amortization of deferred policy acquisition costs | $19,290 | $16,784 | $36,107 | $31,788 |
| Other underwriting and general expenses | 8,229 | 7,475 | 16,934 | 15,276 |
| Total underwriting and general expenses | 27,519 | 24,259 | 53,041 | 47,064 |
| Expense Ratio | 32.3% | 30.9% | 34.2% | 33.2% |

The expense ratio is calculated by dividing other underwriting and general expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company’s operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio increased 1.4 percentage points and 1.0 percentage points in the three-and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. The increase in the amortization of deferred policy acquisition costs is due to higher deferrable costs resulting from significant premium growth compared to the prior year, including significant growth in the Non-Standard Auto segment which generally pays higher agent commissions than our other segments.

### Underwriting Gain (Loss) and Combined Ratio

| Underwriting gain (loss): | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Private Passenger Auto | $(4,294) | $(4,120) | $(506) | $(6,575) |
| Non-Standard Auto | (2,831) | (1,224) | (5,016) | (6,444) |
| Home and Farm | (7,348) | (3,695) | (4,811) | 1,307 |
| Crop | 1,955 | 2,443 | 1,964 | 2,462 |
| All Other | 810 | 1,095 | 879 | 2,690 |
| Total underwriting loss | $(11,708) | $(5,501) | $(7,490) | $(6,560) |

| Combined ratio: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Private Passenger Auto | 119.1% | 120.1% | 101.1% | 116.3% |
| Non-Standard Auto | 110.6% | 105.6% | 109.7% | 115.1% |
| Home and Farm | 133.6% | 118.1% | 111.1% | 96.7% |
| Crop | 82.2% | 81.6% | 79.1% | 80.5% |
| All Other | 73.5% | 62.2% | 85.3% | 54.9% |
| Combined ratio | 113.7% | 107.1% | 104.8% | 104.6% |

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 $6,207, or 112.8%, for the three-month period ended June 30, 2024, compared to the same period in 2023. The total underwriting loss increased $930, or 14.2%, for the six-month period ended June 30, 2024, compared to the same period in 2023. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses as well as the Underwriting and General Expenses and Expense Ratio sections above.

The overall combined ratio increased 6.6 percentage points in the three-month period ended June 30, 2024, compared to the same period in 2023. The overall combined ratio increased 0.2 percentage points in the six-month period ended June 30, 2024, compared to the same period in 2023. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses as well as the Underwriting and General Expenses and Expense Ratio sections above.

### Fee and Other Income

We had fee and other income of $695 and $1,099 for the three and six months ended June 30, 2024, respectively, compared to $490 and $751 for the three and six months ended June 30, 2023, respectively. Fee income is largely attributable to the Non-Standard Auto segment and is a key component in measuring its profitability. Fee and other income on this business increased to $340 and $690 for the three and six months ended June 30, 2024, respectively, from $239 and $471 for the three and six months ended June 30, 2023, respectively, driven by growth in this segment.

### Net Investment Income

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

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Average cash and invested assets | $371,313 | $337,611 | $365,684 | $339,050 |
| Net investment income | $2,523 | $1,923 | $5,278 | $3,614 |
| Gross return on average cash and invested assets | 3.6% | 3.1% | 3.8% | 3.1% |
| Net return on average cash and invested assets | 2.7% | 2.3% | 2.9% | 2.1% |

Net investment income increased $600 for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Net investment income increased $1,664 for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. These increases were primarily driven by the higher interest rate environment which resulted in higher reinvestment rates in our fixed income portfolio.

Gross and net return on average cash and invested assets increased year-over-year, primarily driven by the favorable interest rate environment that resulted in significantly higher net investment income on a slightly increased average fixed income securities balance (measured at fair value). In addition, the increase in investments in high dividend yield equities resulted in relatively consistent year-over-year net investment income despite a reduction in the average equities balance (measured at fair value). The increase in average cash and invested assets was driven by higher operating cash flows during 2023 and the first six months of 2024.

### Net Investment Gains (Losses)

Net investment gains (losses) consisted of the following:

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Gross realized gains | $191 | $344 | $390 | $13,018 |
| Gross realized losses, excluding credit impairment losses | (182) | (442) | (472) | (1,481) |
| Net realized gains (losses) | 9 | (98) | (82) | 11,537 |
| Change in net unrealized gains on equity securities | (589) | (75) | 958 | (10,307) |
| Net investment gains (losses) | $(580) | $(173) | $876 | $1,230 |

We had net realized gains of $9 and losses of $82 for the three and six months ended June 30, 2024, respectively, compared to net unrealized losses of $98 and gains of $11,537 for the three and six months ended June 30, 2023, respectively. The elevated net realized gains in the six months ended June 30, 2023, were the result of a strategic liquidation of a portfolio of equity securities. The gross realized gains from the sale of these securities were largely offset by the elimination of the unrealized gain position of these securities. No credit impairment losses were reported during any of the periods presented.

