NI Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data 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, 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 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. 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. /s/ Mazars USA LLP We have served as the Company’s auditor since February 2016. Fort Washington, Pennsylvania March 10, 2021 73 Table of Contents NI Holdings, Inc. Consolidated Balance Sheets December 31, 2020 and 2019 (dollar amounts in thousands, except par value) 2020 2019 Assets: Cash and cash equivalents $ 101,077 $ 62,132 Fixed income securities, at fair value 320,410 295,945 Equity securities, at fair value 69,952 59,932 Other investments 2,924 1,914 Total cash and investments 494,363 419,923   Premiums and agents' balances receivable 48,523 36,691 Deferred policy acquisition costs 23,968 15,399 Reinsurance premiums receivable 93 — Reinsurance recoverables on losses 8,710 4,045 Accrued investment income 2,141 2,089 Property and equipment, net 9,899 7,694 Receivable from Federal Crop Insurance Corporation 6,646 14,230 Goodwill and other intangibles 18,194 2,912 Other assets 5,066 5,176 Total assets $ 617,603 $ 508,159   Liabilities: Unpaid losses and loss adjustment expenses $ 105,750 $ 93,250 Unearned premiums 119,363 89,276 Reinsurance premiums payable — 170 Income tax payable 754 1,645 Deferred income taxes, net 8,757 4,590 Westminster consideration payable 19,287 — Accrued expenses and other liabilities 14,820 9,425 Total liabilities 268,731 198,356   Commitments and contingencies — —   Shareholders’ equity: Common stock, $ 0.01 par value, authorized 25,000,000 shares, issued: 23,000,000 shares; and outstanding: 2020 – 21,318,638 shares, 2019 – 22,119,380 shares 230 230 Preferred stock, without par value, authorized 5,000,000 shares, no shares issued or outstanding — — Additional paid-in capital 97,911 95,961 Unearned employee stock ownership plan shares ( 1,427 ) ( 1,671 ) Retained earnings 258,741 218,480 Accumulated other comprehensive income, net of income taxes 12,840 5,612 Treasury stock, at cost, 2020 – 1,538,622 shares, 2019 – 713,565 shares ( 23,968 ) ( 12,308 ) Non-controlling interest 4,545 3,499 Total shareholders’ equity 348,872 309,803   Total liabilities and shareholders’ equity $ 617,603 $ 508,159 The accompanying notes are an integral part of these consolidated financial statements. 74 Table of Contents NI Holdings, Inc. Consolidated Statements of Operations Years Ended December 31, 2020, 2019 and 2018 (dollar amounts in thousands, except per share data) 2020 2019 2018 Revenues: Net premiums earned $ 283,661 $ 246,438 $ 195,720 Fee and other income 1,801 2,125 6,496 Net investment income 7,271 7,433 6,180 Net capital gain on investments 13,624 14,783 3,974 Total revenues 306,357 270,779 212,370   Expenses: Losses and loss adjustment expenses 168,473 169,710 119,088 Amortization of deferred policy acquisition costs 51,472 46,188 31,856 Other underwriting and general expenses 33,596 21,070 22,261 Total expenses 253,541 236,968 173,205   Income before income taxes 52,816 33,811 39,165 Income taxes 11,472 7,311 7,921 Net income 41,344 26,500 31,244 Net income (loss) attributable to non-controlling interest 955 99 163 Net income attributable to NI Holdings, Inc. $ 40,389 $ 26,401 $ 31,081   Earnings per common share: Basic $ 1.86 $ 1.19 $ 1.39 Diluted $ 1.84 $ 1.19 $ 1.39   Share data: Weighted average common shares outstanding used in basic per common share calculations 21,772,475 22,179,747 22,358,858 Plus: Dilutive securities 169,995 85,601 26,896 Weighted average common shares used in diluted per common share calculations 21,942,470 22,265,348 22,385,754 The accompanying notes are an integral part of these consolidated financial statements. 75 Table of Contents NI Holdings, Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, 2020, 2019 and 2018 (dollar amounts in thousands) 2020 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income (loss) $ 40,389 $ ( 955 ) $ 41,344 Other comprehensive income, before income taxes: Holding gains on investments 10,051 116 10,167 Reclassification adjustment for net realized capital gain included in net income ( 902 ) ( 1 ) ( 903 ) Other comprehensive income, before income taxes 9,149 115 9,264 Income tax expense related to items of other comprehensive income ( 1,921 ) ( 24 ) ( 1,945 ) Other comprehensive income, net of income taxes 7,228 91 7,319 Comprehensive income $ 47,617 $ ( 1,046 ) $ 48,663 2019 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income $ 26,401 $ 99 $ 26,500 Other comprehensive income, before income taxes: Holding gains on investments 9,583 177 9,760 Reclassification adjustment for net realized capital gain included in net income ( 191 ) ( 3 ) ( 194 ) Other comprehensive income, before income taxes 9,392 174 9,566 Income tax expense related to items of other comprehensive income ( 1,972 ) ( 37 ) ( 2,009 ) Other comprehensive income, net of income taxes 7,420 137 7,557 Comprehensive income $ 33,821 $ 236 $ 34,057   2018 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income $ 31,081 $ 163 $ 31,244 Other comprehensive loss, before income taxes: Holding losses on investments ( 8,206 ) ( 99 ) ( 8,305 ) Reclassification adjustment for net realized capital gain included in net income ( 3,974 ) — ( 3,974 ) Other comprehensive loss, before income taxes ( 12,180 ) ( 99 ) ( 12,279 ) Income tax benefit related to items of other comprehensive income 2,558 21 2,579 Other comprehensive loss, net of income taxes ( 9,622 ) ( 78 ) ( 9,700 ) Comprehensive income $ 21,459 $ 85 $ 21,544   The accompanying notes are an integral part of these consolidated financial statements. 