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Item 8. Financial Statements and Supplementary Data

2021-03-10 compared with 2020-03-11 · 788 added, 1199 removed, 644 unchanged (76% of the section changed)

Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

of NI Holdings, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of NI Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of NI Holdings, Inc.

and Subsidiaries (collectively, the “Company”) as of December 31, 2019 and 2018,

and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the

three years in the period ended December 31, 2019, and the related notes and the schedule listed in Item 15(a)(2) (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present

fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and the

results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with

accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of NI Holdings, Inc.

and Subsidiaries (collectively, the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in shareholders’

equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are

the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required

to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are

required to obtain an understanding of internal controls over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal controls over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to

assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Mazars USA LLP

We have served as the Company’s auditor

since February 2016.

We have served as the Company’s auditor since February 2016.

Fort Washington, Pennsylvania

9 unchanged sentences

Total cash and investments

Premiums and agents' balances receivable

Premiums and agents'

balances receivable

Deferred policy acquisition costs

Reinsurance premiums receivable

Reinsurance recoverables on losses

Accrued investment income

Property and equipment

Property and equipment, net

Receivable from Federal Crop Insurance Corporation

5 unchanged sentences

Deferred income taxes, net

Westminster consideration payable

Accrued expenses and other liabilities

Commitments and contingencies

Total liabilities

Commitments and contingencies

Shareholders’

Common stock, $ 0.01 par value, authorized 25,000,000 shares, issued:

1 unchanged sentence

and outstanding:

22,119,380 shares, 2018 –

2020 –

21,318,638 shares, 2019 –

22,119,380 shares

4 unchanged sentences

Accumulated other comprehensive income, net of income taxes

Treasury stock, at cost, 2019 –

713,565 shares, 2018 –

Treasury stock, at cost, 2020 –

1,538,622 shares, 2019 –

713,565 shares

Non-controlling interest

Total liabilities and equity

The accompanying notes are an integral part of these consolidated

financial statements.

Total shareholders’

Total liabilities and shareholders’

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

NI Holdings, Inc.

14 unchanged sentences

Net income attributable to NI Holdings, Inc.

Basic earnings per common share

Diluted earnings per common share

The accompanying notes are an integral part of these consolidated

financial statements.

Earnings per common share:

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

Dilutive securities

Weighted average common shares used in diluted per common share calculations

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

NI Holdings, Inc.

Consolidated Statements of Comprehensive

Years Ended December 31, 2019, 2018 and 2017

(dollar amounts in thousands)

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2020, 2019 and 2018 (dollar amounts in thousands)

Attributable to

2 unchanged sentences

Non-Controlling

Net income (loss)

Other comprehensive income, before income taxes:

9 unchanged sentences

Non-Controlling

Other comprehensive income, before income taxes:

Holding gains on investments

Reclassification adjustment for net realized capital gain included in net income

Other comprehensive income, before income taxes

Income tax expense related to items of other comprehensive income

Other comprehensive income, net of income taxes

Comprehensive income

Attributable to

NI Holdings, Inc.

Attributable to

Non-Controlling Interest

Other comprehensive loss, before income taxes:

5 unchanged sentences

Comprehensive income

Attributable to

NI Holdings, Inc.

Attributable to

Non-Controlling

Net income (loss)

Other comprehensive income, before income taxes:

Holding gains on investments

Reclassification adjustment for net realized capital loss (gain) included in net income (loss)

Other comprehensive income, before income taxes

Income tax expense related to items of other comprehensive income

Other comprehensive income, net of income taxes

Comprehensive income (loss)

The accompanying notes are an integral part of these consolidated

financial statements.

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

NI Holdings, Inc.

Consolidated Statements of Changes in Equity

Consolidated Statements of Changes in Shareholders’

Years Ended December 31, 2020, 2019 and 2018

1 unchanged sentence

Comprehensive

Shareholders’

January 1, 2018

Issuance of common stock

Net income (loss)

Other comprehensive income, net of income taxes

Reclassification of income tax effects stranded in AOCI from tax reform

Other comprehensive loss, net of income taxes

Share-based compensation

Purchase of treasury stock

Issuance of vested award shares

Distribution of employee stock ownership plan shares

December 31, 2017

Other comprehensive loss, net of income taxes

Balance, December 31, 2018

Cumulative effect of change in accounting for equity securities

Other comprehensive income, net of income taxes

Share-based compensation

3 unchanged sentences

December 31, 2019

Cumulative effect of change in accounting for equity securities

Net income (loss)

Other comprehensive income, net of income taxes

4 unchanged sentences

December 31, 2020

The accompanying notes are an integral part of these consolidated

financial statements.

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

NI Holdings, Inc.

3 unchanged sentences

Cash flows from operating activities:

Adjustments to reconcile net income to net cash flows from operating activities:

Gain on acquisition of Direct Auto Insurance Company

9 unchanged sentences

Loss (gain) on sale of property and equipment

Changes in assets and liabilities which provided (used) cash:

Premiums and agents’

Changes in operating assets and liabilities:

Premiums and agents’

balances receivable

9 unchanged sentences

Cash flows from investing activities:

Proceeds from sales of fixed income securities

Proceeds from maturities and sales of fixed income securities

Proceeds from sales of equity securities

1 unchanged sentence

Purchases of equity securities

Purchases of property and equipment, net

Purchases of property and equipment

Acquisition of Direct Auto Insurance Company (cash consideration paid net of cash and cash equivalents acquired)

Acquisition of Westminster American Insurance Company (cash consideration paid net of cash and cash equivalents acquired)

Net cash flows from investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock

Purchases of treasury stock

Loan to employee stock ownership plan

Issuance of restricted stock awards

3 unchanged sentences

Cash and cash equivalents at end of period

The Company paid $3,500, $10,300, and $4,550 in federal income

taxes during 2019, 2018, and 2017, respectively.

The accompanying notes are an integral part of these consolidated

financial statements.

Non-cash item:

Present value of installment payable issued in connection with acquisition of Westminster American Insurance Company

Income taxes paid

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

NI Holdings, Inc.

3 unchanged sentences

NI Holdings, Inc.

(“NI Holdings”)

is a North Dakota business corporation that is the stock holding company of Nodak Insurance Company 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.

(“NI Holdings”) is a North Dakota business corporation that is the stock holding company of Nodak Insurance Company 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 Company (the successor to Nodak Mutual Insurance Company) were issued to Nodak Mutual

Group, Inc., which then contributed the shares to NI Holdings in exchange for 55% of the outstanding shares of common stock of

Immediately following the conversion, all of the outstanding shares of common stock of Nodak Insurance Company (the successor to Nodak Mutual Insurance Company) were issued to Nodak Mutual Group, Inc., which then contributed the shares to NI Holdings in exchange for 55 % of the outstanding shares of common stock of NI Holdings.

Nodak Insurance Company 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 Company and its existing subsidiaries.

The newly issued shares of NI Holdings were available for public

trading on March 16, 2017.

These Consolidated Financial Statements of NI

Holdings include the financial position and results of operations of NI Holdings and six other entities:

Nodak Insurance Company (“Nodak Insurance”, formerly Nodak Mutual Insurance Company prior to the conversion);

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 Company and its existing subsidiaries.

The newly issued shares of NI Holdings were available for public trading on March 16, 2017.

These Consolidated Financial Statements of NI Holdings include the financial position and results of operations of NI Holdings and seven other entities:

Nodak Insurance Company (“Nodak Insurance”, formerly Nodak Mutual Insurance Company prior to the conversion);  

Nodak Agency, Inc.

(“Nodak Agency”);

American West Insurance Company (“American West”);

Primero Insurance Company (“Primero”);

Battle Creek Mutual Insurance Company (“Battle Creek”, an affiliated company with Nodak Insurance);

Direct Auto Insurance Company (“Direct Auto”).

Nodak Insurance is the largest domestic

property and casualty insurance company in North Dakota.

Nodak Insurance was incorporated on April 15, 1946 under the laws of North

Dakota, and benefits from a strong marketing affiliation with the North Dakota Farm Bureau Federation (“NDFB”).

Insurance specializes in providing private passenger auto, homeowners, farmowners, commercial, crop hail, and Federal multi-peril

crop insurance coverages.

Nodak Agency, a wholly-owned subsidiary

of Nodak Insurance, is an inactive shell corporation.

American West, a wholly-owned subsidiary

of Nodak Insurance, 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 is a wholly-owned subsidiary

of Tri-State, Ltd.

(“Nodak Agency”);  

American West Insurance Company (“American West”);  

Primero Insurance Company (“Primero”);  

Battle Creek Mutual Insurance Company (“Battle Creek”, an affiliated company with Nodak Insurance);

and  

Direct Auto Insurance Company (“Direct Auto”);

and  

Westminster American Insurance Company (Westminster).  

Nodak Insurance is the largest domestic property and casualty insurance company in North Dakota.

Nodak Insurance was incorporated on April 15, 1946 under the laws of North Dakota, and benefits from a strong marketing affiliation with the North Dakota Farm Bureau (“NDFB”).

Nodak Insurance specializes in providing private passenger auto, homeowners, farmowners, commercial, crop hail, and Federal multi-peril crop insurance coverages.

Nodak Agency, a wholly-owned subsidiary of Nodak Insurance, is an inactive shell corporation.

American West, a wholly-owned subsidiary of Nodak Insurance, 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 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 is controlled by Nodak Insurance

via a surplus note and 100% quota-share agreement.

The terms of the surplus note and quota-share agreement allow Nodak Insurance

to appoint two-thirds of the Battle Creek Board of Directors.

Battle Creek is a property and casualty insurance company writing

personal auto, homeowners, and farm coverages solely in the state of Nebraska.

Direct Auto, a wholly-owned subsidiary

of NI Holdings, is a property and casualty 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.

The same executive management

team provides oversight and strategic direction for the entire organization.

Nodak Insurance provides common product oversight,

pricing practices, and underwriting standards, as well as underwriting and claims administration, to itself, American West, and

Battle Creek.

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

The insurance

companies share a combined business plan to achieve market penetration and underwriting profitability objectives.

within the products of the insurance companies generally relate to the states in which the risk is located and specific risk profiles

targeted within similar classes of business.

of Consolidation

Our Consolidated Financial Statements,

which we have prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”),

include our accounts and those of our wholly-owned subsidiaries, as well as Battle Creek, an entity we control via contract.

have eliminated all significant inter-company accounts and transactions in consolidation.

The terms “we”, “us”,

“our”, or “the Company”

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 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.

Battle Creek is a property and casualty insurance company writing personal auto, homeowners, and farm coverages solely in the state of Nebraska.

Direct Auto, a wholly-owned subsidiary of NI Holdings, is a property and casualty 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.

The financial results of Direct Auto have been included in the Consolidated Financial Statements herein since August 31, 2018.

Westminster, a wholly-owned subsidiary of NI Holdings, is a property and casualty insurance company licensed in seventeen states and the District of Columbia.

Westminster is headquartered in Owings Mills, Maryland and underwrites multi-peril commercial 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.

The financial results of Westminster have been included in the Consolidated Financial Statements herein since January 1, 2020.

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.

The insurance companies share a combined business plan to achieve market penetration and underwriting profitability objectives.

Distinctions within the products of the insurance companies generally relate to the states in which the risk is located and specific risk profiles targeted within similar classes of business.

Basis of Consolidation

Our Consolidated Financial Statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), include our accounts and those of our wholly-owned subsidiaries, as well as Battle Creek, an entity we control via contract.

We have eliminated all significant inter-company accounts and transactions in consolidation.

The terms “we”, “us”, “our”, or “the Company”

as used herein refer to the consolidated entity.

of Significant Accounting Policies

Summary of Significant Accounting Policies

Use of Estimates :

In preparing our Consolidated Financial

Statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of

the balance sheet, and revenues and expenses for the periods then ended.

In preparing our Consolidated Financial Statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet, and revenues and expenses for the periods then ended.

Actual results could differ significantly from those estimates.

We make estimates and assumptions that

can have a significant effect on amounts and disclosures we report in our Consolidated Financial Statements.

The most significant

estimates relate to our reserves for unpaid losses and loss adjustment expenses, earned premiums for crop insurance, valuation

of investments, determination of other-than-temporary impairments, valuation allowances for deferred income tax assets, deferred

policy acquisition costs, and the valuations used to establish intangible assets acquired related to business combinations.

we believe our estimates are appropriate, the ultimate amounts may differ from the estimates provided.

We regularly review our

methods for making these estimates as well as the continuing appropriateness of the estimated amounts, and we reflect any adjustment

we consider necessary in our current results of operations.

We make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our Consolidated Financial Statements.

The most significant estimates relate to our reserves for unpaid losses and loss adjustment expenses, earned premiums for crop insurance, valuation of investments, determination of other-than-temporary impairments, valuation allowances for deferred income tax assets, deferred policy acquisition costs, and the valuations used to establish intangible assets acquired related to business combinations.