We experienced a decrease of $589 and an increase of $958 in net unrealized gains on equity securities during the three and six months ended June 30, 2024, respectively, attributable to overall favorable equity markets during the current year partially offset by unfavorable equity markets during the current quarter. We experienced a decrease in net unrealized gains on equity securities of $75 and $10,307 during the three and six months ended June 30, 2023, respectively. The decrease in unrealized gains on equity securities during the six months ended June 30, 2023, was driven by the equity portfolio liquidation noted above, offset by the impact of changes in fair value attributable to favorable equity markets during the quarter.

Our fixed income securities are classified as available for sale because we will, from time to time, make sales of securities that are not impaired, consistent with our investment goals and policies. The fixed income portion of the portfolio experienced net unrealized losses of $923 and net unrealized losses of $2,730 during the three and six months ended June 30, 2024, respectively, compared to net unrealized losses of $2,766 and net unrealized gains of $2,977 during the three and six months ended June 30, 2023, respectively. The changes were primarily the result of changes in U.S. interest rates. The change in the fair value of fixed income securities is not reflected in net income; rather it is reflected as a separate component (net of income taxes) of other comprehensive income.

### Income (Loss) before Income Taxes

For the three months ended June 30, 2024, we had a pre-tax loss of $9,070 compared to a pre-tax loss of $3,261 for the three months ended June 30, 2023. The year-over-year change was largely attributable to higher non-catastrophe weather-related losses for Home and Farm in the states of South Dakota and Nebraska as well as unfavorable prior year loss reserve development for Non-Standard Auto, partially offset by higher net investment income.

For the six months ended June 30, 2024, we had a pre-tax loss of $237 compared to pre-tax loss of $965 for the six months ended June 30, 2023. The year-over-year improvement was largely attributable to higher levels of net investment income as well as lower levels of winter weather-related losses for Private Passenger Auto in the current year, partially offset by higher non-catastrophe weather-related losses for Home and Farm in the states of South Dakota and Nebraska.

### Income Tax Expense (Benefit)

We recorded an income tax benefit of $1,592 for the three months ended June 30, 2024, compared to an income tax benefit of $685 for the three months ended June 30, 2023. Our effective tax rate for the second quarter of 2024 was 17.6% compared to an effective tax rate of 21.0% for the second quarter of 2023.

We recorded an income tax expense of $306 for the six months ended June 30, 2024, compared to income tax benefit of $203 for the six months ended June 30, 2023. Our effective tax rate for the first six months of 2024 was 42.0% compared to an effective tax rate of 21.0% for the first six months of 2023. The effective tax rate for the first six months of 2024 was impacted by a $346 current quarter valuation allowance on net operating loss carryforwards established as a result of the Battle Creek demutualization.

### Net Income (Loss)

For the three months ended June 30, 2024, we had a net loss before non-controlling interest of $7,478 compared to a net loss of $2,576 for the three months ended June 30, 2023. The year-over-year change was largely attributable to higher non-catastrophe weather-related losses for Home and Farm in the states of South Dakota and Nebraska as well as unfavorable prior year loss reserve development for Non-Standard Auto, partially offset by higher net investment income.

For the six months ended June 30, 2024, we had a net loss before non-controlling interest of $543 compared to net loss of $762 for the six months ended June 30, 2023. The year-over-year improvement was largely attributable to higher levels of net investment income as well as lower levels of winter weather-related losses for Private Passenger Auto in the current year, partially offset by higher non-catastrophe weather-related losses for Home and Farm in the states of South Dakota and Nebraska.

### Return on Average Equity

For the three months ended June 30, 2024, we had annualized return on average equity, after non-controlling interest, of (12.7)% compared to annualized return on average equity, after non-controlling interest, of (4.5)% for the three months ended June 30, 2023.

For the six months ended June 30, 2024, we had annualized return on average equity, after non-controlling interest, of (0.5)% compared to annualized return on average equity, after non-controlling interest, of (0.3)% for the six months ended June 30, 2023.