76 Table of Contents NI Holdings, Inc. Consolidated Statements of Changes in Shareholders’ Equity Years Ended December 31, 2020, 2019 and 2018 (dollar amounts in thousands) Common Stock Additional Paid-in Capital Unearned Employee Stock Ownership Plan Shares Retained Earnings Accumulated Other Comprehensive Income, Net of Income Taxes Treasury Stock Non- Controlling Interest Total Shareholders’ Equity Balance, January 1, 2018 $ 230 $ 93,496 $ ( 2,517 ) $ 152,865 $ 15,998 $ ( 8,037 ) $ 3,178 $ 255,573   Net income — — — 31,081 — — 163 31,244 Other comprehensive loss, net of income taxes — — — — ( 9,622 ) — ( 78 ) ( 9,700 ) Share-based compensation — 1,232 — — — — — 1,232 Purchase of treasury stock — — — — — ( 2,996 ) — ( 2,996 ) Issuance of vested award shares — ( 399 ) — — — 399 — — Distribution of employee stock ownership plan shares — 157 243 — — — — 400 Balance, December 31, 2018 230 94,486 ( 1,914 ) 183,946 6,376 ( 10,634 ) 3,263 275,753   Cumulative effect of change in accounting for equity securities — — — 8,184 ( 8,184 ) — — — Net income — — — 26,401 — — 99 26,500 Other comprehensive income, net of income taxes — — — — 7,420 — 137 7,557 Share-based compensation — 1,613 — — — — — 1,613 Purchase of treasury stock — — — — — ( 2,006 ) — ( 2,006 ) Issuance of vested award shares — ( 300 ) — ( 51 ) — 332 — ( 19 ) Distribution of employee stock ownership plan shares — 162 243 — — — — 405 Balance, December 31, 2019 230 95,961 ( 1,671 ) 218,480 5,612 ( 12,308 ) 3,499 309,803   Net income (loss) — — — 40,389 — — 955 41,344 Other comprehensive income, net of income taxes — — — — 7,228 — 91 7,319 Share-based compensation — 2,297 — — — — — 2,297 Purchase of treasury stock — — — — — ( 12,234 ) — ( 12,234 ) Issuance of vested award shares — ( 477 ) — ( 128 ) — 574 ( 31 ) Distribution of employee stock ownership plan shares — 130 244 — — — — 374 Balance, December 31, 2020 $ 230 $ 97,911 $ ( 1,427 ) $ 258,741 $ 12,840 $ ( 23,968 ) $ 4,545 $ 348,872 The accompanying notes are an integral part of these consolidated financial statements. 77 Table of Contents NI Holdings, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2020, 2019 and 2018 (dollar amounts in thousands) 2020 2019 2018 Cash flows from operating activities: Net income $ 41,344 $ 26,500 $ 31,244 Adjustments to reconcile net income to net cash flows from operating activities:​​ Gain on acquisition of Direct Auto Insurance Company — — ( 4,578 ) Net capital gain on investments ( 13,624 ) ( 14,783 ) ( 3,974 ) Deferred income tax expense (benefit) 638 1,871 ( 692 ) Depreciation of property and equipment 709 538 492 Amortization of intangibles 5,224 1,711 3,507 Distribution of employee stock ownership plan shares 373 405 400 Share-based incentive compensation 2,297 1,613 1,232 Amortization of deferred policy acquisition costs 51,472 46,188 31,856 Deferral of policy acquisition costs ( 60,041 ) ( 48,721 ) ( 35,863 ) Net amortization of premiums and discounts on investments 1,460 1,146 1,149 Loss (gain) on sale of property and equipment 6 37 ( 11 ) Changes in operating assets and liabilities: Premiums and agents’ balances receivable ( 3,325 ) ( 2,404 ) ( 2,806 ) Reinsurance premiums payable ( 828 ) 170 ( 428 ) Reinsurance recoverables on losses ( 3,902 ) ( 1,813 ) 1,896 Accrued investment income 17 ( 191 ) 161 Receivable from Federal Crop Insurance Corporation 7,584 1,939 ( 5,668 ) Income tax recoverable / payable ( 753 ) 889 ( 1,721 ) Other assets 186 ( 109 ) ( 1,477 ) Unpaid losses and loss adjustment expenses 3,932 6,129 264 Unearned premiums 13,476 4,509 5,550 Accrued expenses and other liabilities 4,765 41 422 Net cash flows from operating activities 51,010 25,665 20,955   Cash flows from investing activities: Proceeds from maturities and sales of fixed income securities 87,874 59,649 61,465 Proceeds from sales of equity securities 27,718 20,174 23,409 Purchases of fixed income securities ( 91,559 ) ( 92,012 ) ( 73,871 ) Purchases of equity securities ( 22,312 ) ( 17,042 ) ( 13,557 ) Purchases of property and equipment ( 543 ) ( 1,290 ) ( 1,552 ) Acquisition of Direct Auto Insurance Company (cash consideration paid net of cash and cash equivalents acquired) — — 27,485 Acquisition of Westminster American Insurance Company (cash consideration paid net of cash and cash equivalents acquired) ( 703 ) — — Other ( 275 ) 63 18 Net cash flows from investing activities ( 200 ) ( 30,458 ) 23,397   Cash flows from financing activities: Purchases of treasury stock ( 12,234 ) ( 2,006 ) ( 2,996 ) Issuance of restricted stock awards ( 31 ) ( 19 ) — Net cash flows from financing activities ( 12,265 ) ( 2,025 ) ( 2,996 )   Net (decrease) increase in cash and cash equivalents 38,945 ( 6,818 ) 41,356   Cash and cash equivalents at beginning of period 62,132 68,950 27,594   Cash and cash equivalents at end of period $ 101,077 $ 62,132 $ 68,950     Non-cash item: Present value of installment payable issued in connection with acquisition of Westminster American Insurance Company $ 18,787 $ — $ —   Income taxes paid $ 11,586 $ 4,000 $ 10,300 The accompanying notes are an integral part of these consolidated financial statements. 78 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements December 31, 2020, 2019 and 2018 (dollar amounts in thousands) 1. Organization 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. 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 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 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); 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 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. See Note 4. 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. See Note 4. 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. 79 Table of Contents 2. 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. 3. 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. 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. 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. 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. 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 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). See Note 13. 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. Investments : 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 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. 80 Table of Contents 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. 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 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 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 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. 81 Table of Contents 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. 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. 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. 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 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 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. 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 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. 82 Table of Contents 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 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” 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. 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. We also assess goodwill and other intangibles for impairment upon the occurrence of certain events. 