While we believe our estimates are appropriate, the ultimate amounts may differ from the estimates provided.

We regularly review our methods for making these estimates as well as the continuing appropriateness of the estimated amounts, and we reflect any adjustment we consider necessary in our current results of operations.

Variable-Interest Entities :

Any company deemed to be a variable interest

entity (“VIE”) is required to be consolidated by the primary beneficiary of the VIE.

We assess our investments in other entities

at inception to determine if any meet the qualifications of a VIE.

Any company deemed to be a variable interest entity (“VIE”) is required to be consolidated by the primary beneficiary of the VIE.

We assess our investments in other entities at inception to determine if any meet the qualifications of a VIE.

We consider an investment in another company to be a VIE if:

(a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated

financial support, (b) the characteristics of a controlling financial interest are missing (either the ability to make decisions

through voting or other rights, the obligation to absorb expected losses of the entity or the right to receive the expected residual

returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the

expected losses of the entity and/or the rights to receive the expected residual returns of the entity, and substantially all of

the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

(a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or the rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

Upon the occurrence of certain events, we would reassess our initial determination of whether the investment is a VIE.

We evaluate whether we are the primary

beneficiary of each VIE and we consolidate the VIE if we have both (1) the power to direct the economically significant activities

of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity.

We consider the contractual

agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting

rights, and board representation of the respective parties in determining whether we qualify as the primary beneficiary.

Our assessment

of whether we are the primary beneficiary of a VIE is performed at least annually.

We control Battle Creek via a 100% quota-share

reinsurance agreement between Nodak Insurance and Battle Creek, as well as the ability to control a majority of the Board of Directors

of Battle Creek.

Through the effects of the 100% quota-share agreement with Battle Creek, we are considered the primary beneficiary

of Battle Creek’s operating results excluding net investment income, bad debt expense, and income taxes.

Therefore, 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 Equity in our Consolidated Balance Sheet.

We evaluate whether we are the primary beneficiary of each VIE and we consolidate the VIE if we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity.

We consider the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights, and board representation of the respective parties in determining whether we qualify as the primary beneficiary.

Our assessment of whether we are the primary beneficiary of a VIE is performed at least annually.

We control Battle Creek via a surplus note which provides us with ability to appoint two-thirds of the Board of Directors of Battle Creek.

Under the quota share reinsurance agreement that existed through December 31, 2019, Battle Creek’s operating results included only net investment income, bad debt expense, and income taxes.

Effective January 1, 2020, the Company implemented an intercompany pooling reinsurance agreement, and Battle Creek’s operating results now include their participation in the underwriting results of the pool (2% during 2020).

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 Consolidated Balance Sheet.

Cash and Cash Equivalents :

Cash and cash equivalents include certain

investments in highly liquid debt instruments with original maturities of three months or less.

Cost approximates fair value for

these short-term investments.

Cash and cash equivalents include certain investments in highly liquid debt instruments with original maturities of three months or less.

Cost approximates fair value for these short-term investments.

Investments :

We have categorized our investment portfolio

as “available-for-sale”

We have categorized our investment portfolio as “available-for-sale”

and have reported the portfolio at fair value.

Unrealized gains and losses on fixed income

securities, and on equity securities prior to January 1, 2019, net of income taxes, are reported in accumulated other comprehensive

Effective January 1, 2019, in accordance with a change in accounting principle, changes in unrealized gains and losses

on equity securities are reported as a component of net capital gain on investments in our operating results.

Fair values are based on quoted market

prices or dealer quotes, if available.

If a quoted market price is not available, fair value is estimated using quoted market prices

for similar securities.

Unrealized gains and losses on fixed income securities, and on equity securities prior to January 1, 2019, net of income taxes, are reported in accumulated other comprehensive income.

Effective January 1, 2019, in accordance with a change in accounting principle, changes in unrealized gains and losses on equity securities began to be reported as a component of net capital gain on investments in our operating results.

Fair values are based on quoted market prices or dealer quotes, if available.

If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Amortization of premium and accretion of discount are computed using an effective interest method.

investment income includes interest and dividend income together with amortization of purchase premiums and discounts, and is net

of investment management and custody fees.

Realized gains and losses on investments are determined using the specific identification

method and are included in net capital gain on investments, along with the change in unrealized gains and losses on equity securities

after January 1, 2019.

We review our investments each quarter

to determine whether a decline in fair value below the amortized cost basis is other than temporary.

Accordingly, we assess whether

we intend to sell or it is more likely than not that we will be required to sell a security before recovery of its amortized cost

For fixed income securities that are considered other-than-temporarily impaired and that we do not intend to sell and will

not be required to sell prior to recovery of the amortized cost basis, we separate the amount of the impairment into the amount

that is credit related (credit loss component) and the amount due to all other factors.

The credit loss component is recognized

in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future

cash flows discounted at the security’s effective yield.

The remaining difference between the security’s fair value

and the present value of future expected cash flows is due to factors that are not credit related and, therefore, is not required

to be recognized as losses in the Consolidated Statement of Operations, but is recognized in other comprehensive income.

We classify each fair value measurement

at the appropriate level in the fair value hierarchy.

The hierarchy gives the highest priority to unadjusted quoted market price

in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level

III measurements).

An asset’s or liability’s classification within the fair value hierarchy is based on the lowest

level of significant input to its valuation.

Level I –

Quoted price in active markets for

identical assets and liabilities.

Level II –

Quoted prices in markets that are

not active or inputs that are observable either directly or indirectly.

Level II inputs include quoted prices for similar assets

or liabilities other than quoted in prices in Level I, quoted prices in markets that are not active, or other inputs that are observable

or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level III –

Unobservable inputs that are supported

by little or no market activity and are significant to the fair value of the assets or liabilities.

Unobservable inputs reflect

the reporting entity’s own assumptions that market participants would use in pricing the asset or liability.

Level III assets

and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies,

or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment

or estimation.

Fair Value of Other Financial

Instruments :

Our other financial instruments, aside

from investments, are cash and cash equivalents, premiums and agents’

balances receivable, and accrued expenses and accounts

The carrying amounts for cash and cash equivalents, premiums and agents’

balances receivable, and accrued expenses

and accounts payable approximate their fair value based on their short-term nature.

Other invested assets that do not have observable

inputs and little or no market activity are carried on a cost basis.

Net investment income includes interest and dividend income together with amortization of purchase premiums and discounts, and is net of investment management and custody fees.

Realized gains and losses on investments are determined using the specific identification method and are included in net capital gain on investments, along with the change in unrealized gains and losses on equity securities after January 1, 2019.

We review our investments each quarter to determine whether a decline in fair value below the amortized cost basis is other than temporary.

Accordingly, we assess whether we intend to sell or it is more likely than not that we will be required to sell a security before recovery of its amortized cost basis.

For fixed income securities that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors.

The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows discounted at the security’s effective yield.

The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and, therefore, is not required to be recognized as losses in the Consolidated Statement of Operations, but is recognized in other comprehensive income.

We classify each fair value measurement at the appropriate level in the fair value hierarchy.

The hierarchy gives the highest priority to unadjusted quoted market price in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements).

An asset’s or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its valuation.

Level I –

Quoted price in active markets for identical assets and liabilities.

Level II –

Quoted prices in markets that are not active or inputs that are observable either directly or indirectly.

Level II inputs include quoted prices for similar assets or liabilities other than quoted in prices in Level I, quoted prices in markets that are not active, or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level III –

Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

Unobservable inputs reflect the reporting entity’s own assumptions that market participants would use in pricing the asset or liability.

Level III assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Fair Value of Other Financial Instruments :

Our other financial instruments, aside from investments, are cash and cash equivalents, premiums and agents’

balances receivable, and accrued expenses and accounts payable.

The carrying amounts for cash and cash equivalents, premiums and agents’

balances receivable, and accrued expenses and accounts payable approximate their fair value based on their short-term nature.

Other invested assets that do not have observable inputs and little or no market activity are carried on a cost basis, which approximates fair value.

All other invested assets have been assessed for impairment.

The carrying value of these other invested assets was $ 2,924 at December 31, 2020 and $ 1,914 at December 31, 2019.

Reclassifications:

Certain amounts in the 2018 Consolidated

Financial Statements have been reclassified to conform to the 2019 presentation.

The reclassifications did not impact the 2017

Consolidated Financial Statements.

Reclassifications of Segment Information:

Effective in the first quarter of 2020, the Company’s results began to be reported in our Consolidated Financial Statements in the following five primary operating segments –

private passenger auto insurance, non-standard auto insurance, home and farm insurance, crop insurance, and commercial insurance.

A sixth “all other”

segment captures all other insurance business, including our assumed reinsurance lines of business.

Commercial insurance was previously reported within the all other segment.

All prior periods presented have been reclassified to conform to this presentation.

Revenue Recognition :

We record premiums written at policy

inception and recognize them as revenue on a pro rata basis over the policy term or, in the case of crop insurance, over the period

We record premiums written at policy inception and recognize them as revenue on a pro rata basis over the policy term or, in the case of crop insurance, over the period of risk.

The portion of premiums that could be earned in the future is deferred and reported as unearned premiums.

When policies

lapse, the Company reverses the unearned portion of the written premium and removes the applicable unearned premium.

Policy-related

fee income is recognized when collected.

The Company uses the direct write-off

method for recognizing bad debts.

Accounts billed directly to the policyholder are provided grace payment and cancellation notice

periods per state insurance regulations.

Any earned but uncollected premiums are written off within 90 days after the effective

date of policy cancellation.

Direct Auto also provides for agency

billing for a portion of their agents.

Accounts billed to agents are due within 60 days of

the statement date.

The balances are

carried as agents’

When policies lapse, the Company reverses the unearned portion of the written premium and removes the applicable unearned premium.

Policy-related fee income is recognized when collected.

The period of risk for our crop insurance program, which comprise primarily spring-planted crops, typically runs from April 1 (the approximate time when farmers can begin to work their fields) through December 15 (last date claims can be made for the most recent planting season).

The crop insurance program provides indemnification for acreage that cannot be planted because of flood, drought, or other natural disaster (known as “prevented planting”).

In cases where a valid prevented planting claim is made by an insured, the Company assumes that the risk period has ended as there will be no additional coverage under the policy, and the Company will immediately recognize the remaining unearned premium.

The Company uses the direct write-off method for recognizing bad debts.

Accounts billed directly to the policyholder are provided grace payment and cancellation notice periods per state insurance regulations.

Any earned but uncollected premiums are written off within 90 days after the effective date of policy cancellation.

Direct Auto also provides for agency billing for a portion of their agents.

Accounts billed to agents are due within 60 days of the statement date.

The balances are carried as agents’

balances receivable until it is determined the amount is not collectible from the agent.

At that time,

the balance is written off as uncollectible.

At that time, the balance is written off as uncollectible.

The agent is responsible for all past due balances.

As part of its agent appointment,

Direct Auto requires a personal guarantee for all balances due to Direct Auto from the principal of the contracted agency.

As part of its agent appointment, Direct Auto requires a personal guarantee for all balances due to Direct Auto from the principal of the contracted agency.

Policy Acquisition Costs :

We defer our policy acquisition costs,

consisting primarily of commissions, premium taxes, and certain other underwriting costs, reduced by ceding commissions, which

vary with and relate directly to the production of business.

We amortize these deferred policy acquisition costs over the period

in which we earn the premiums.

The method we follow in computing deferred policy acquisition costs limits the amount of such deferred

costs to their estimated realizable value, which gives effect to the premium to be earned, related investment income, losses and

loss adjustment expenses, and certain other costs we expect to incur as we earn the premium.

We defer our policy acquisition costs, consisting primarily of commissions, premium taxes, and certain other underwriting costs, reduced by ceding commissions, which vary with and relate directly to the production of business.

We amortize these deferred policy acquisition costs over the period in which we earn the premiums.

The method we follow in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value, which gives effect to the premium to be earned, related investment income, losses and loss adjustment expenses, and certain other costs we expect to incur as we earn the premium.

Property and Equipment :

We report property and equipment at cost

less accumulated depreciation.

Depreciation is computed using the straight-line method based upon estimated useful lives of the

Losses and Loss Adjustment

Liabilities for unpaid losses and loss

adjustment expenses are estimates at a given point in time of the amounts we expect to pay with respect to policyholder claims

based on facts and circumstances then known.

At the time of establishing our estimates, we recognize that our ultimate liability

for losses and loss adjustment expenses will exceed or be less than such estimates.

We base our estimates of liabilities for unpaid

losses and loss adjustment expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability,

and other factors.

During the loss adjustment period, we may learn additional facts regarding certain claims, and, consequently,

it often becomes necessary for us to refine and adjust our estimates of the liability.

We reflect any adjustments to our liabilities

for unpaid losses and loss adjustment expenses in our operating results in the period in which we determine the need for a change

in the estimates.