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

### Critical Accounting Policies

The preparation of financial statements in accordance with GAAP requires both the use of estimates and judgment relative to the application of appropriate accounting policies. We are required to make estimates and assumptions in certain circumstances that affect amounts reported in the unaudited consolidated financial statements and related footnotes. We evaluate these estimates and assumptions on an ongoing basis based on historical developments, market conditions, industry trends, and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to these estimates and assumptions or that reported results of operations will not be materially and adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. Our critical accounting policies are more fully described in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” presented in our 2023 Annual Report. There have been no changes in our critical accounting policies from December 31, 2023.

### Liquidity and Capital Resources

We expect to generate sufficient funds from our operations and maintain a high degree of liquidity in our investment portfolio to meet the demands of claim settlements and operating expenses for the foreseeable future. Our primary sources of funds are premium collections, investment earnings, and fixed income maturities.

The change in cash and cash equivalents for continuing and discontinued operations for the six months ended June 30, 2024 and 2023, were as follows:

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash flows from operating activities | $34,760 | $19,887 |
| Net cash flows from investing activities | (3,776) | 1,117 |
| Net cash flows from financing activities | (202) | (3,397) |
| Net increase in cash and cash equivalents | $30,782 | $17,607 |

For the six months ended June 30, 2024, net cash provided by operating activities totaled $34,760 compared to $19,887 a year ago. This change was primarily driven by lower levels of loss and loss adjustment payments in the current year.

For the six months ended June 30, 2024, net cash used by investing activities totaled $3,776 compared to net cash provided of $1,117 a year ago. This change was primarily attributable to a decrease in sales of equity securities compared to the prior year partially offset by the proceeds from the sale of Westminster in the current year.

For the six months ended June 30, 2024, net cash used by financing activities totaled $202 compared to $3,397 a year ago. This decrease in cash used was attributable to a reduction in share repurchases in the current year.

As a holding company, a principal source of long-term liquidity will be dividend payments from our directly-owned subsidiaries.

Nodak Insurance is restricted by the insurance laws of North Dakota as to the amount of dividends or other distributions it may pay to NI Holdings. North Dakota law sets the maximum amount of dividends that may be paid by Nodak Insurance during any twelve-month period after notice to, but without prior approval of, the North Dakota Insurance Department. This amount cannot exceed the lesser of (i) 10% of the Company’s surplus as regards policyholders as of the preceding December 31, or (ii) the Company’s statutory net income for the preceding calendar year (excluding realized investment gains), less any prior dividends paid during such twelve-month period. In addition, any insurance company other than a life insurance company may carry forward net income from the preceding two calendar years, not including realized investment gains, less any dividends actually paid during those two calendar years. Dividends in excess of this amount are considered “extraordinary” and are subject to the approval of the North Dakota Insurance Department.

There is no amount available for payment of dividends from Nodak Insurance to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department. Prior to its payment of any dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if an insurance company is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Nodak Insurance during the six months ended June 30, 2024, or the year ended December 31, 2023.

Direct Auto re-domesticated from Illinois to North Dakota during 2021 and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Direct Auto to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $90 as of December 31, 2023. No dividends were declared or paid by Direct Auto during the six months ended June 30, 2024, or the year ended December 31, 2023.

Westminster re-domesticated from Maryland to North Dakota during 2021 and was subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Westminster to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department was approximately $1,200 as of December 31, 2023. No dividends were declared or paid by Westminster during the six months ended June 30, 2024, or the year ended December 31, 2023. Westminster was sold on June 30, 2024. For additional information see Part I, Item 1, Note 19 “Discontinued Operations” of this Quarterly Report on Form 10-Q.

## Market risk

As filed, 274 characters.

The Company’s assessment of market risk as of June 30, 2024, indicates there have been no material changes in the quantitative and qualitative disclosures from those in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Annual Report.

## Controls and procedures

As filed, 2,086 characters.

### 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 Rules 13a-15(b) and 15d-15(b) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”), and that such material information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosures. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

### Changes in Internal Control over Financial Reporting

In the ordinary course of business, we periodically review our system of internal control over financial reporting to identify opportunities to improve our controls and increase efficiency, while ensuring that we maintain an effective internal control environment. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. -

OTHER INFORMATION

## Risk factors

As filed, 156 characters.

There have been no material changes in our assessment of our risk factors from those set forth in Part I, Item 1A, “Risk Factors” in our 2023 Annual Report.

Filed Aug 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001174947-24-000978. Last ingested by Listed: Nov 6, 2026, 16:44 ET. No prices; not investment advice.