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. 83 Table of Contents 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. 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 commercial business product line of the Company. 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. 4. Acquisitions 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 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: Pro Forma Year Ended December 31, 2018 Revenues $ 237,346   Net income attributable to NI Holdings, Inc. 27,166   Basic earnings per common share attributable to NI Holdings, Inc. 1.21 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. 84 Table of Contents 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: Fair Value of Consideration: Total cash consideration transferred $ 17,000   Fair Value of Identifiable Assets Acquired and Liabilities Assumed: Identifiable net assets: Cash and cash equivalents $ 44,485 Fixed income securities 11,414 Equity securities 14,634 Premiums and agents' balances receivable 5,849 Accrued investment income 63 Property and equipment 31 Favorable lease contract (included in goodwill and other intangibles) 20 License (included in goodwill and other intangibles) 100 Trade name (included in goodwill and other intangibles) 248 Value of business acquired (included in goodwill and other intangibles) 5,134 Other assets 107 Unpaid losses and loss adjustment expenses ( 40,967 ) Unearned premiums ( 15,955 ) Federal income tax payable ( 1,486 ) Deferred income taxes, net ( 1,442 ) Accrued expenses and other liabilities ( 657 ) Total identifiable net assets $ 21,578   Gain on bargain purchase $ 4,578 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. 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. 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 Westminster 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 following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2019: Pro Forma Year Ended December 31, 2019 Revenues $ 292,858   Net income attributable to NI Holdings, Inc. 24,394   Basic earnings per common share attributable to NI Holdings, Inc. 1.10 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 85 Table of Contents 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 $ 20,000 Present value of future cash consideration 18,787 Total cash consideration $ 38,787   Fair Value of Identifiable Assets Acquired and Liabilities Assumed: Identifiable net assets: Cash and cash equivalents $ 19,297 Fixed income securities 12,073 Equity securities 2,705 Other investments 735 Premiums and agents' balances receivable 8,507 Reinsurance recoverables on losses 763 Accrued investment income 70 Property and equipment 2,376 Federal income tax recoverable 138 State insurance licenses (included in goodwill and other intangibles) 1,800 Distribution network (included in goodwill and other intangibles) 6,700 Trade name (included in goodwill and other intangibles) 500 Value of business acquired (included in goodwill and other intangibles) 4,750 Other assets 76 Unpaid losses and loss adjustment expenses ( 8,568 ) Unearned premiums ( 16,611 ) Deferred income taxes, net ( 1,583 ) Reinsurance premiums payable ( 565 ) Accrued expenses and other liabilities ( 1,132 ) Total identifiable net assets $ 32,031   Goodwill $ 6,756 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. 5. 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. Adopted 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’ 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. As a result, there was no impact to the Company’s financial position, results of operations, or cash flows. 86 Table of Contents 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. 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, 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. 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. 87 Table of Contents 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. We are evaluating the impact this new guidance will have on our financial position, results of operations, and cash flows. 88 Table of Contents 6. Investments The amortized cost and estimated fair value of fixed income securities as of December 31, 2020 and 2019 were as follows: December 31, 2020 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed income securities: U.S. Government and agencies $ 13,334 $ 1,055 $ ( 6 ) $ 14,383 Obligations of states and political subdivisions 61,001 3,278 ( 35 ) 64,244 Corporate securities 119,826 8,755 ( 147 ) 128,434 Residential mortgage-backed securities 35,017 1,478 ( 1 ) 36,494 Commercial mortgage-backed securities 23,976 1,700 ( 21 ) 25,655 Asset-backed securities 50,751 535 ( 86 ) 51,200 Total fixed income securities $ 303,905 $ 16,801 $ ( 296 ) $ 320,410 December 31, 2019 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed income securities: U.S. Government and agencies $ 17,078 $ 472 $ ( 4 ) $ 17,546 Obligations of states and political subdivisions 55,232 1,511 ( 91 ) 56,652 Corporate securities 109,457 3,772 ( 16 ) 113,213 Residential mortgage-backed securities 50,458 1,050 ( 22 ) 51,486 Commercial mortgage-backed securities 26,450 658 ( 51 ) 27,057 Asset-backed securities 30,029 132 ( 170 ) 29,991 Total fixed income securities $ 288,704 $ 7,595 $ ( 354 ) $ 295,945   89 Table of Contents 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 Amortized Cost Fair Value Due to mature: One year or less $ 17,722 $ 17,933 After one year through five years 86,709 91,457 After five years through ten years 59,408 64,987 After ten years 30,322 32,684 Mortgage / asset-backed securities 109,744 113,349 Total fixed income securities $ 303,905 $ 320,410 December 31, 2019 Amortized Cost Fair Value Due to mature: One year or less $ 19,567 $ 19,663 After one year through five years 84,937 87,134 After five years through ten years 55,927 58,466 After ten years 21,336 22,148 Mortgage / asset-backed securities 106,937 108,534 Total fixed income securities $ 288,704 $ 295,945   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. 