We maintain liabilities for unpaid losses

and loss adjustment expenses with respect to both reported and unreported claims.

We establish these liabilities for the purpose

of covering the ultimate costs of settling all losses, including investigation and litigation costs.

We base the amount of our

liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances

surrounding each claim, and the insurance policy provisions relating to the type of loss our policyholder incurred.

the amount of our liability for unreported losses and loss adjustment expenses on the basis of historical information by line of

We report property and equipment at cost less accumulated depreciation.

Depreciation is computed using the straight-line method based upon estimated useful lives of the assets.

Losses and Loss Adjustment Expenses :

Liabilities for unpaid losses and loss adjustment expenses are estimates at a given point in time of the amounts we expect to pay with respect to policyholder claims based on facts and circumstances then known.

At the time of establishing our estimates, we recognize that our ultimate liability for losses and loss adjustment expenses will exceed or be less than such estimates.

We base our estimates of liabilities for unpaid losses and loss adjustment expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability, and other factors.

During the loss adjustment period, we may learn additional facts regarding certain claims, and, consequently, it often becomes necessary for us to refine and adjust our estimates of the liability.

We reflect any adjustments to our liabilities for unpaid losses and loss adjustment expenses in our operating results in the period in which we determine the need for a change in the estimates.

We maintain liabilities for unpaid losses and loss adjustment expenses with respect to both reported and unreported claims.

We establish these liabilities for the purpose of covering the ultimate costs of settling all losses, including investigation and litigation costs.

We base the amount of our liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim, and the insurance policy provisions relating to the type of loss our policyholder incurred.

We determine the amount of our liability for unreported losses and loss adjustment expenses on the basis of historical information by line of insurance.

Inflation is not explicitly selected in the loss reserve analysis.

However, historical inflation is embedded in the

estimated loss reserving function through analysis of costs and trends and reviews of historical reserving results.

monitor our liabilities and update them periodically using new information on reported claims and a variety of statistical techniques.

However, historical inflation is embedded in the estimated loss development factors.

We closely monitor our liabilities and update them periodically using new information on reported claims and a variety of statistical techniques.

We do not discount our liabilities for unpaid losses and loss adjustment expenses.

Reserve estimates can change over time

because of unexpected changes in assumptions related to our external environment and, to a lesser extent, assumptions as to our

internal operations.

Assumptions related to our external environment include the absence of significant changes in tort law and

the legal environment which may impact liability exposure, the trends in judicial interpretations of insurance coverage and policy

provisions, and the rate of loss cost inflation.

Internal assumptions include consistency in the recording of premium and loss

statistics, consistency in the recording of claims, payment and case reserving methodologies, accurate measurement of the impact

of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given

line of business, and consistency in reinsurance coverage and collectability of reinsured losses, among other items.

To the extent

we determine that underlying factors impacting our assumptions have changed, we attempt to make appropriate adjustments for such

changes in our reserves.

Accordingly, our ultimate liability for unpaid losses and loss adjustment expenses will likely differ

from the amount recorded.

Reserve estimates can change over time because of unexpected changes in assumptions related to our external environment and, to a lesser extent, assumptions as to our internal operations.

Assumptions related to our external environment include the absence of significant changes in tort law and the legal environment which may impact liability exposure, the trends in judicial interpretations of insurance coverage and policy provisions, and the rate of loss cost inflation.

Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodologies, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business, and consistency in reinsurance coverage and collectability of reinsured losses, among other items.

To the extent we determine that underlying factors impacting our assumptions have changed, we attempt to make appropriate adjustments for such changes in our reserves.

Accordingly, our ultimate liability for unpaid losses and loss adjustment expenses will likely differ from the amount recorded.

Income Taxes :

With the exception of Battle Creek, which

files a stand-alone federal income tax return, we currently file a consolidated federal income tax return.

For the year ended December

31, 2017 and thereafter, the consolidated federal income tax return included, and will include thereafter, NI Holdings and its

wholly-owned subsidiaries.

Direct Auto became part of the consolidated federal income tax return as of its acquisition date.

Insurance companies typically pay state

premium taxes rather than state income taxes.

However, Direct Auto is subject to state income taxes in the state of Illinois, in

addition to state premium taxes.

Additionally, NI Holdings, on a stand-alone basis, pays state income taxes to the state of North

Dakota for income or losses generated as separate financial entity.

While state premium taxes are included as a part of amortization

of deferred policy acquisition costs, state income taxes are combined with federal income taxes

within the financial reporting

category labeled income taxes.

The Company reports tax-related interest

and penalties, if any, as part of income tax expense in the year such amounts are determinable.

We account for deferred income taxes

using the asset and liability method.

The objective of the asset and liability method is to establish deferred income tax assets

and liabilities for the temporary differences between the financial reporting basis and the income tax basis of our assets and

liabilities at enacted tax rates expected to be in effect when we realize or settle such amounts.

Accounting guidance requires that companies

re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs,

and record an offset for the net amount of the change as a component of income tax expense from continuing operations in the period

of enactment.

The guidance also requires any change to a previously recorded valuation allowance as a result of re-measuring existing

temporary differences and loss carryforwards to be reflected as a component of income tax expense from continuing operations.

The Company has elected to reclassify

any tax effects stranded in accumulated other comprehensive income as a result of a change in income tax rates to retained earnings.

With the exception of Battle Creek, which files a stand-alone federal income tax return, we currently file a consolidated federal income tax return which includes NI Holdings and its wholly-owned subsidiaries.

Direct Auto and Westminster became part of the consolidated federal income tax return as of their acquisition dates.

Insurance companies typically pay state premium taxes rather than state income taxes.

However, Direct Auto is subject to state income taxes in the state of Illinois, in addition to state premium taxes.

Additionally, NI Holdings, on a stand-alone basis, pays state income taxes to the state of North Dakota for income or losses generated as a separate financial entity.

While state premium taxes are included as a part of amortization of deferred policy acquisition costs, state income taxes are combined with federal income taxes within the financial reporting category labeled income taxes.

The Company did not have any material uncertain tax positions.

The Company’s policy is to recognize tax-related interest and penalties accrued related to unrecognized benefits as a component of income tax expense (benefit).

The Company did not recognize any tax-related interest and penalties, nor did it have any tax-related interest or penalties accrued as of December 31, 2020 and 2019.

We account for deferred income taxes using the asset and liability method.

The objective of the asset and liability method is to establish deferred income tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of our assets and liabilities at enacted tax rates expected to be in effect when we realize or settle such amounts.

We re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs, and record an offset for the net amount of the change as a component of income tax expense from continuing operations in the period of enactment.

We also record any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards as a component of income tax expense from continuing operations.

The Company has elected to reclassify any tax effects stranded in accumulated other comprehensive income as a result of a change in income tax rates to retained earnings.

Credit Risk :

Our primary investment objective is to

earn competitive returns by investing in a diversified portfolio of securities.

Our portfolio of fixed income securities and, to

a lesser extent, short-term investments, is subject to credit risk.

We define this risk as the potential loss in fair value resulting

from adverse changes in the borrower’s ability to repay the debt.

We manage this risk by performing an analysis of prospective

investments and through regular reviews of our portfolio by our management team and investment advisors.

We also limit the amount

of our total investment portfolio that we invest in any one security.

Property and liability insurance coverages

are marketed through captive agents in North Dakota and through independent insurance agencies located throughout all other operating

All business, except for the majority of Direct Auto’s business, is billed directly to the policyholders.

We maintain cash balances primarily at

one bank, which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250.

During the normal course

of business, balances are maintained above the FDIC insurance limit.

The Company maintains short-term investment balances in investment

grade money market accounts that are insured by the Securities Investor Protection Corporation (“SIPC”) up to $500.

Our primary investment objective is to earn competitive returns by investing in a diversified portfolio of securities.

Our portfolio of fixed income securities and, to a lesser extent, short-term investments, is subject to credit risk.

We define this risk as the potential loss in fair value resulting from adverse changes in the borrower’s ability to repay the debt.

We manage this risk by performing an analysis of prospective investments and through regular reviews of our portfolio by our management team and investment advisors.

We also limit the amount of our total investment portfolio that we invest in any one security.

Property and liability insurance coverages are marketed through captive agents in North Dakota and through independent insurance agencies located throughout all other operating areas.

All business, except for the majority of Direct Auto’s business, is billed directly to the policyholders.

We maintain cash balances primarily at one bank, which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250 .

During the normal course of business, balances are maintained above the FDIC insurance limit.

The Company maintains short-term investment balances in investment grade money market accounts that are insured by the Securities Investor Protection Corporation (“SIPC”) up to $ 500 .

On occasion, balances for these accounts are maintained in excess of the SIPC insurance limit.

Reinsurance :

The Company limits the maximum net loss

that can arise from large risks or risks in concentrated areas of exposure by reinsuring (ceding) certain levels of risks to other

insurers or reinsurers, either on an automatic basis under general reinsurance contracts known as “treaties”

negotiation on substantial individual risks.

The Company limits the maximum net loss that can arise from large risks or risks in concentrated areas of exposure by reinsuring (ceding) certain levels of risks to other insurers or reinsurers, either on an automatic basis under general reinsurance contracts known as “treaties”

or by negotiation on substantial individual risks.

Ceded reinsurance is treated as the risk and liability of the assuming companies.

Reinsurance contracts do not relieve

the Company from its obligations to policyholders.

In the event that all or any of the reinsuring companies might be unable to

meet their obligations under existing reinsurance agreements, the Company would be liable for such defaulted amounts.

Reinsurance contracts do not relieve the Company from its obligations to policyholders.

In the event that all or any of the reinsuring companies might be unable to meet their obligations under existing reinsurance agreements, the Company would be liable for such defaulted amounts.

Goodwill and Other Intangibles :

Goodwill represents the excess of the

purchase price over the underlying fair value of acquired entities.

When completing acquisitions, we seek also to identify separately

identifiable intangible assets that we have acquired.

We assess goodwill and other intangibles with an indefinite useful life for

impairment annually.

Goodwill represents the excess of the purchase price over the underlying fair value of acquired entities.

When completing acquisitions, we seek also to identify separately identifiable intangible assets that we have acquired.

We assess goodwill and other intangibles with an indefinite useful life for impairment annually.

We also assess goodwill and other intangibles for impairment upon the occurrence of certain events.

our assessment, we consider a number of factors including operating results, business plans, economic projections, anticipated

future cash flows, and current market data.

Inherent uncertainties exist with respect to these factors and to our judgment in applying

them when we make our assessment.

Impairment of goodwill and other intangibles could result from changes in economic and operating

conditions in future periods.

We did not record any impairments of goodwill or other intangibles during the years ended December

31, 2019, 2018, or 2017.

Goodwill arising from the acquisition

of Primero in 2014 represents the excess of the purchase price over the fair value of the net assets acquired.

The purchase price

in excess of the fair value of net assets acquired was negotiated at arms-length with an unrelated party and was based upon the

strategic decision by Company management to expand both the geographic footprint and product lines of the Company.

The nature of

the business acquired was such that there were limited intangibles not reflected in the net assets acquired.

The purchase price

was paid with a combination of cash and cancellation of obligations owed to the acquired

company by the sellers.

The goodwill that

arose from this transaction is included in the basis of the net assets acquired and is not deductible for income tax purposes.

Intangible assets arising from the acquisition

of Direct Auto in 2018 represent the estimated fair values of certain intangible assets, including a favorable lease contract,

a state insurance license, the value of the Direct Auto trade name, and the value of business acquired (“VOBA”).

state insurance license asset has an indefinite life, while the favorable lease contract, Direct Auto trade name, and VOBA assets

will be amortized over eighteen months, five years, and twelve months, respectively, from the August 31, 2018 acquisition/valuation

of Direct Auto Insurance Company

On August 31, 2018, the Company 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 the Company.

Direct Auto is a property and casualty insurance company specializing in non-standard

automobile insurance in the state of Illinois.

The Company realized a $4,578 gain on the purchase of Direct Auto due to the use

of applicable purchase accounting guidance (known as a “bargain purchase”).

Direct Auto remains headquartered in

Chicago, Illinois and the current president (who was also one of the principal shareholders) of Direct Auto continues to manage

the Direct Auto insurance operations along with the staff and management team in place at the time of the acquisition.

of Direct Auto are included as part of the Company’s non-standard auto business segment following the closing date.

We account for business acquisitions

in accordance with the acquisition method of accounting, which requires, among other things, that most assets acquired, liabilities

assumed, and contingent consideration be recognized at their fair values as of the acquisition date, which is the closing date

for the Direct Auto transaction.

During the measurement period, adjustments to provisional purchase price allocations are recognized

if new information is obtained about the facts and circumstances that existed as of the acquisition date that, if known, would

have resulted in the recognition of those assets and liabilities as of that date.

The measurement period ends as soon as it is

determined that no more information is obtainable, but in no case shall the measurement period exceed one year from the acquisition

In making our assessment, we consider a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and current market data.