90 Table of Contents 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 Less than 12 Months Greater than 12 months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fixed income securities: U.S. Government and agencies $ 931 $ ( 6 ) $ — $ — $ 931 $ ( 6 ) Obligations of states and political subdivisions 1,806 ( 35 ) — — 1,806 ( 35 ) Corporate securities 3,215 ( 97 ) 734 ( 50 ) 3,949 ( 147 ) Residential mortgage-backed securities 68 ( 1 ) — — 68 ( 1 ) Commercial mortgage-backed securities 1,103 ( 21 ) — — 1,103 ( 21 ) Asset-backed securities 5,785 ( 31 ) 4,188 ( 55 ) 9,973 ( 86 ) Total fixed income securities $ 12,908 $ ( 191 ) $ 4,922 $ ( 105 ) $ 17,830 $ ( 296 )   December 31, 2019 Less than 12 Months Greater than 12 months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fixed income securities: U.S. Government and agencies $ 494 $ ( 4 ) $ — $ — $ 494 $ ( 4 ) Obligations of states and political subdivisions 8,018 ( 91 ) — — 8,018 ( 91 ) Corporate securities 2,066 ( 15 ) 650 ( 1 ) 2,716 ( 16 ) Residential mortgage-backed securities 2,911 ( 9 ) 2,583 ( 13 ) 5,494 ( 22 ) Commercial mortgage-backed securities 4,841 ( 35 ) 653 ( 16 ) 5,494 ( 51 ) Asset-backed securities 8,511 ( 96 ) 7,686 ( 74 ) 16,197 ( 170 ) Total fixed income securities $ 26,841 $ ( 250 ) $ 11,572 $ ( 104 ) $ 38,413 $ ( 354 ) 91 Table of Contents 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. 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, 2020 2019 2018 Fixed income securities $ 8,682 $ 8,394 $ 6,975 Equity securities 1,220 996 934 Real estate 587 365 364 Cash and cash equivalents 30 71 111 Total gross investment income 10,519 9,826 8,384 Investment expenses 3,248 2,393 2,204 Net investment income $ 7,271 $ 7,433 $ 6,180 Net realized capital gain on investments consisted of the following: Year Ended December 31, 2020 2019 2018 Gross realized gains: Fixed income securities $ 1,035 $ 341 $ 72 Equity securities 8,705 4,311 5,890 Total gross realized gains 9,740 4,652 5,962   Gross realized losses, excluding other-than-temporary impairment losses: Fixed income securities ( 132 ) ( 147 ) ( 426 ) Equity securities ( 1,837 ) ( 1,259 ) ( 1,180 ) Total gross realized losses, excluding other-than-temporary impairment losses​​ ( 1,969 ) ( 1,406 ) ( 1,606 )   Other-than-temporary impairment losses — — ( 382 ) Net realized gain on investments 7,771 3,246 3,974   Change in net unrealized gain on equity securities 5,853 11,537 — Net capital gain on investments $ 13,624 $ 14,783 $ 3,974 92 Table of Contents 7. 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 Total Level I Level II Level III Fixed income securities: U.S. Government and agencies $ 14,383 $ — $ 14,383 $ — Obligations of states and political subdivisions 64,244 — 64,244 — Corporate securities 128,434 — 128,434 — Residential mortgage-backed securities 36,494 — 36,494 — Commercial mortgage-backed securities 25,655 — 25,655 — Asset-backed securities 51,200 — 51,200 — Total fixed income securities 320,410 — 320,410 —   Equity securities: Basic materials 1,285 1,285 — — Communications 7,455 7,455 — — Consumer, cyclical 9,929 9,929 — — Consumer, non-cyclical 14,633 14,633 — — Energy 1,499 1,499 — — Financial 6,235 6,235 — — Industrial 12,733 12,733 — — Technology 16,145 16,145 — — Utility 38 38 — — Total equity securities 69,952 69,952 — —   Cash and cash equivalents 101,077 65,354 35,723 — Total assets at fair value $ 491,439 $ 135,306 $ 356,133 $ — 93 Table of Contents December 31, 2019 Total Level I Level II Level III Fixed income securities: U.S. Government and agencies $ 17,546 $ — $ 17,546 $ — Obligations of states and political subdivisions 56,652 — 56,652 — Corporate securities 113,213 — 113,213 — Residential mortgage-backed securities 51,486 — 51,486 — Commercial mortgage-backed securities 27,057 — 27,057 — Asset-backed securities 29,991 — 29,991 — Total fixed income securities 295,945 — 295,945 —   Equity securities: Basic materials 1,210 1,210 — — Communications 6,996 6,996 — — Consumer, cyclical 9,612 9,612 — — Consumer, non-cyclical 12,567 12,567 — — Energy 2,456 2,456 — — Financial 5,929 5,929 — — Industrial 9,299 9,299 — — Technology 11,863 11,863 — — Total equity securities 59,932 59,932 — —   Cash and cash equivalents 62,132 43,707 18,425 — Total assets at fair value $ 418,009 $ 103,639 $ 314,370 $ — There were no liabilities measured at fair value on a recurring basis at December 31, 2020 or 2019. 94 Table of Contents 8. Reinsurance 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” or higher. A reconciliation of direct to net premiums on both a written and an earned basis is as follows: 2020 2019 2018 Premiums Written Premiums Earned Premiums Written Premiums Earned Premiums Written Premiums Earned Direct premium $ 314,187 $ 301,061 $ 262,145 $ 257,661 $ 225,223 $ 219,600 Assumed premium 6,590 6,459 5,921 5,897 6,441 6,514 Ceded premium ( 23,633 ) ( 23,859 ) ( 17,120 ) ( 17,120 ) ( 30,394 ) ( 30,394 ) Net premiums $ 297,144 $ 283,661 $ 250,946 $ 246,438 $ 201,270 $ 195,720   Percentage of assumed premium earned to direct premium earned 2.1 % 2.3 % 3.0 % A reconciliation of direct to net losses and loss adjustment expenses is as follows: 2020 2019 2018 Direct losses and loss adjustment expenses $ 185,370 $ 173,943 $ 119,894 Assumed losses and loss adjustment expenses 3,308 4,032 3,399 Ceded losses and loss adjustment expenses ( 20,205 ) ( 8,265 ) ( 4,205 ) Net losses and loss adjustment expenses $ 168,473 $ 169,710 $ 119,088 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. 95 Table of Contents 9. Deferred Policy Acquisition Costs Activity with regards to our deferred policy acquisition costs was as follows: Year Ended December 31, 2020 2019 2018 Balance, beginning of year $ 15,399 $ 12,866 $ 8,859 Deferral of policy acquisition costs 60,041 48,721 35,863 Amortization of deferred policy acquisition costs ( 51,472 ) ( 46,188 ) ( 31,856 ) Balance, end of year $ 23,968 $ 15,399 $ 12,866 10. 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, 2020 2019 2018 Balance at beginning of year: Liability for unpaid losses and loss adjustment expenses $ 93,250 $ 87,121 $ 45,890 Reinsurance recoverables on losses 4,045 2,232 4,128 Net balance at beginning of year 89,205 84,889 41,762   Acquired unpaid losses and loss adjustment expenses related to: Current year — — 17,795 Prior years 8,568 — 23,172 Total acquired 8,568 — 40,967   Incurred related to: Current year 165,181 176,219 119,677 Prior years 3,292 ( 6,509 ) ( 589 ) Total incurred 168,473 169,710 119,088   Paid related to: Current year 116,755 125,940 92,175 Prior years 52,451 39,454 24,753 Total paid 169,206 165,394 116,928   Balance at end of year: Liability for unpaid losses and loss adjustment expenses 105,750 93,250 87,121 Reinsurance recoverables on losses 8,710 4,045 2,232 Net balance at end of year $ 97,040 $ 89,205 $ 84,889 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. 96 Table of Contents 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 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 For the Year Ended December 31, At December 31, 2020 Accident Year 2011  (1) 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2011 $ 25,552 $ 24,126 $ 25,220 $ 24,409 $ 24,209 $ 23,967 $ 23,814 $ 23,826 $ 23,852 $ 23,785 — 11,485 2012 — 26,962 24,787 24,323 24,098 24,133 23,298 23,621 23,651 22,523 3 9,726 2013 — — 29,079 27,840 27,363 27,334 26,014 26,138 26,105 26,077 36 10,825 2014 — — — 32,548 31,349 30,427 29,099 29,144 29,298 29,479 115 11,744 2015 — — — — 32,438 31,532 30,461 30,503 30,679 30,455 230 11,687 2016 — — — — — 40,227 39,260 39,057 39,314 38,535 298 14,317 2017 — — — — — — 40,779 40,199 40,120 40,427 287 13,740 2018 — — — — — — — 44,925 43,428 43,641 591 14,651 2019 — — — — — — — — 53,769 53,328 1,279 16,451 2020 — — — — — — — — — 46,247 2,477 12,624 Total $ 354,497 (1) Prior years unaudited Private Passenger Auto Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2011 (1) 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2011 $ 19,116 $ 22,161 $ 22,325 $ 23,024 $ 23,339 $ 23,583 $ 23,732 $ 23,747 $ 23,852 $ 23,785 2012 — 18,681 21,434 21,888 22,640 22,726 23,073 23,271 23,324 22,490 2013 — — 20,077 23,576 24,765 24,918 25,718 25,843 26,035 26,019 2014 — — — 22,744 25,727 27,076 27,443 28,281 28,765 29,239 2015 — — — — 23,401 27,171 28,933 29,598 29,795 30,120 2016 — — — — — 29,009 35,845 37,307 38,108 37,833 2017 — — — — — — 31,033 37,050 38,331 39,738 2018 — — — — — — — 34,358 40,213 41,479 2019 — — — — — — — — 42,414 48,414 2020 — — — — — — — — — 35,495 Total $ 334,612 All outstanding liabilities prior to 2011, net of reinsurance 14 Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 19,899 (1) Prior years unaudited 97 Table of Contents Non-Standard Auto (Primero) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2020 Accident Year 2011  (1) 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2011 $ 8,129 $ 8,173 $ 8,178 $ 8,191 $ 8,168 $ 8,168 $ 8,168 $ 8,178 $ 8,178 $ 8,178 — 1,939 2012 — 8,749 8,491 8,369 8,361 8,302 8,312 8,324 8,324 8,323 — 2,048 2013 — — 11,063 10,823 10,800 10,804 10,843 10,833 10,828 10,844 — 2,617 2014 — — — 7,297 7,619 7,591 7,577 7,612 7,625 7,606 — 1,838 2015 — — — — 9,727 9,806 9,655 9,691 9,641 9,622 — 1,793 2016 — — — — — 9,967 10,048 10,054 10,033 10,008 9 1,740 2017 — — — — — — 8,722 8,654 8,556 8,541 18 1,460 2018 — — — — — — — 10,445 11,804 11,763 40 1,791 2019 — — — — — — — — 12,264 11,391 163 1,490 2020 — — — — — — — — — 9,018 992 899 Total $ 95,294 (1) Prior years unaudited Non-Standard Auto (Primero) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2011 (1) 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2011 $ 4,457 $ 7,445 $ 7,984 $ 8,146 $ 8,168 $ 8,168 $ 8,168 $ 8,178 $ 8,178 8,178 2012 — 4,377 7,522 7,983 8,276 8,302 8,312 8,324 8,324 8,323 2013 — — 6,320 9,675 10,508 10,717 10,805 10,815 10,818 10,844 2014 — — — 3,733 6,707 7,423 7,521 7,579 7,605 7,606 2015 — — — — 5,335 8,685 9,479 9,557 9,620 9,622 2016 — — — — — 5,409 8,882 9,790 9,912 9,974 2017 — — — — — — 4,348 7,660 8,204 8,460 2018 — — — — — — — 5,492 10,536 11,616 2019 — — — — — — — — 6,309 10,007 2020 — — — — — — — — — 4,111 Total $ 88,741 All outstanding liabilities prior to 2011, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 6,553 (1) Prior years unaudited 98 Table of Contents 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 2011  (1) 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 (1) 2017 (1) 2018 2019 2020 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2011 $ 5,296 $ 3,313 $ 3,134 $ 2,937 $ 2,902 $ 2,854 $ 2,874 $ 3,003 $ 2,983 $ 2,984 13 2,910 2012 — 7,164 4,159 3,927 3,916 4,215 4,643 4,909 4,930 5,009 27 3,357 2013 — — 10,596 6,020 5,869 5,261 5,278 5,160 5,049 5,131 18 3,372 2014 — — — 14,010 9,068 6,224 8,381 6,745 6,476 6,672 54 4,788 2015 — — — — 17,917 14,498 13,043 10,538 10,704 10,945 ( 219 ) 9,083 2016 — — — — — 20,547 14,660 13,552 13,956 12,876 ( 282 ) 11,159 2017 — — — — — — 23,376 18,621 15,858 14,648 ( 2,938 ) 11,671 2018 — — — — — — — 25,791 22,662 21,980 ( 501 ) 15,523 2019 — — — — — — — — 24,932 25,473 ( 1,678 ) 10,610 2020 — — — — — — — — — 24,036 ( 3,092 ) 12,902 Total $ 129,754 (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 2011 (1) 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 2019 2020 2011 $ 1,290 $ 1,890 $ 2,342 $ 2,590 $ 2,761 $ 2,830 $ 2,851 $ 2,925 $ 2,937 $ 2,939 2012 — 1,696 2,421 3,041 3,587 4,081 4,503 4,671 4,730 4,915 2013 — — 1,944 3,123 3,796 4,291 4,602 4,808 4,890 4,960 2014 — — — 2,201 3,573 4,452 5,369 5,781 6,151 6,327 2015 — — — — 2,967 5,202 7,057 8,327 9,560 10,057 2016 — — — — — 3,526 6,272 8,559 10,603 11,058 2017 — — — — — — 4,385 6,981 10,034 11,366 2018 — — — — — — — 6,034 12,285 15,204 2019 — — — — — — — — 10,203 16,214 2020 — — — — — — — — — 9,964 Total $ 93,004 All outstanding liabilities prior to 2011, net of reinsurance 33 Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 36,783 (1) Prior years unaudited 99 Table of Contents Home and Farm Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2020 Accident Year 2011  (1) 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2011 $ 31,948 $ 32,104 $ 32,113 $ 31,771 $ 31,684 $ 31,388 $ 31,306 $ 31,313 $ 31,312 $ 31,325 — 5,946 2012 — 25,179 24,439 24,320 24,091 24,081 24,079 24,088 24,086 24,324 — 3,631 2013 — — 29,976 29,217 28,531 28,315 28,286 28,315 27,593 27,588 — 4,189 2014 — — — 36,663 36,001 35,770 35,589 35,684 35,534 35,497 12 5,241 2015 — — — — 32,789 31,818 31,297 31,577 31,446 31,612 15 3,923 2016 — — — — — 45,825 44,510 44,945 44,602 44,728 91 6,346 2017 — — — — — — 42,110 41,593 41,886 41,779 204 4,932 2018 — — — — — — — 42,515 43,846 43,747 323 4,561 2019 — — — — — — — — 45,438 45,828 911 5,426 2020 — — — — — — — — — 36,264 2,416 3,721 Total $ 362,692 (1) Prior years unaudited Home and Farm Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2011 (1) 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2011 $ 29,399 $ 33,019 $ 31,126 $ 31,460 $ 31,702 $ 31,277 $ 31,304 $ 31,313 $ 31,312 $ 31,325 2012 — 21,761 23,863 24,029 24,168 24,075 24,076 24,087 24,086 24,324 2013 — — 23,354 26,934 27,183 27,221 27,456 27,495 27,560 27,583 2014 — — — 32,207 35,199 35,219 35,371 35,481 35,482 35,485 2015 — — — — 27,204 30,164 30,350 30,573 31,383 31,597 2016 — — — — — 37,656 44,942 44,270 44,530 44,583 2017 — — — — — — 34,657 38,928 40,442 40,941 2018 — — — — — — — 37,881 42,814 43,178 2019 — — — — — — — — 38,709 43,253 2020 — — — — — — — — — 29,274 Total $ 351,543 All outstanding liabilities prior to 2011, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 11,149 (1) Prior years unaudited 100 Table of Contents