Inherent uncertainties exist with respect to these factors and to our judgment in applying them when we make our assessment.

Impairment of goodwill and other intangibles could result from changes in economic and operating conditions in future periods.

We did not record any impairments of goodwill or other intangibles during the years ended December 31, 2020, 2019, or 2018.

Goodwill arising from the acquisition of Primero in 2014 represents the excess of the purchase price over the fair value of the net assets acquired.

The purchase price in excess of the fair value of net assets acquired was negotiated at arms-length with an unrelated party and was based upon the strategic decision by Company management to expand both the geographic footprint and product lines of the Company.

The nature of the business acquired was such that there were limited intangibles not reflected in the net assets acquired.

The purchase price was paid with a combination of cash and cancellation of obligations owed to the acquired company by the sellers.

The goodwill that arose from this transaction is included in the basis of the net assets acquired and is not deductible for income tax purposes.

Intangible assets arising from the acquisition of Direct Auto in 2018 represent the estimated fair values of certain intangible assets, including a favorable lease contract, a state insurance license, the value of the Direct Auto trade name, and the value of business acquired (“VOBA”).

The state insurance license asset has an indefinite life, while the favorable lease contract, Direct Auto trade name, and VOBA assets will be amortized over eighteen months, five years, and twelve months, respectively, from the August 31, 2018 acquisition/valuation date.

Goodwill arising from the acquisition of Westminster in January 2020 represents the excess of the purchase price over the fair value of the net assets acquired.

Other intangible assets arising from the acquisition of Westminster represent the estimated fair values of certain intangible assets, including state insurance licenses, the value of Westminster’s distribution network, the value of the Westminster trade name, and the VOBA.

The state insurance license asset has an indefinite life, while the distribution networks asset, Westminster trade name, and VOBA assets will be amortized over twenty years, ten years, and twelve months, respectively, from the January 1, 2020 acquisition/valuation date.

Direct Auto Insurance Company:

On August 31, 2018, the Company 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 the Company.

Direct Auto is a property and casualty insurance company specializing in non-standard automobile insurance in the state of Illinois.

The Company realized a $ 4,578 gain on the purchase of Direct Auto due to the use of applicable purchase accounting guidance (known as a “bargain purchase”).

Direct Auto remains headquartered in Chicago, Illinois and continues to be led by its president (who was also one of the principal shareholders) and other key management in place at the time of the acquisition.

The results of Direct Auto are included as part of the Company’s non-standard auto business segment following the closing date.

We account for business acquisitions in accordance with the acquisition method of accounting, which requires, among other things, that most assets acquired, liabilities assumed, and contingent consideration be recognized at their fair values as of the acquisition date, which is the closing date for the Direct Auto transaction.

During the measurement period, adjustments to provisional purchase price allocations are recognized if new information is obtained about the facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date.

The measurement period ends as soon as it is determined that no more information is obtainable, but in no case shall the measurement period exceed one year from the acquisition date.

The Company did not make any adjustments during this period.

We assigned fair values to the acquired

intangibles consisting of favorable lease contract, state insurance license, Direct Auto trade name, and VOBA of $20, $100, $248,

and $5,134, respectively.

The state insurance license has an indefinite life, while the other intangibles will be amortized over

useful lives of up to five years.

During the years ended December 31, 2019

and 2018, the acquired Direct Auto business contributed revenues of $49,135 and $14,178, respectively, and net income of $9,867

and $2,979, respectively, to the Company.

The following unaudited pro forma summary presents consolidated information of the Company

as if the business combination had occurred on January 1, 2017:

Pro Forma Year Ended December 31,

We assigned fair values to the acquired intangibles consisting of favorable lease contract, state insurance license, Direct Auto trade name, and VOBA of $ 20 , $ 100 , $ 248 , and $ 5,134 , respectively.

The state insurance license has an indefinite life, while the other intangibles will be amortized over useful lives of up to five years .

During the year ended December 31, 2018, the acquired Direct Auto business contributed revenues of $ 14,178 , and net income of $ 2,979 , to the Company.

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2018:

Net income attributable to NI Holdings, Inc.

Basic earnings per common share attributable to NI Holdings, Inc.

The Company did not reflect any material,

nonrecurring pro forma adjustments directly attributable to the business combination to the above pro forma revenue and earnings.

These pro forma amounts have been calculated

after applying the Company’s accounting policies and adjusting the results of Direct Auto’s operations to reflect the

deferral and amortization of policy acquisition costs and the additional amortization that would have been charged assuming the

fair value adjustments to intangibles had been applied from January 1, 2017, with the related income tax effects.

In 2018, the Company incurred $118 of

acquisition-related costs.

The Company did not reflect any material, nonrecurring pro forma adjustments directly attributable to the business combination to the above pro forma revenue and earnings.

These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Direct Auto’s operations to reflect the deferral and amortization of policy acquisition costs and the additional amortization that would have been charged assuming the fair value adjustments to intangibles had been applied from January 1, 2018, with the related income tax effects.

In 2018, the Company incurred $ 118 of acquisition-related costs.

These expenses did not impact the pro forma amounts presented above.

The Company paid $17,000 in cash consideration

to the private shareholders of Direct Auto.

The Company paid $17,000 in cash consideration to the private shareholders of Direct Auto.

The acquisition of Direct Auto did not include any contingent consideration.

The following

table summarizes the consideration transferred to acquire Direct Auto and the amounts of identified assets acquired and liabilities

assumed at the acquisition date:

The following table summarizes the consideration transferred to acquire Direct Auto and the amounts of identified assets acquired and liabilities assumed at the acquisition date:

Fair Value of Consideration:

Total cash consideration transferred

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

Fair Value of Identifiable Assets Acquired and Liabilities Assumed:

Identifiable net assets:

Cash and cash equivalents

Fixed income securities, at fair value

Equity securities, at fair value

Premiums and agents' balances receivable

Fixed income securities

Equity securities

Premiums and agents'

balances receivable

Accrued investment income

11 unchanged sentences

Gain on bargain purchase

The fair value of the assets acquired

includes premiums and agents’

The fair value of the assets acquired includes premiums and agents’

balances receivable of $5,849.

This is the gross amount due from policyholders and agents,

none of which is anticipated to be uncollectible.

The Company did not acquire any other material class of receivable as a result

of the acquisition of Direct Auto.

The gain realized on bargain purchase

of $4,578 from the Direct Auto acquisition is included in fee and other income in the Company’s Consolidated Statements of

Operations for the year ended December 31, 2018.

Accounting Pronouncements

As an emerging growth company, we have

elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section

13(a) of the Exchange Act.

The following discussion includes effective dates for both public business entities and emerging growth

companies, as well as whether specific guidance may be adopted early.

On July 1, 2017, the Company early adopted

amended guidance from the Financial Accounting Standards Board (the “FASB”) on goodwill impairment testing.

amended guidance, the optional qualitative assessment (Step 0) and the first step of the quantitative assessment (Step 1) remain

Step 2 is eliminated.

As a result, for annual impairment testing or in the event a test is required prior to the annual

test, the Company will use Step 0 to determine if an impairment might exist and Step 1 to determine the amount of goodwill impairment.

An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value,

not to exceed the carrying amount of goodwill in the reporting unit.

The Company early adopted this guidance during the year ended

December 31, 2017 on a prospective basis as a change in accounting principle, therefore at the date of adoption there was no impact

to the Company’s financial position or results of operations.

In March 2016, the FASB issued amended

guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences,

classification of awards as either equity or liabilities, and classification on the Consolidated Statement of Cash Flows.

income tax benefits and income tax deficiencies should be recognized as income tax expense or benefit in the Consolidated Statement

of Operations, instead of affecting additional paid-in-capital on the Consolidated Balance Sheet.

These discrete income tax items

should be classified along with other income tax cash flows as an operating activity on the Consolidated Statement of Cash Flows.

In addition, cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing

Amendments requiring recognition of excess income tax benefits

and income tax deficiencies in the Consolidated Statement

of Operations should be applied prospectively.

The Company early adopted this guidance on a prospective basis for the year ended

December 31, 2017.

At the date of adoption, there was an immaterial impact to the computation of diluted earnings per share, but

no impact to the Company’s financial position or results of operations.

In February 2018, the FASB issued new

guidance to provide companies the option to reclassify income tax effects that are stranded in accumulated other comprehensive

income as a result of income tax reform to retained earnings.

In the period of adoption, an entity was able to choose whether to

apply the amendments retrospectively or in the period of adoption.

The Company elected to early adopt this guidance on a prospective

basis, resulting in a $2,717 reclassification of stranded income tax effects from accumulated other comprehensive income to retained

earnings within the Equity section of the Consolidated Balance Sheet as of December 31, 2017.

There was no impact to the Company’s

financial position, results of operations, or cash flows.

In January 2019, the Company adopted

amended guidance from the FASB that generally requires entities to measure equity securities at fair value and recognize changes

in fair value in their results of operations.

The FASB issued other impairment, disclosure, and presentation improvements related

to financial instruments within the guidance.

Effective January 1, 2019, we applied this guidance, which resulted in a cumulative-effect

reclassification of after-tax unrealized net capital gains aggregating $8,184, from accumulated other comprehensive income to retained

This reclassification had no impact to the Company’s results of operations at the date of adoption.

The after-tax

change in accounting for equity securities did not affect the Company’s total Equity;

however, the unrealized net capital

gains reclassified at the transition date to retained earnings will never be recognized in net income.

Prior year financial statements

were not restated.

Going forward, the accounting used for equity securities will record the market fluctuations attributed to equity

securities through our results of operations rather than as a component of other comprehensive income, which will add a level of

volatility to our net income.

In December 2019, the Company adopted

guidance from the FASB that establishes the manner in which an entity recognizes the amount of revenue to which it expects to be

entitled for the transfer of promised goods or services to customers.

While the guidance replaces most existing GAAP revenue recognition

guidance, the scope of the guidance excludes insurance contracts.

The Company has reviewed its sources of revenues, and has determined

that no material revenues are derived from non-insurance contracts and thus subject to the new revenue recognition guidance.

a result, there was no impact to the Company’s financial position, results of operations, or cash flows.

In December 2019, the Company

adopted amended guidance from the FASB that addressed diversity in how certain cash receipts and cash payments are presented and

classified in the Consolidated Statement of Cash Flows, and the presentation of restricted cash in the Consolidated Statement of

The amendments provided clarity on the treatment of eight specifically defined types of cash inflows and outflows,

and requires entities to explain the changes during a reporting period in the total of cash, cash equivalents, and amounts generally

described as restricted cash or restricted cash equivalents.

There was no impact to the Company’s financial position, results

of operations, or cash flows.

This is the gross amount due from policyholders and agents, none of which is anticipated to be uncollectible.

The Company did not acquire any other material class of receivable as a result of the acquisition of Direct Auto.

The gain realized on bargain purchase of $ 4,578 from the Direct Auto acquisition is included in fee and other income in the Company’s Consolidated Statements of Operations for the year ended December 31, 2018.

Westminster American Insurance Company:

On January 1, 2020, the Company completed the acquisition of 100 % of the common stock of Westminster from the private shareholder of Westminster, and Westminster became a consolidated subsidiary of the Company.

Westminster is a property and casualty insurance company specializing in multi-peril commercial insurance in nine states and the District of Columbia.

Westminster remains headquartered in Owings Mills, Maryland, and continues to be led by its president and other key management in place at the time of the acquisition.

The results of Westminster are included as part of the Company’s commercial business segment following the closing date.

The measurement period ends as soon as it is determined that no more information is obtainable, but in no case shall the measurement period exceed one year from the acquisition date.

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2019:

Net income attributable to NI Holdings, Inc.

Basic earnings per common share attributable to NI Holdings, Inc.

The Company did not reflect any material, nonrecurring pro forma adjustments directly attributable to the business combination in the above pro forma revenue and earnings.

These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Westminster to reflect the deferral and amortization of policy acquisition costs and the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from January 1, 2019, with the related income tax effects.

The Company incurred acquisition-related costs of $ 828 during the year ended December 31, 2020, and $ 83 during the year ended December 31, 2019.

These expenses were reclassified to occur in first quarter 2019 in the pro forma amounts presented above.

The Company paid $20,000 in cash consideration to the private shareholder of Westminster as of the closing date, and will pay

an additional $20,000 in three equal annual installments.

The acquisition of Westminster did not include any contingent consideration other than a provision regarding future changes to federal income tax rates.