Crop Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2020 Accident Year 2011  (1) 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2011 $ 55,094 $ 54,953 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ — 3,211 2012 — 13,546 13,676 13,673 13,673 13,673 13,673 13,673 13,673 13,673 — 2,137 2013 — — 40,976 39,665 39,665 39,665 39,665 39,665 39,665 39,665 — 2,097 2014 — — — 22,686 20,333 20,333 20,333 20,333 20,333 20,333 — 2,268 2015 — — — — 13,813 13,849 13,849 13,849 13,849 13,849 — 2,427 2016 — — — — — 20,209 19,582 19,487 19,487 19,487 — 2,806 2017 — — — — — — 33,733 34,181 34,181 34,181 — 2,968 2018 — — — — — — — 12,506 11,730 11,730 — 2,147 2019 — — — — — — — — 33,913 37,629 — 3,101 2020 — — — — — — — — — 28,688 22 2,339 Total $ 278,886 (1) Prior years unaudited Crop Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2011 (1) 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2011 $ 57,741 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 $ 59,651 2012 — 13,078 13,673 13,673 13,673 13,673 13,673 13,673 13,673 13,673 2013 — — 35,511 39,665 39,665 39,665 39,665 39,665 39,665 39,665 2014 — — — 17,788 20,333 20,333 20,333 20,333 20,333 20,333 2015 — — — — 12,866 13,849 13,849 13,849 13,849 13,849 2016 — — — — — 16,444 19,487 19,487 19,487 19,487 2017 — — — — — — 32,767 34,181 34,181 34,181 2018 — — — — — — — 10,764 11,730 11,730 2019 — — — — — — — — 26,332 37,629 2020 — — — — — — — — — 28,038 Total $ 278,236 All outstanding liabilities prior to 2010, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 650 (1) Prior years unaudited 101 Table of Contents Commercial (Westminster) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2020 Accident Year 2011  (1) 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 (1) 2017 (1) 2018 (1) 2019 (1) 2020 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2011 $ 1,911 $ 1,740 $ 1,758 $ 1,828 $ 1,827 $ 1,821 $ 1,821 $ 1,821 $ 1,821 $ 1,848 — 137 2012 — 2,795 2,492 2,539 2,583 2,666 2,680 2,680 2,680 2,680 — 133 2013 — — 2,214 1,982 2,000 1,935 2,058 2,053 2,037 2,036 — 138 2014 — — — 4,385 4,274 4,286 4,428 4,450 4,443 4,445 10 272 2015 — — — — 3,082 3,258 4,019 4,218 4,293 4,238 2 278 2016 — — — — — 4,661 5,719 6,200 6,091 6,248 36 264 2017 — — — — — — 5,552 6,249 6,838 7,347 251 320 2018 — — — — — — — 10,358 11,177 12,414 628 476 2019 — — — — — — — — 11,658 13,051 1,269 399 2020 — — — — — — — — — 14,774 3,043 390 Total $ 69,081 (1) Prior years unaudited Commercial (Westminster) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2011 (1) 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 (1) 2019 (1) 2020 2011 $ 1,496 $ 1,718 $ 1,745 $ 1,758 $ 1,781 $ 1,821 $ 1,821 $ 1,821 $ 1,821 $ 1,848 2012 — 1,634 2,364 2,442 2,537 2,591 2,680 2,680 2,680 2,680 2013 — — 1,494 1,727 1,829 1,889 1,949 2,035 2,036 2,036 2014 — — — 3,330 3,921 4,151 4,269 4,395 4,403 4,410 2015 — — — — 2,126 2,794 3,332 3,950 4,206 4,231 2016 — — — — — 3,172 5,289 5,630 5,693 6,112 2017 — — — — — — 3,573 4,927 5,865 6,576 2018 — — — — — — — 6,494 9,472 10,591 2019 — — — — — — — — 6,294 9,925 2020 — — — — — — — — — 8,146 Total $ 56,555 All outstanding liabilities prior to 2011, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 12,526 (1) Prior years unaudited 102 Table of Contents Commercial (non-Westminster) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2020 Accident Year 2011  (1) 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2011 $ 1,937 $ 1,444 $ 1,414 $ 1,407 $ 1,429 $ 1,450 $ 1,433 $ 1,433 $ 1,433 $ 1,433 $ — 220 2012 — 1,600 1,125 1,001 988 985 970 969 969 970 — 142 2013 — — 2,690 2,637 2,566 2,548 2,508 2,511 2,511 2,511 — 227 2014 — — — 2,180 1,732 1,694 1,675 1,650 1,650 1,650 — 163 2015 — — — — 1,695 1,643 1,637 1,582 1,580 1,580 — 135 2016 — — — — — 2,683 2,526 2,515 2,516 2,512 — 288 2017 — — — — — — 2,530 2,513 2,510 2,497 — 167 2018 — — — — — — — 1,652 1,576 1,609 109 147 2019 — — — — — — — — 2,607 2,782 15 187 2020 — — — — — — — — — 2,293 250 116 Total $ 19,837 (1) Prior years unaudited Commercial (non-Westminster) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2011 (1) 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2011 $ 1,054 $ 1,357 $ 1,322 $ 1,374 $ 1,393 $ 1,428 $ 1,433 $ 1,433 $ 1,433 $ 1,433 2012 — 776 932 985 969 969 970 969 969 970 2013 — — 2,520 2,751 2,530 2,504 2,508 2,511 2,511 2,511 2014 — — — 1,782 1,925 1,563 1,640 1,650 1,650 1,650 2015 — — — — 1,274 1,796 1,818 1,580 1,580 1,580 2016 — — — — — 1,822 2,806 2,498 2,512 2,512 2017 — — — — — — 1,530 2,465 2,497 2,497 2018 — — — — — — — 1,049 1,213 1,240 2019 — — — — — — — — 1,917 2,712 2020 — — — — — — — — — 1,543 Total $ 18,648 All outstanding liabilities prior to 2011, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 1,189 (1) Prior years unaudited 103 Table of Contents 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 Liabilities for unpaid losses and loss adjustment expenses: Private passenger auto $ 20,311 Non-standard auto (Primero) 6,553 Non-standard auto (Direct Auto) 36,783 Home and farm 11,737 Crop 771 Commercial (Westminster) 17,900 Commercial (non-Westminster) 1,189 All other 10,506 Total liabilities for unpaid losses and loss adjustment expenses 105,750   Reinsurance recoverables on losses: Private passenger auto 412 Non-standard auto (Primero) — Non-standard auto (Direct Auto) — Home and farm 588 Crop 121 Commercial (Westminster) 5,374 Commercial (non-Westminster) — All other 2,215 Total reinsurance recoverables on losses 8,710   Net liability for unpaid losses and loss adjustment expenses $ 97,040 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 Years 1 2 3 4 5 6 7 8 9 10 Private Passenger Auto 50.0 % 19.2 % 12.3 % 6.7 % 4.9 % 3.3 % 1.7 % 1.4 % 0.5 % — Non-Standard Auto (Primero) 78.4 % 16.3 % 3.9 % 1.0 % 0.2 % 0.1 % 0.1 % — — — Non-Standard Auto (Direct Auto) 34.5 % 23.6 % 16.2 % 10.2 % 6.4 % 3.6 % 2.4 % 1.5 % 0.8 % 0.8 % Home and Farm 52.6 % 8.2 % 9.5 % 5.1 % 1.7 % 1.9 % 7.2 % 5.8 % 8.0 % — Crop 100.0 % — — — — — — — — — Commercial (Westminster) 57.5 % 23.1 % 6.5 % 9.4 % 3.5 % — — — — — Commercial (non-Westminster) 68.2 % 13.2 % 6.6 % 4.0 % 1.2 % 1.5 % 1.4 % 0.9 % 0.9 % 2.2 % 104 Table of Contents 11. Property and Equipment Property and equipment consisted of the following: December 31, 2020 2019 Estimated Useful Life Cost: Real estate $ 15,313 $ 12,733 10 - 31 years Electronic data processing equipment 1,271 1,271 5 - 7 years Furniture and fixtures 2,867 2,796 5 - 7 years Automobiles 1,275 1,130 2 - 3 years Gross cost 20,726 17,930   Accumulated depreciation ( 10,827 ) ( 10,236 ) Total property and equipment, net $ 9,899 $ 7,694 Depreciation expense was $ 709 , $ 538 , and $ 492 during the years ended December 31, 2020, 2019 and 2018, respectively. 12. Goodwill and Other Intangibles Goodwill The following table presents the carrying amount of the Company’s goodwill by segment: December 31, 2020 2019 Non-standard auto from acquisition of Primero $ 2,628 $ 2,628 Commercial from acquisition of Westminster 6,756 — Total $ 9,384 $ 2,628 Other Intangible Assets The following table presents the carrying amount of the Company’s other intangible assets: December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Subject to amortization: Trade names $ 748 $ 166 $ 582 Distribution network 6,700 372 6,328 Total subject to amortization 7,448 538 6,910   Not subject to amortization – state insurance licenses 1,900 - 1,900 Total $ 9,348 $ 538 $ 8,810 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Subject to amortization: Trade names $ 248 $ 66 $ 182 Other 20 18 2 Total subject to amortization 268 84 184   Not subject to amortization – state insurance license 100 - 100 Total $ 368 $ 84 $ 284 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, Amount 2021 $ 472 2022 472 2023 455 2024 422 2025 422 Thereafter 4,667 Total other intangible assets with finite lives $ 6,910 13. 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 105 Table of Contents 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 66.0 % American West Insurance Company 7.0 % Primero Insurance Company 3.0 % Battle Creek Mutual Insurance Company 2.0 % Direct Auto Insurance Company 13.0 % Westminster American Insurance Company 9.0 % Total 100.0 % North Dakota Farm Bureau We were organized by the 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. 106 Table of Contents Dividends State insurance laws require our insurance subsidiaries to maintain certain minimum capital and surplus amounts on a statutory basis. Our insurance subsidiaries are subject to regulations that restrict the payment of dividends from statutory surplus and may require prior approval from their domiciliary insurance regulatory authorities. Our insurance subsidiaries are also subject to risk-based capital (“RBC”) requirements that may further affect their ability to pay dividends. Our insurance subsidiaries statutory capital and surplus at December 31, 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. 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, 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. 107 Table of Contents 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: December 31, 2020 2019 Assets: Cash and cash equivalents $ 6,055 $ — Investments 5,543 4,661 Premiums and agents’ balances receivable 4,738 4,801 Deferred policy acquisition costs 479 — Pooling receivable (1) 920 — Reinsurance recoverables on losses (2) 5,646 26,330 Accrued investment income 27 33 Deferred income tax asset, net 101 343 Property and equipment 337 348 Other assets 49 45 Total assets $ 23,895 $ 36,561   Liabilities: Unpaid losses and loss adjustment expenses $ 2,445 $ 10,622 Unearned premiums 2,381 15,708 Notes payable (1) 3,000 3,000 Reinsurance losses payable (2) 11,221 1,706 Accrued expenses and other liabilities 303 2,026 Total liabilities 19,350 33,026   Equity: Non-controlling interest 4,545 3,499 Total equity 4,545 3,499   Total liabilities and equity $ 23,895 $ 36,561   (1) Amount fully eliminated in consolidation . (2) Amount partly eliminated in consolidation . Year Ended December 31, 2020 2019 2018 Revenues: Net premiums earned $ 5,673 $ — $ — Fee and other income ( 23 ) ( 9 ) 12 Net investment income ( 3 ) 139 147 Net capital gain on investments 1 3 - Total revenues 5,648 133 159   Expenses: Losses and loss adjustment expenses 3,369 — — Amortization of deferred policy acquisition costs 1,029 — — Other underwriting and general expenses 77 — — Total expenses 4,475 — —   Income before income taxes 1,173 133 159 Income taxes 218 34 ( 4 ) Net income $ 955 $ 99 $ 163   14. 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 $ 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). 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 $ 308 , $ 458 , and $ 451 for the years ended December 31, 2020, 2019, and 2018, respectively. 108 Table of Contents 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, 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. 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 $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. 15. 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 January 30, 2022. 109 Table of Contents 16. Income Taxes 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, 2020 2019 2018 Federal Current $ 10,109 $ 5,116 $ 8,020 Deferred 638 1,871 ( 692 ) Total federal 10,747 6,987 7,328 State 725 324 593 Total provision for income taxes $ 11,472 $ 7,311 $ 7,921 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, 2020 2019 2018 Income before income taxes $ 52,816 $ 33,811 $ 39,165   Expected provision for federal income taxes at 21 % $ 11,091 $ 7,100 $ 8,100   Tax-exempt interest ( 209 ) ( 235 ) ( 232 ) Dividends received deduction ( 104 ) ( 89 ) ( 87 ) Executive compensation 130 151 159 Change in valuation allowance ( 17 ) 7 ( 41 ) State income taxes, net of federal impact 570 224 476 Other 11 153 ( 454 ) Total provision for income taxes $ 11,472 $ 7,311 $ 7,921   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. 110 Table of Contents 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: December 31, 2020 2019 Deferred income tax assets: Unearned premium $ 5,013 $ 3,750 Unpaid losses and loss adjustment expenses 792 615 Net operating loss carryovers 1,260 977 Other 1,538 952 Total deferred income tax assets 8,603 6,294   Deferred income tax liabilities: Deferred policy acquisition costs 5,033 3,234 Net unrealized gains on investments 9,897 6,927 Intangibles 1,451 39 Other 48 90 Total deferred income tax liabilities 16,429 10,290   Net deferred income tax liability ( 7,826 ) ( 3,996 )   Valuation allowance ( 931 ) ( 594 ) Deferred income tax liability, net $ ( 8,757 ) $ ( 4,590 ) 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. 17. 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, Estimated Future Minimum Commitments 2021 $ 249 2022 319 2023 358 2024 320 2025 286 Thereafter 1,066 18. 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. 