The following table summarizes the consideration transferred to acquire Westminster and the amounts of identified assets acquired and liabilities assumed at the acquisition date:

Fair Value of Consideration:

Cash consideration transferred

Present value of future cash consideration

Total cash consideration

Fair Value of Identifiable Assets Acquired and Liabilities Assumed:

Identifiable net assets:

Cash and cash equivalents

Fixed income securities

Equity securities

Other investments

Premiums and agents'

balances receivable

Reinsurance recoverables on losses

Accrued investment income

Property and equipment

Federal income tax recoverable

State insurance licenses (included in goodwill and other intangibles)

Distribution network (included in goodwill and other intangibles)

Trade name (included in goodwill and other intangibles)

Value of business acquired (included in goodwill and other intangibles)

Unpaid losses and loss adjustment expenses

Unearned premiums

Deferred income taxes, net

Reinsurance premiums payable

Accrued expenses and other liabilities

Total identifiable net assets

The fair value of the assets acquired includes premiums and agents’

balances receivable of $8,507 and reinsurance recoverables on losses of $763.

These are the gross amounts due from policyholders and reinsurers, respectively, none of which are anticipated to be uncollectible.

The Company did not acquire any other material class of receivable as a result of the acquisition of Westminster.

We have completed our final analysis of the assets and liabilities acquired and assigned fair values to the acquired distribution network, state insurance licenses, Westminster trade name, and VOBA intangible assets of $ 6,700 , $ 1,800 , $ 500 , and $ 4,750 , respectively.

The state insurance license intangible has an indefinite life, while the other intangible assets will be amortized over useful lives of up to twenty years.

The goodwill is not deductible for income tax purposes.

Recent Accounting Pronouncements

As an emerging growth company, we have elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

The following discussion includes effective dates for both public business entities and emerging growth companies, as well as whether specific guidance may be adopted early.

In January 2019, the Company adopted amended guidance from the Financial Accounting Standards Board (“FASB”) that generally requires entities to measure equity securities at fair value and recognize changes in fair value in their results of operations.

The FASB issued other impairment, disclosure, and presentation improvements related to financial instruments within the guidance.

Effective January 1, 2019, we applied this guidance, which resulted in a cumulative-effect reclassification of after-tax unrealized net capital gains aggregating $ 8,184 , from accumulated other comprehensive income to retained earnings.

This reclassification had no impact to the Company’s results of operations at the date of adoption.

The after-tax change in accounting for equity securities did not affect the Company’s total shareholders’

however, the unrealized net capital gains reclassified at the transition date to retained earnings will never be recognized in net income.

Prior year financial statements were not restated.

Going forward, the accounting used for equity securities will record the market fluctuations attributed to equity securities through our results of operations rather than as a component of other comprehensive income, which will add a level of volatility to our net income.

In December 2019, the Company adopted guidance from the FASB that establishes the manner in which an entity recognizes the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

While the guidance replaces most existing GAAP revenue recognition guidance, the scope of the guidance excludes insurance contracts.

The Company has reviewed its sources of revenues, and has determined that no material revenues are derived from non-insurance contracts and thus subject to the new revenue recognition guidance.

As a result, there was no impact to the Company’s financial position, results of operations, or cash flows.

In December 2019, the Company adopted amended guidance from the FASB that addressed diversity in how certain cash receipts and cash payments are presented and classified in the Consolidated Statement of Cash Flows, and the presentation of restricted cash in the Consolidated Statement of Cash Flows.

The amendments provided clarity on the treatment of eight specifically defined types of cash inflows and outflows, and requires entities to explain the changes during a reporting period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.

There was no impact to the Company’s financial position, results of operations, or cash flows.

In January 2020, the Company adopted amended guidance from the FASB that shortened the amortization period of premiums on certain fixed income securities held at a premium to the earliest call date rather than through the maturity date of the callable security.

The adoption of this guidance did not materially impact the Company’s financial position, results of operations, or cash flows.

In March 2020, the Company adopted modified disclosure requirements from the FASB relating to the fair value of assets and liabilities.

The modifications primarily related to Level 3 fair value measurements.

The Company does not currently carry any Level 3 assets or liabilities.

As a result, there was no impact to the Company’s financial statement disclosures.

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.

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 leases 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, which replaces the current

lease guidance, is effective for annual and interim reporting periods beginning after December 15, 2018 for public business entities.

For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December

15, 2020 and interim periods within fiscal years beginning after December 15, 2021.

An entity may apply the new leases 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, which replaces the current lease guidance, is effective for annual and interim reporting periods beginning after December 15, 2018 for public business entities.

For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted for all entities.

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.

In June 2016, the FASB issued

a new standard that will require timelier recording of credit losses on loans and other financial instruments held by financial

institutions and other organizations.

The guidance will require 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.

institutions and other organizations will now use forward-looking information to better form their credit loss estimates.

of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to

reflect the full amount of expected credit losses.

Organizations will 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 is effective for fiscal years, and interim periods within those fiscal years, beginning after December

2019 for Securities and Exchange Commission filers that are not smaller reporting companies.

For private companies, smaller

reporting companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December

15, 2022 and interim periods within those fiscal years.

Early adoption is permitted for all entities as of the fiscal years beginning

after December 15, 2018, including interim periods within those fiscal years.

We are evaluating the impact this new guidance will

have on our financial position, results of operations, and cash flows.

In March 2017, the FASB issued

amended guidance to shorten the amortization period of premiums on certain purchased callable fixed income securities to the earliest

The amended guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within

those fiscal years, for public business entities.

For private companies and emerging growth companies, this amended guidance is

effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December

Early adoption is permitted, including adoption in an interim period.

If an entity early adopts the amendments in an

interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

entity should apply the amendments on a modified retrospective basis through a cumulative-effect adjustment directly to retained

earnings as of the beginning of the period of adoption.

We are evaluating the requirements of this guidance and the potential impact

to our financial position, results of operations, and cash flows.

In August 2018, the FASB issued

modified disclosure requirements relating to the fair value of assets and liabilities.

The amended requirements are effective for

fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted.

do not expect these modified requirements will have a material impact on our financial statement disclosures.

In December 2019, the FASB issued

amended guidance to simplify the accounting for income taxes.

The amended guidance is effective for fiscal years beginning after

December 15, 2020, including interim periods within those fiscal years, for public business entities.

For private companies and

emerging growth companies, this amended guidance is effective for fiscal years beginning after December 15, 2021, and interim periods

within fiscal years beginning after December 15, 2022.

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 liabilities 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 will require timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

The guidance will require 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.

Financial institutions and other organizations will now use forward-looking information to better form their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses.

Organizations will 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 is 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 emerging growth companies that did not relinquish private company relief.

For all other entities, this guidance is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years.

Early adoption is permitted for all entities.

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 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, for public business entities.

For private companies and emerging growth companies, this amended guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted, including adoption in an interim period.

are evaluating the impact this new guidance will have on our financial position, results of operations, and cash flows.

The amortized cost and estimated fair

value of investment securities as of December 31, 2019 and 2018 were as follows:

We are evaluating the impact this new guidance will have on our financial position, results of operations, and cash flows.

The amortized cost and estimated fair value of fixed income securities as of December 31, 2020 and 2019 were as follows:

December 31, 2020

10 unchanged sentences

Total fixed income securities

Equity securities:

Basic materials

Communications

Consumer, cyclical

Consumer, non-cyclical

Total equity securities

Total investments

December 31, 2019

10 unchanged sentences

Total fixed income securities

Equity securities:

Basic materials

Communications

Consumer, cyclical

Consumer, non-cyclical

Total equity securities

Total investments

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 of the securities may have the right to call or prepay certain obligations, which may or may not include call or

prepayment penalties.

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 of the securities may have the right to call or prepay certain obligations, which may or may not include call or prepayment penalties.

December 31, 2020

16 unchanged sentences

Total fixed income securities

Fixed income securities with a fair value

of $5,585 at December 31, 2019 and $4,900 at December 31, 2018 were deposited with various state regulatory agencies as required

Fixed income securities with a fair value of $ 6,093 at December 31, 2020 and $ 5,585 at December 31, 2019 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 and equity securities were as follows:

The investment category and duration of the Company’s gross unrealized losses on fixed income securities and equity securities were as follows:

December 31, 2020

9 unchanged sentences

Total fixed income securities

Equity securities:

Basic materials

Communications

Consumer, cyclical

Consumer, non-cyclical

Total equity securities

Total investments

December 31, 2019

9 unchanged sentences

Total fixed income securities

Equity securities:

Basic materials

Communications

Consumer, cyclical

Consumer, non-cyclical

Total equity securities

Total investments

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.

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 cost

of the securities is written down to fair value and the previously unrealized loss is therefore reflected as a realized capital

loss on investment.

The Company did not record any impairments

The Company recorded impairments of $382 and $330 in the years ended December 31, 2018 and 2017, respectively.

As of December 31, 2019, we held 88 fixed

income securities with unrealized losses.

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.

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 cost of the securities is written down to fair value and the previously unrealized loss is therefore reflected as a realized capital loss on investment.

The Company did not record any OTTI in 2020 or 2019.

The Company recorded OTTI of $382 in the year ended December 31, 2018.

As of December 31, 2020, we held 67 fixed income securities with unrealized losses.

In conjunction with our outside investment advisors, we analyzed the credit ratings of the securities as well as the historical

monthly amortized cost to fair value ratio of securities in an unrealized loss position.

This analysis yielded no fixed income

securities that had fair values less than 80% of amortized cost for the preceding 12-month period.

Net investment income consisted of the

As of December 31, 2019, we held 88 fixed income securities with unrealized losses.

In conjunction with our outside investment advisors, we analyzed the credit ratings of the securities as well as the historical monthly amortized cost to fair value ratio of securities in an unrealized loss position.

This analysis yielded no fixed income securities that had fair values less than 80 % of amortized cost for the preceding 12-month period.

Net investment income consisted of the following:

Year Ended December 31,

5 unchanged sentences

Net investment income

Net realized capital gain on investments

consisted of the following:

Net realized capital gain on investments consisted of the following:

Year Ended December 31,

6 unchanged sentences

Equity securities

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

Other-than-temporary impairment losses

2 unchanged sentences

Net capital gain on investments

Value Measurements

We maximize the use of observable inputs

in our valuation techniques and apply unobservable inputs only to the extent that observable inputs are unavailable.

class of assets and liabilities carried at fair value by the Company at December 31, 2019 and 2018 were fixed income securities.

Prices provided by independent pricing

services and independent broker quotes can vary widely, even for the same security.

Our available-for-sale investments are

comprised of a variety of different securities, which are classified into levels based on the valuation technique and inputs used

in their valuation.

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 December 31, 2019 or 2018.

The following tables set forth our assets

that are measured on a recurring basis by the level within the fair value hierarchy in which fair value measurements fall:

Fair Value Measurements

We maximize the use of observable inputs in our valuation techniques and apply unobservable inputs only to the extent that observable inputs are unavailable.

The largest class of assets and liabilities carried at fair value by the Company at December 31, 2020 and 2019 were fixed income securities.

Prices provided by independent pricing services and independent broker quotes can vary widely, even for the same security.

Our available-for-sale investments are comprised of a variety of different securities, which are classified into levels based on the valuation technique and inputs used in their valuation.

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 December 31, 2020 or 2019.

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

December 31, 2020

32 unchanged sentences

Total assets at fair value

were no liabilities measured at fair value on a recurring basis at December 31, 2019 or 2018.

The Company will assume and cede certain

premiums and losses to and from various companies and associations under various 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 by negotiation on substantial individual

Reinsurance contracts do not relieve

the Company from its obligation to policyholders.

Additionally, failure of reinsurers to honor their obligations could result in

significant losses to us.

There can be no assurance that reinsurance will continue to be available to us at the same extent, and

at the same cost, as it has in the past.

The Company may choose in the future to reevaluate the use of reinsurance to increase

or decrease the amounts of risk ceded to reinsurers.

As a group, during the year ended

December 31, 2019, the Company retained the first $10,000 of weather-related losses from catastrophic events and had reinsurance

under various reinsurance agreements up to $78,600 in excess of its $10,000 retained risk.

During the years ended December 31,

2018 and 2017, the Company retained the first $10,000 of weather-related losses from catastrophic events and had reinsurance under

various reinsurance agreements up to $74,600 in excess of its $10,000 retained risk.

For 2020, the catastrophe retention amount

remains at $10,000 while the overall catastrophic reinsurance program limit increased to $97,000.

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 largest reinsurance

recoverables on paid and unpaid losses were due from reinsurance companies with A.M.

Best ratings of “A-”

A reconciliation of direct to net premiums

on both a written and an earned basis is as follows:

There were no liabilities measured at fair value on a recurring basis at December 31, 2020 or 2019.

The Company will assume and cede certain premiums and losses to and from various companies and associations under various 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 by negotiation on substantial individual risks.

Reinsurance contracts do not relieve the Company from its obligation to policyholders.

Additionally, failure of reinsurers to honor their obligations could result in significant losses to us.

There can be no assurance that reinsurance will continue to be available to us at the same extent, and at the same cost, as it has in the past.

The Company may choose in the future to reevaluate the use of reinsurance to increase or decrease the amounts of risk ceded to reinsurers.

As a group, during the year ended December 31, 2020, the Company retained the first $ 10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $ 97,000 in excess of its $ 10,000 retained risk.

As a group, during the year ended December 31, 2019, the Company retained the first $ 10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $ 78,600 in excess of its $ 10,000 retained risk.

During the year ended December 31, 2018, the Company retained the first $ 10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $ 74,600 in excess of its $ 10,000 retained risk.

For 2021, the catastrophe retention amount remains at $ 10,000 while the overall catastrophic reinsurance program limit increased to $ 117,000 in excess of the $ 10,000 retention.

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 A.M.

Best ratings of “A”

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

Premiums Written

Premiums Earned

Premiums Written

Premiums Earned

Premiums Written

Premiums Earned

Direct premium

2 unchanged sentences

Percentage of assumed premium earned to direct premium earned

A reconciliation of direct to net losses

and loss adjustment expenses is as follows:

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

Direct losses and loss adjustment expenses

2 unchanged sentences

Net losses and loss adjustment expenses

If 100% of our ceded reinsurance was

cancelled as of December 31, 2019, no ceded commissions would need to be returned to the reinsurers.

Reinsurance contracts are

typically effective from January 1 through December 31 each year.

Policy Acquisition Costs

Activity with regards to our deferred

policy acquisition costs was as follows:

If 100 % of our ceded reinsurance was cancelled as of December 31, 2020, no ceded commissions would need to be returned to the reinsurers.

Reinsurance contracts are typically effective from January 1 through December 31 each year.

Deferred Policy Acquisition Costs

Activity with regards to our deferred policy acquisition costs was as follows:

Year Ended December 31,

3 unchanged sentences

Balance, end of year

Losses and Loss Adjustment Expenses

Activity in the liability for unpaid

losses and loss adjustment expenses is summarized as follows:

Unpaid Losses and Loss Adjustment Expenses

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:

Year Ended December 31,

12 unchanged sentences

Net balance at end of year

During 2019, the Company’s reported

losses and LAE included $6,509 of net favorable development on prior accident years, compared to $589 of net favorable development

on prior accident years during 2018, and $10,101 of net favorable development on prior accident years during 2017.

Increases and

decreases are generally the result of ongoing analysis of recent loss development trends.

As additional information becomes known

regarding individual claims, original estimates are increased or decreased accordingly.

The following tables present information,

organized by our primary operating segments, about incurred and paid claims development as of December 31, 2019, net of reinsurance,

as well as cumulative claim frequency and the total of IBNR reserves plus expected development on reported claims.

The cumulative

number of reported claims represents open claims, claims closed with payment, and claims closed without payment.

It does not include

an estimated amount for unreported claims.

The number of claims is measured by claim event (such as a car accident or storm damage)

and an individual claim event may result in more than one reported claim (such as a car accident with both property and liability

During the year ended December 31, 2020, the Company’s reported losses and LAE included $3,292 of net unfavorable development on prior accident years, compared to $6,509 of net favorable development on prior accident years during the year ended December 31, 2019.

Increases and decreases are generally the result of ongoing analysis of recent loss development trends.

As additional information becomes known regarding individual claims, original estimates are increased or decreased accordingly.

The net unfavorable development reported for the year ended December 31, 2020 was primarily attributable to our 2019 multi-peril crop business.

The following tables present information, organized by our primary operating segments, about incurred and paid claims development as of December 31, 2020, net of reinsurance, as well as cumulative claim frequency and the total of IBNR reserves plus expected development on reported claims.

The cumulative number of reported claims represents open claims, claims closed with payment, and claims closed without payment.

It does not include an estimated amount for unreported claims.

The number of claims is measured by claim event (such as a car accident or storm damage) and an individual claim event may result in more than one reported claim (such as a car accident with both property and liability damages).

The Company considers a claim that does not result in a liability as a claim closed without payment.

The tables include

unaudited information about incurred and paid claims development for the years ended December 31, 2010 through 2015, and through

2017 for the Direct Auto information, which we present as supplementary information.

The segment information presented in the tables is prior to the effects of the intercompany reinsurance pooling agreement.

The tables include unaudited information about incurred and paid claims development (a) for the years ended December 31, 2011 through 2015 for the Private Passenger Auto, Primero Non-Standard Auto, Home and Farm, and Crop segments, (b) through 2017 for the Direct Auto Non-Standard Auto information, and (c) through 2019 for the Westminster Commercial information, which we present as supplementary information.

Private Passenger Auto

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

13 unchanged sentences

Plus Expected

(in thousands, except claim counts)

(in thousands,

(1) Prior years unaudited

4 unchanged sentences

(1) Prior years unaudited

(Direct Auto)

Non-Standard Auto (Direct Auto)

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31,

At December 31, 2020

Accident Year

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

(in thousands, except claim counts)

(1) Prior years unaudited

Non-Standard Auto (Direct Auto)

Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31,

Accident Year

All outstanding liabilities prior to 2011, net of reinsurance

Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance

(1) Prior years unaudited

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2020

Plus Expected

(in thousands, except claim

(1) Prior years unaudited

(Direct Auto)

Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

7 unchanged sentences

Plus Expected

(in thousands, except claim counts)

(in thousands, except claim

(1) Prior years unaudited

4 unchanged sentences

(1) Prior years unaudited

Commercial (Westminster)

Incurred Claims and Allocated Claim Adjustment Expenses,

Net of Reinsurance For the Year Ended December 31,

At December 31, 2020

(in thousands, except claim

(1) Prior years unaudited

(Westminster)

Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

All outstanding liabilities prior to 2011, net of reinsurance

Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance

(1) Prior years unaudited

Commercial (non-Westminster)

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

2 unchanged sentences

Plus Expected

(in thousands, except claim counts)

(in thousands, except claim

(1) Prior years unaudited

(non-Westminster)

Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

3 unchanged sentences

(1) Prior years unaudited

The following table presents a reconciliation

of the net incurred and paid claims development tables to the liability for unpaid losses and loss adjustment expenses in our Consolidated

Balance Sheet:

The following table presents a reconciliation of the net incurred and paid claims development tables to the liability for unpaid losses and loss adjustment expenses in our Consolidated Balance Sheet:

December 31, 2020

4 unchanged sentences

Home and farm

Commercial (Westminster)

Commercial (non-Westminster)

Total liabilities for unpaid losses and loss adjustment expenses

Reinsurance recoverables on losses:

Private passenger auto

Non-standard auto

Non-standard auto (Primero)

Non-standard auto (Direct Auto)

Home and farm

Commercial (Westminster)

Commercial (non-Westminster)

Total reinsurance recoverables on losses

Net liability for unpaid losses and loss adjustment expenses

The following table presents required

supplementary information about average historical claims duration as of December 31, 2019:

The following table presents required supplementary information about average historical claims duration as of December 31, 2020:

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance

Private Passenger Auto

Non-Standard Auto

(Direct Auto)

Non-Standard Auto (Primero)

Non-Standard Auto (Direct Auto)

Home and Farm

and Equipment

Property and equipment consisted of the

Estimated Useful

Commercial (Westminster)

Commercial (non-Westminster)

Property and Equipment

Property and equipment consisted of the following:

10 - 31 years

3 unchanged sentences

Total property and equipment, net

Depreciation expense was $538, $492,

and $500 during the years ended December 31, 2019, 2018 and 2017, respectively.

Party Transactions

We were organized by the 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 insurance policies.

Royalties paid to the

NDFB were $1,352, $1,315, and $1,289 during the years ended December 31, 2019, 2018, and 2017 respectively.

Royalty amounts payable

of $115 and $108 were accrued as a liability to the NDFB at December 31, 2019 and 2018, respectively.

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,

2019 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 2020 without the prior approval of the North Dakota Insurance Department is

$18,984 based upon the policyholders’

Depreciation expense was $ 709 , $ 538 , and $ 492 during the years ended December 31, 2020, 2019 and 2018, respectively.

Goodwill and Other Intangibles

The following table presents the carrying amount of the Company’s goodwill by segment:

Non-standard auto from acquisition of Primero

Commercial from acquisition of Westminster

Other Intangible Assets

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

December 31, 2020

Gross Carrying

Subject to amortization:

Distribution network

Total subject to amortization

Not subject to amortization –

state insurance licenses

December 31, 2019

Gross Carrying

Subject to amortization:

Total subject to amortization

Not subject to amortization –

state insurance license

Amortization expense was $ 5,224 , $ 1,711 , and $ 3,507 during the years ended December 31, 2020, 2019 and 2018, respectively.

The VOBA intangible asset of $ 4,750 acquired in the Westminster transaction was fully amortized during 2020.

Other intangible assets that have finite lives, including trade names and distribution networks, are amortized over their useful lives.

The estimated amortization of other intangible assets with finite lives for the next five years and thereafter is as follows:

Year ending December 31,

Total other intangible assets with finite lives

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 A.M.

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 year ended December 31, 2020, the pooling share percentages by insurance company subsidiary were:

Pool Percentage

Nodak Insurance Company

American West Insurance Company

Primero Insurance Company

Battle Creek Mutual Insurance Company

Direct Auto Insurance Company

Westminster American Insurance Company

North Dakota Farm Bureau

We were organized by the 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 insurance policies.

Royalties paid to the NDFB were $ 1,370 , $ 1,352 , and $ 1,315 during the years ended December 31, 2020, 2019, and 2018 respectively.

Royalty amounts payable of $ 113 and $ 115 were accrued as a liability to the NDFB at December 31, 2020 and 2019, respectively.

During 2020, Nodak Insurance paid $ 1,129 of membership dues on behalf of its NDFB members in North Dakota in response to the COVID-19 pandemic.

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, 2020 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 2021 without the prior approval of the North Dakota Insurance Department is $ 21,628 based upon the policyholders’

surplus of Nodak Insurance at December 31, 2020.

Prior to its payment of any extraordinary

dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department.

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 years ended December 31, 2019,

2018, or 2017.

The amount available for payment of

dividends from Direct Auto to NI Holdings during 2020 without the prior approval of the Illinois Department of Insurance is $6,881

based upon the policyholders’

Prior to its payment of any extraordinary 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.

The Board of Directors of Nodak Insurance declared and paid a $ 6,000 dividend to NI Holdings during the year ended December 31, 2020.

No dividends were declared or paid by Nodak Insurance during the years ended December 31, 2019 or 2018.

The amount available for payment of dividends from Direct Auto to NI Holdings during 2021 without the prior approval of the Illinois Department of Insurance is $ 3,582 based upon the policyholders’

surplus of Direct Auto at December 31, 2020.

Prior to its payment of any dividend, Direct Auto

will be required to provide notice of the dividend to the Illinois Department of Insurance.

This notice must be provided to the

Illinois Department of Insurance within five business days following declaration of any dividend and no less than 30 days prior

to the payment of an extraordinary dividend or 10 days prior to the payment of an ordinary dividend.

The Illinois Department of

Insurance has the power to limit or prohibit dividend payments if Direct Auto 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 Direct Auto during

the years ended December 31, 2019 or 2018.

The following table illustrates the impact

of including Battle Creek in our Consolidated Balance Sheets prior to intercompany eliminations:

Cash and cash equivalents (overdraft)

Premiums and agents’

Prior to its payment of any dividend, Direct Auto will be required to provide notice of the dividend to the Illinois Department of Insurance.

This notice must be provided to the Illinois Department of Insurance within five business days following declaration of any dividend and no less than 30 days prior to the payment of an extraordinary dividend or 10 days prior to the payment of an ordinary dividend.

The Illinois Department of Insurance has the power to limit or prohibit dividend payments if Direct Auto 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 Direct Auto during the years ended December 31, 2020, 2019 or 2018.

The amount available for payment of dividends from Westminster to NI Holdings during 2021 without the prior approval of the Maryland Insurance Administration is $ 505 based upon the statutory net investment income of Westminster for the year ended December 31, 2020 and the three preceding years.

Prior to its payment of any dividend, Westminster will be required to provide notice of the dividend to the Maryland Insurance Administration.

This notice must be provided to the Maryland Insurance Administration within five business days following declaration of any dividend and no less than 30 days prior to the payment of an extraordinary dividend or 10 days prior to the payment of an ordinary dividend.

The Maryland Insurance Administration has the power to limit or prohibit dividend payments if Westminster 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 Westminster during the year ended December 31, 2020.

Battle Creek Mutual Insurance Company

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

Cash and cash equivalents

Premiums and agents’

balances receivable

Deferred policy acquisition costs

Pooling receivable (1)

Reinsurance recoverables on losses (2)

5 unchanged sentences

Notes payable (1)

Reinsurance premiums payable (1)

Reinsurance losses payable (2)

Accrued expenses and other liabilities

2 unchanged sentences

Total liabilities and equity

(1) Amount eliminated in consolidation.

Total statutory revenues of Battle Creek,

after intercompany eliminations, which is limited to net investment income, were $133, $159, and $153 during the year ended December

31, 2019, 2018, and 2017, respectively.

There were no statutory-basis expenses reported, after intercompany eliminations, during

the years ended December 31, 2019, 2018, and 2017.

The Company sponsors a money purchase

plan that covers all eligible employees.

Amount fully eliminated in consolidation .

Amount partly eliminated in consolidation .

Year Ended December 31,

Net premiums earned

Fee and other income

Net investment income

Net capital gain on investments

Total revenues

Losses and loss adjustment expenses

Amortization of deferred policy acquisition costs

Other underwriting and general expenses

Total expenses

Income before income taxes

Benefit Plans

The Company sponsors a money purchase plan that covers all eligible employees.

Plan costs are funded annually as they are earned.

The Company reported expenses related

to the money purchase plan totaling $618, $598, and $854 during the years ended December 31, 2019, 2018, and 2017, respectively.

The Company also sponsors a 401(k) plan

with an automatic contribution to all eligible employees and a matching contribution for eligible employees of 50% up to 3% of

eligible compensation.

The Company reported expenses related to the 401(k) plan totaling $516, $475, and $411 during the years

ended December 31, 2019, 2018, and 2017, respectively.

All fees associated with both plans are deducted from the eligible employee

The Company reported expenses related to the money purchase plan totaling $ 900 , $ 618 , and $ 598 during the years ended December 31, 2020, 2019, and 2018, respectively.

The Company also sponsors a 401(k) plan with an automatic contribution to all eligible employees and a matching contribution for eligible employees of 50 % up to 3 % of eligible compensation.

Primero, Direct Auto, and Westminster also sponsor 401(k) plans.

The Company reported expenses related to the 401(k) plans totaling $ 651 , $ 516 , and $ 475 during the years ended December 31, 2020, 2019, and 2018, respectively.

All fees associated with both plans are deducted from the eligible employee accounts.

Deferred Compensation Plan

The Board of Directors has authorized

a non-qualified deferred compensation plan covering key executives of the Company (as designated by the Board of Directors).

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’

The Board of Directors has authorized a non-qualified deferred compensation plan covering 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 relating

to this plan totaling $458, $451, and $183 for the years ended December 31, 2019, 2018, and 2017, respectively.

Employee Stock Ownership

The Company has 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 will invest solely in common stock of the Company.

In connection with our initial public

offering in March 2017, Nodak Insurance loaned $2,400 to the ESOP’s related trust (the “ESOP Trust”).

loan will be for a period of ten years and bears 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 initial public offering,

which results 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.

The shares held in the ESOP’s suspense account

are not considered outstanding for earnings per share purposes.

Nodak Insurance will make 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.

ESOP makes two loan payments per year, a pre-determined portion of the shares will be released from the suspense account and allocated

to participant accounts at the end of the calendar year.

This release and allocation will occur on an annual basis over the ten-year

term of the ESOP loan.

Nodak Insurance will have a lien on the shares of common stock of the Company held by the ESOP to secure

repayment of the loan from the ESOP to Nodak Insurance.

If the ESOP is terminated as a result of a change in control of the Company,

the ESOP may be required to pay the costs of terminating the plan.

It is anticipated that the only assets

held by the ESOP will be shares of the Company’s common stock.

Participants in the ESOP cannot direct the investment of any

assets allocated to their accounts.

The plan also allows employee-directed deferral of key executive’s compensation or incentive payments.

The Company reported expenses relating to this plan totaling $ 308 , $ 458 , and $ 451 for the years ended December 31, 2020, 2019, and 2018, respectively.

Employee Stock Ownership Plan

The Company has 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 will invest solely in common stock of the Company.

In connection with our initial public offering in March 2017, Nodak Insurance loaned $ 2,400 to the ESOP’s related trust (the “ESOP Trust”).

The ESOP loan will be for a period of ten years and bears 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 initial public offering, which results 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.

The shares held in the ESOP’s suspense account are not considered outstanding for earnings per share purposes.

Nodak Insurance will make 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 will be released from the suspense account and allocated to participant accounts at the end of the calendar year.

This release and allocation will occur on an annual basis over the ten-year term of the ESOP loan.

Nodak Insurance will have a lien on the shares of common stock of the Company held by the ESOP to secure repayment of the loan from the ESOP to Nodak Insurance.

If the ESOP is terminated as a result of a change in control of the Company, the ESOP may be required to pay the costs of terminating the plan.

It is anticipated that the only assets held by the ESOP will be shares of the Company’s common stock.

Participants in the ESOP cannot direct the investment of any assets allocated to their accounts.

The initial ESOP participants are employees of Nodak Insurance.

The employees of Primero and

Direct Auto do not participate in the ESOP.

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 will

automatically become 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 will receive annual reports from the Company showing the number of shares

of common stock of the Company allocated to the participant’s account 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 initial public

offering, the Company created a contra-equity account on the Company’s Consolidated Balance Sheet equal to the ESOP’s

basis in the shares.

Each employee of Nodak Insurance will automatically become 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 will receive annual reports from the Company showing the number of shares of common stock of the Company allocated to the participant’s account 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 initial public offering, the Company created a contra-equity account on the Company’s 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 initial public offering.

As shares are

released from the ESOP suspense account, the contra-equity account will be credited, which shall reduce the impact of the contra-equity

account on the Company’s Consolidated Balance Sheet.

The Company shall record a compensation expense related to the shares

released, which compensation expense is 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 $405, $400, and $401 during the years ended December 31, 2019, 2018, and 2017, respectively, related to the ESOP.

Through December 31, 2019, 72,945 ESOP

shares had been released and allocated to participants, with the remainder of 167,055 ESOP shares held in suspense at December

Using the Company’s year-end market price of $17.20, the fair value of the unearned ESOP shares was $2,873 at December

Nodak Insurance has a $5,000 line of

credit with Wells Fargo Bank, N.A.

As shares are released from the ESOP suspense account, the contra-equity account will be credited, which shall reduce the impact of the contra-equity account on the Company’s Consolidated Balance Sheet.

The Company shall record a compensation expense related to the shares released, which compensation expense is 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 $374, $ 405 , and $ 400 during the years ended December 31, 2020, 2019, and 2018, respectively, related to the ESOP.

Through December 31, 2020, 97,260 ESOP shares had been released and allocated to participants, with the remainder of 142,740 ESOP shares held in suspense at December 31, 2020.

Using the Company’s year-end market price of $ 16.42 , the fair value of the unearned ESOP shares was $ 2,344 at December 31, 2020.

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 with a floor rate of 3.25 %.

There were no outstanding amounts during the years ended December 31, 2020, 2019, or 2018.

This line of credit is scheduled to expire on October 31, 2020.

The components of our provision for income

tax expense were as follows:

This line of credit is scheduled to expire on January 30, 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted, implementing numerous changes to tax law including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, and the creation of certain refundable employee retention credits.

There has been no impact to the Company’s income taxes due to this legislation.

The components of our provision for income tax expense were as follows:

Year Ended December 31,

1 unchanged sentence

Total provision for income taxes

The provision for income taxes differs

from the amount that would be computed by applying the statutory federal rate to income before provision for income taxes as a

result of the following:

The provision for income taxes differs from the amount that would be computed by applying the statutory federal rate to income before provision for income taxes as a result of the following:

Year Ended December 31,

Income before income taxes

Expected provision for federal income taxes

Expected provision for federal income taxes at 21 %

Tax-exempt interest

2 unchanged sentences

Change in valuation allowance

Stock conversion and IPO expenses

Impact of effective tax rate change on deferred income tax assets and liabilities

State income taxes, net of federal impact

Total provision for income taxes

Income tax expense for the year ended

December 31, 2017 includes a reduction of $1,274 to current income tax expense due to a new corporate income tax rate for tax year

2018 and beyond, enacted on December 22, 2017.

Accounting guidance requires that companies re-measure existing deferred income

tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs and record an offset for the net amount

of the change as a component of income tax expense from continuing operations in the period of enactment.

The guidance also requires

any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards

to be reflected as a component of income tax expense from continuing operations.

The valuation allowance against certain deferred

income tax assets was $594, $587, and $628 at December 31, 2019, 2018, and 2017, respectively.

The income tax effects of temporary differences

that give rise to significant portions of our deferred income tax assets and deferred income tax liabilities, valued at the effective

tax rate of 21% at December 31, 2019 and 2018, are as follows:

We re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs and record an offset for the net amount of the change as a component of income tax expense from continuing operations in the period of enactment.

We record any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards as a component of income tax expense from continuing operations.

The valuation allowance against certain deferred income tax assets was $ 931 , $ 594 , and $ 587 at December 31, 2020, 2019, and 2018, respectively.

The income tax effects of temporary differences that give rise to significant portions of our deferred income tax assets and deferred income tax liabilities at December 31, 2020 and 2019 are as follows:

Deferred income tax assets:

10 unchanged sentences

Deferred income tax liability, net

At December 31, 2019 and 2018, 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 years ended December 31, 2019, 2018, or 2017.

At December 31, 2019 and 2018, the Company,

other than Battle Creek, had no income tax related carryovers for net operating losses, alternative minimum tax credits, or capital

Battle Creek, which files its federal income tax returns on a stand-alone basis, had net operating loss carryovers of $4,652

and $4,786 at December 31, 2019 and 2018, respectively.

The net operating loss carryforward expires beginning in 2021 through 2030.

Our Primero subsidiary leases a facility

in Spearfish, South Dakota under a non-cancellable operating lease expiring in 2023.

Our Direct Auto subsidiary leases a facility

in Chicago, Illinois under a non-cancellable operating lease expiring in 2020, and will transition to a new facility in Chicago

under a new non-cancellable operating lease expiring in 2029.

Our Nodak Insurance subsidiary leases a facility in Fargo, North

Dakota under a non-cancellable operating lease expiring in 2024.

We leased equipment and software under non-cancellable operating

leases expiring at various times through 2017.

There were expenses of $316, $140, and $80 related to these leases during the years

ended December 31, 2019, 2018, and 2017, respectively.

As of December 31, 2019, we have

minimum future commitments under non-cancellable leases as follows:

At December 31, 2020 and 2019, 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 years ended December 31, 2020, 2019, or 2018.

At December 31, 2020 and 2019, the Company, other than Battle Creek and Westminster, had no income tax related carryovers for net operating losses, alternative minimum tax credits, or capital losses.

Battle Creek, which files its federal income tax returns on a stand-alone basis, had net operating loss carryovers of $ 3,390 and $ 4,652 at December 31, 2020 and 2019, respectively.

The net operating loss carryforward expires beginning in 2021 through 2030, due to limitations on the use of this net operating loss carryforward.

Westminster, which became part of the Company’s consolidated federal income tax return beginning in 2020, had $ 2,559 of net operating loss carryover at December 31, 2020.

This net operating loss carryforward expires beginning in 2021 through 2023 , due to limitations on the use of this net operating loss carryforward.

Operating Leases

Our Primero subsidiary leases a facility in Spearfish, South Dakota under a non-cancellable operating lease expiring in 2023.

Our Direct Auto subsidiary leases a facility in Chicago, Illinois under a non-cancellable operating lease expiring in 2029.

Our Nodak Insurance subsidiary leases a facility in Fargo, North Dakota under a non-cancellable operating lease expiring in 2024.

There were expenses of $ 370 , $ 316 , and $ 140 related to these leases during the years ended December 31, 2020, 2019, and 2018, respectively.

As of December 31, 2020, we have minimum future commitments under non-cancellable leases as follows:

Year ending December 31,

1 unchanged sentence

Minimum Commitments

We also sub-lease a portion of our home

office building under non-cancellable operating leases.

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.

The Company does not have any unrecorded

or potential contingent liabilities or material commitments requiring the use of assets as of December 31, 2019 and 2018.

Changes in the number of common stock

shares outstanding are as follows:

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.

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

Year Ended December 31,

Shares outstanding, beginning

Initial public offering

Shares repurchased related to employee stock ownership plan

Treasury shares repurchased through stock repurchase authorization

2 unchanged sentences

Shares outstanding, ending

Shares were not available prior to the Company’s initial public offering in March 2017.

On May 23, 2017, our Board of Directors

approved an authorization for the repurchase of up to $8 million of the Company’s outstanding common stock.

the repurchase of 446,671 shares of our common stock for $8,037 during the three months ended June 30, 2017, and reflected the

cost of this treasury stock as a reduction of Equity within our Consolidated Balance Sheet.

On February 28, 2018, our Board of Directors

approved an authorization for the repurchase of up to approximately $10 million of the Company’s outstanding common stock.

We completed the repurchase of 191,265 shares of our common stock for $2,966 during 2018, and an additional 116,034 shares for

$2,006 during 2019.

The cost of this treasury stock is a reduction of Equity within our Consolidated Balance Sheet.

Based Compensation

At its 2017 Annual Shareholders’

On February 28, 2018, our Board of Directors approved an authorization for the repurchase of up to approximately $ 10,000 of the Company’s outstanding common stock.

We completed the repurchase of 191,265 shares of our common stock for $2,966 during 2018, and an additional 116,034 shares for $ 2,006 during 2019.

During the six months ended June 30, 2020, we completed the repurchase of 402,056 shares of our common stock for $ 4,996 to close out this authorization.

On May 4, 2020, our Board of Directors approved an additional 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 new authorization.

The cost of this treasury stock is a reduction of shareholders’

equity within our Consolidated Balance Sheet.

Stock Based Compensation

At its 2020 Annual Shareholders’

Meeting, the NI Holdings, Inc.

2017 Stock and Incentive Plan (the “Plan”) was approved by shareholders.

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, 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, to compensate such persons through

various stock and cash-based arrangements, and to provide them with opportunities for stock ownership 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”).

made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the

The total aggregate number of shares

of common stock that awards may be issued under all awards made under the Plan shall not exceed 500,000 shares of common stock,

subject to adjustments as provided in the Plan.

No eligible participant may be granted more than 100,000 shares from any stock

options, stock appreciation rights, or performance awards denominated in 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 $100 in any calendar year.

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 awards may be issued under all awards made under the Plan shall not exceed 1,000,000 shares of common stock, 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

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.

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 based on the grant date fair value.

The compensation costs are normally expensed over the vesting periods to each vesting

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.

The Company recognizes stock-based compensation costs 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

restricted stock units is presented below:

No forfeitures are currently estimated.

A summary of the Company’s outstanding restricted stock units is presented below:

Weighted-Average

9 unchanged sentences

Units outstanding and unearned at December 31, 2020

The following table shows the impact

of RSU activity to the Company’s financial results:

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

Year Ended December 31,

3 unchanged sentences

Total grant-date fair value of vested RSUs at end of period

Share-based compensation was not available prior to the Company’s IPO in March 2017.

At December 31, 2019, there was $775

of unrecognized compensation cost related to outstanding RSUs.

That cost is expected to be recognized over a weighted-average period

of 2.98 years.

At December 31, 2020, there was $ 681 of unrecognized compensation cost related to outstanding RSUs.

That cost is expected to be recognized over a weighted-average period of 1.89 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

The Company recognizes stock-based compensation

costs 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 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 based on the grant date fair value over the performance period of the awards.

Estimated forfeitures are included in the determination of compensation costs.

No forfeitures are currently estimated.

The current cost estimate assumes that the cumulative growth target

will be achieved.

A summary of the Company’s outstanding

PSUs is presented below:

The current cost estimate assumes that the cumulative growth target will be achieved.

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

Performance Share

5 unchanged sentences

Units outstanding and unearned at December 31, 2019

The following table shows the impact

of PSU activity to the Company’s financial results:

PSUs granted during 2020 (at target)

Units outstanding and unearned at December 31, 2020

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

Year Ended December 31,

3 unchanged sentences

Total grant-date fair value of vested PSUs at end of period

The PSU grants above represent initial

target awards and do not reflect potential increases or decreases resulting from financial performance objectives to be determined

at the end of the performance period.

The actual number of shares to be issued at the end of the performance period will range

from 0% to 150% of the initial target awards.

At December 31, 2019, there was $994

of unrecognized compensation cost related to outstanding PSUs.

That cost is expected to be recognized over a weighted-average period

of 1.61 years.

As described in Note 1, the conversion

of the mutual company to a stock company resulted in the issuance of NI Holdings common shares on March 13, 2017.

share is computed by dividing net income available to common shareholders for the period by the weighted average number of common

shares outstanding for the same period.

The weighted average number of common shares outstanding was 22,179,747, 22,358,858, and

22,512,401 for the years ended December 31, 2019, 2018, and 2017, respectively.

For the period prior to the date of the conversion,

we assumed that the net common shares issued in the initial public offering of 22,760,000 shares were outstanding since January

Unearned ESOP shares are not considered

outstanding until they are released and allocated to plan participants.

Unearned RSU and PSU shares are not considered outstanding

until they are earned by award participants.

The following table presents a reconciliation

of the numerators and denominators we used in the basic and diluted per share computations for our common stock:

The PSU grants above represent initial target awards and do not reflect potential increases or decreases resulting from financial performance objectives to be determined at the end of the performance period.

The actual number of shares to be issued at the end of the performance period will range from 0 % to 150 % of the initial target awards.

At December 31, 2020, there was $ 1,090 of unrecognized compensation cost related to outstanding PSUs.

That cost is expected to be recognized over a weighted-average period of 1.59 years.

Earnings Per Share

Earnings per share is computed by dividing net income available to common shareholders for the period by the weighted average number of common shares outstanding for the same period.

The weighted average number of common shares outstanding was 21,772,475 , 22,179,747 , and 22,358,858 for the years ended December 31, 2020, 2019, and 2018, respectively.

Unearned ESOP shares are not considered outstanding until they are released and allocated to plan participants.

Unearned RSU and PSU shares are not considered outstanding until they are earned by award participants.

The following table presents a reconciliation of the numerators and denominators we used in the basic and diluted per share computations for our common stock:

Year Ended December 31,

10 unchanged sentences

Diluted earnings per common share

We have four primary reportable operating

segments, which consist of private passenger auto insurance, non-standard auto insurance, home and farm insurance, and crop insurance.

A fifth segment captures all other insurance coverages we sell, including commercial coverages and our assumed reinsurance lines

Segment Information

We have five primary reportable operating segments, which consist of private passenger auto insurance, non-standard auto insurance, home and farm insurance, crop insurance, and commercial insurance.

A sixth segment captures all other insurance coverages we sell, including our assumed reinsurance lines of business.

We operate only in the United States, 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 years ended December 31, 2020, 2019, and 2018.

presentation in these tables, “LAE”

For presentation in these tables, “LAE”

refers to loss adjustment expenses.

The ratios presented in these tables

are non-GAAP financial measures under Securities and Exchange Commission rules and regulations.

The non-GAAP ratios may not be

comparable to similarly-named measures reported by other companies.

The loss and LAE ratio equals losses

and loss adjustment expenses divided by net premiums earned.

The expense ratio equals amortization of deferred policy acquisition

costs and other underwriting and general expenses, divided by net premiums earned.

The combined ratio equals losses and loss adjustment

expenses, amortization of deferred policy acquisition costs, and other underwriting and general expenses, divided by net premiums

The ratios presented in these tables are non-GAAP financial measures under Securities and Exchange Commission rules and regulations.

The non-GAAP ratios may not be comparable to similarly-named measures reported by other companies.

These ratios are used widely in the property and casualty insurance industry.

The loss and LAE ratio equals losses and loss adjustment expenses divided by net premiums earned.

The expense ratio equals amortization of deferred policy acquisition costs and other underwriting and general expenses, divided by net premiums earned.

The combined ratio equals losses and loss adjustment expenses, amortization of deferred policy acquisition costs, and other underwriting and general expenses, divided by net premiums earned.

Year Ended December 31, 2020

Private Passenger Auto

Non-Standard Auto

Home and Farm

Direct premiums earned

19 unchanged sentences

Balances at December 31, 2020:

Premiums and agents’

balances receivable

Deferred policy acquisition costs

Reinsurance recoverables on losses

Reinsurance recoverables

Receivable from Federal Crop Insurance Corporation

3 unchanged sentences

Year Ended December 31, 2019

Private Passenger Auto

Non-Standard Auto

Home and Farm

Direct premiums earned

19 unchanged sentences

Balances at December 31, 2019:

Premiums and agents’

balances receivable

Deferred policy acquisition costs

Reinsurance recoverables on losses

Reinsurance recoverables

Receivable from Federal Crop Insurance Corporation

3 unchanged sentences

Year Ended December 31, 2018

Private Passenger Auto

Non-Standard Auto

Home and Farm

Direct premiums earned

12 unchanged sentences

Income before income taxes

Net loss attributable to non-controlling interest

Net income attributable to non-controlling interest

Net income attributable to NI Holdings, Inc.

4 unchanged sentences

Balances at December 31, 2018:

Premiums and agents’

balances receivable

Deferred policy acquisition costs

Reinsurance recoverables on losses

Reinsurance recoverables

Receivable from Federal Crop Insurance Corporation

2 unchanged sentences

Unearned premiums

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 above tables.

The remaining fee and other income amounts are not allocated to any segment, including the $4,578 gain realized

on the bargain purchase of Direct Auto in 2018.

We do not assign or allocate all Consolidated

Statement of Operations or Consolidated Balance Sheet line items to our operating segments.

Those line items include investment

income, net capital gain on investments, other income excluding non-standard auto insurance fees, and income taxes within the

Consolidated Statement of Operations.

For the Consolidated Balance Sheet, those items include cash and investments, property and

equipment, other assets, accrued expenses, federal income taxes recoverable or payable, and equity.

Net Income, Capital and Surplus, and Dividend Restrictions

The following table presents selected

information, as filed with insurance regulatory authorities, for our insurance subsidiaries as determined in accordance with accounting

practices prescribed or permitted by such insurance regulatory authorities as of and for the years ended December 31, 2019, 2018,

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 above tables.

The remaining fee and other income amounts are not allocated to any segment, including the $ 4,578 gain realized on the bargain purchase of Direct Auto in 2018.

We do not assign or allocate all Consolidated Statement of Operations or Consolidated Balance Sheet line items to our operating segments.

Those line items include investment income, net capital gain on investments, other income excluding non-standard auto insurance fees, and income taxes within the Consolidated Statement of Operations.

For the Consolidated Balance Sheet, those items include cash and investments, property and equipment, other assets, accrued expenses, federal income taxes recoverable or payable, and shareholders’

Beginning in March 2020, the global pandemic associated with novel coronavirus COVID-19 and related economic conditions began to impact the Company’s results.

The Company’s underwriting results for 2020 were impacted by reduced net premiums earned in our non-standard auto segment, which decreased 6 % from 2019.

We anticipate additional pressure on premiums in this segment for 2021.

Conversely, the pandemic favorably impacted loss frequency in our private passenger and non-standard auto segments during the second and third quarters of 2020, due to fewer miles driven by our insureds, resulting in improvements in our loss and LAE ratios.

Statutory Net Income, Capital and Surplus, and Dividend Restrictions

The following table presents selected information, as filed with insurance regulatory authorities, for our insurance subsidiaries as determined in accordance with accounting practices prescribed or permitted by such insurance regulatory authorities as of and for the years ended December 31, 2020, 2019, and 2018:

Nodak Insurance:

16 unchanged sentences

Statutory net income

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,

2019 and 2018 exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the

RBC requirements, by a significant margin.

Amounts available for distribution in

2020 to Nodak Insurance as dividends from its insurance subsidiaries without prior approval of insurance regulatory authorities

are $1,617 from American West and none from Primero.

No dividends were paid to Nodak Insurance from either entity during the years

ended December 31, 2019, 2018, or 2017.

amount available for payment of dividends from Nodak Insurance to NI Holdings during 2020 without the prior approval of the North

Dakota Insurance Department is $18,984 based upon the policyholders’

Statutory capital and surplus

Statutory unassigned surplus

Statutory net income

State insurance laws require our insurance subsidiaries to maintain certain minimum capital and surplus amounts on a statutory basis.

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, 2020 and 2019 exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements, by a significant margin.

Amounts available for distribution in 2021 to Nodak Insurance as dividends from its insurance subsidiaries without prior approval of insurance regulatory authorities are $ 1,837 from American West and $ 512 from Primero.

No dividends were paid to Nodak Insurance from either entity during the years ended December 31, 2020, 2019, or 2018.

surplus of Nodak Insurance at December 31, 2020.

to its payment of any extraordinary 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 in the years ended

December 31, 2019, 2018, or 2017.

The amount available for payment of

dividends from Direct Auto to NI Holdings during 2020 without the prior approval of the Illinois Department of Insurance is $6,881

based upon the policyholders’

Prior to its payment of any extraordinary 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.

The Board of Directors of Nodak Insurance declared and paid a $ 6,000 dividend during the year ended December 31, 2020.

No dividends were declared or paid in the years ended December 31, 2019 or 2018.

The amount available for payment of dividends from Direct Auto to NI Holdings during 2021 without the prior approval of the Illinois Department of Insurance is $ 3,582 based upon the policyholders’

surplus of Direct Auto at December 31, 2020.

Prior to its payment of any dividend, Direct

Auto will be required to provide notice of the dividend to the Illinois Department of Insurance.

This notice must be provided

to the Illinois Department of Insurance within five business days following declaration of any dividend and no less than 30 days

prior to the payment of an extraordinary dividend or 10 days prior to the payment of an ordinary dividend.

The Illinois Department

of Insurance has the power to limit or prohibit dividend payments if Direct Auto is in violation of any law or regulation.

restrictions or any subsequently imposed restrictions may affect our future liquidity.

No dividends were declared or paid by Direct

Auto during the years ended December 31, 2019 or 2018.

Financial Data (Unaudited)

following table provides a summary of unaudited quarterly results for the periods presented.