111 Table of Contents 19. Common Stock Changes in the number of common stock shares outstanding are as follows: Year Ended December 31, 2020 2019 2018 Shares outstanding, beginning 22,119,380 22,192,894 22,337,644 Treasury shares repurchased through stock repurchase authorization ( 856,499 ) ( 116,034 ) ( 191,265 ) Issuance of treasury shares for vesting of stock awards 31,442 18,205 22,200 Issuance of shares related to employee stock ownership plan 24,315 24,315 24,315 Shares outstanding, ending 21,318,638 22,119,380 22,192,894 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. 20. Stock Based Compensation At its 2020 Annual Shareholders’ Meeting, the NI Holdings, Inc. 2020 Stock and Incentive Plan (the “Plan”) was approved by shareholders. The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors, advisors, and non-employee directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business and to afford such persons an opportunity to acquire an ownership interest in the Company, thereby aligning the interests of such persons with the Company’s shareholders. The Plan provides for the grant of nonqualified stock options, incentive stock options, restricted stock units (“RSUs”), stock appreciation rights, dividend equivalents, and performance share units (“PSUs”) to employees, officers, consultants, advisors, non-employee directors, and independent contractors designated by the Compensation Committee of the Board of Directors (the “Compensation Committee”). Awards made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the Company. The total aggregate number of shares of common stock that 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 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. 112 Table of Contents 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: Shares Weighted-Average Grant-Date Fair Value Per Share Units outstanding and unearned at January 1, 2018 65,500 $ 17.31 RSUs granted during 2018 40,000 16.25 RSUs earned during 2018 ( 31,620 ) 16.99 Units outstanding and unearned at December 31, 2018 73,880 $ 16.87   RSUs granted during 2019 57,100 15.81 RSUs earned during 2019 ( 34,440 ) 16.24 Units outstanding and unearned at December 31, 2019 96,540 $ 16.47   RSUs granted during 2020 66,000 14.27 RSUs earned during 2020 ( 46,760 ) 16.33 Units outstanding and unearned at December 31, 2020 115,780 $ 15.27 The following table shows the impact of RSU activity to the Company’s financial results: Year Ended December 31, 2020 2019 2018 RSU compensation expense $ 1,035 $ 792 $ 999 Income tax benefit ( 217 ) ( 166 ) ( 210 ) RSU compensation expense, net of income taxes $ 818 $ 626 $ 789   Total grant-date fair value of vested RSUs at end of period $ 764 $ 568 $ 537 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 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. 113 Table of Contents A summary of the Company’s outstanding PSUs is presented below: Performance Share Units Weighted-Average Grant-Date Fair Value Per Share Units outstanding and unearned at January 1, 2018 — $ — PSUs granted during 2018 (at target) 48,600 16.25 Units outstanding and unearned at December 31, 2018 48,600 $ 16.25   PSUs granted during 2019 (at target) 62,400 15.21 Units outstanding and unearned at December 31, 2019 111,000 $ 15.27   PSUs granted during 2020 (at target) 63,600 14.26 Units outstanding and unearned at December 31, 2020 174,600 $ 15.15 The following table shows the impact of PSU activity to the Company’s financial results: Year Ended December 31, 2020 2019 2018 PSU compensation expense $ 1,262 $ 822 $ 233 Income tax benefit ( 265 ) ( 173 ) ( 49 ) PSU compensation expense, net of income taxes $ 997 $ 649 $ 184   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, 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. 21. 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. 114 Table of Contents 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, 2020 2019 2018 Basic earnings per common share: Numerator: Net income attributable to NI Holdings $ 40,389 $ 26,401 $ 31,081 Denominator: Weighted average shares outstanding 21,772,475 22,179,747 22,358,858 Basic earnings per common share $ 1.86 $ 1.19 $ 1.39   Diluted earnings per common share: Numerator: Net income attributable to NI Holdings $ 40,389 $ 26,401 $ 31,081 Denominator: Number of shares used in basic computation 21,772,475 22,179,747 22,358,858 Weighted average effect of dilutive securities Add: RSUs and PSUs 169,995 85,601 26,896 Number of shares used in diluted computation 21,942,470 22,265,348 22,385,754 Diluted earnings per common share $ 1.84 $ 1.19 $ 1.39 115 Table of Contents 22. 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. 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. 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. 116 Table of Contents Year Ended December 31, 2020 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 74,998 $ 53,909 $ 82,036 $ 39,893 $ 45,557 $ 4,668 $ 301,061 Assumed premiums earned — — — 1,896 — 4,563 6,459 Ceded premiums earned ( 2,989 ) ( 172 ) ( 7,157 ) ( 6,071 ) ( 7,269 ) ( 201 ) ( 23,859 ) Net premiums earned 72,009 53,737 74,879 35,718 38,288 9,030 283,661   Direct losses and LAE 45,423 30,347 38,700 36,022 32,620 2,258 185,370 Assumed losses and LAE — — ( 116 ) 1,070 — 2,354 3,308 Ceded losses and LAE 88 — ( 1,839 ) ( 5,713 ) ( 12,190 ) ( 551 ) ( 20,205 ) Net losses and LAE 45,511 30,347 36,745 31,379 20,430 4,061 168,473   Gross margin 26,498 23,390 38,134 4,339 17,858 4,969 115,188   Underwriting and general expenses 19,986 20,739 20,874 4,807 16,358 2,304 85,068 Underwriting gain (loss) 6,512 2,651 17,260 ( 468 ) 1,500 2,665 30,120   Fee and other income 1,337 1,801   3,988 Net investment income 7,271 Net capital gain on investments 13,624 Income before income taxes 52,816 Income taxes 11,472 Net income 41,344 Net income attributable to non-controlling interest 955 Net income attributable to NI Holdings, Inc. $ 40,389   Non-GAAP Ratios: Loss and LAE ratio 63.2 % 56.5 % 49.1 % 87.9 % 53.4 % 45.0 % 59.4 % Expense ratio 27.8 % 38.6 % 27.9 % 13.5 % 42.7 % 25.5 % 30.0 % Combined ratio 91.0 % 95.1 % 76.9 % 101.3 % 96.1 % 70.5 % 89.4 %     Balances at December 31, 2020: Premiums and agents’ balances receivable $ 18,540 $ 6,543 $ 9,072 $ — $ 13,732 $ 636 $ 48,523 Deferred policy acquisition costs 5,461 4,649 7,828 — 5,588 442 23,968 Reinsurance recoverables 412 — 588 121 5,374 2,215 8,710 Receivable from Federal Crop Insurance Corporation — — — 6,646 — — 6,646 Goodwill and other intangibles — 2,860 — — 15,334 — 18,194   Unpaid losses and LAE 20,311 43,336 11,737 771 19,089 10,506 105,750 Unearned premiums 28,293 16,147 41,301 — 30,705 2,917 119,363 117 Table of Contents Year Ended December 31, 2019 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 71,297 $ 57,278 $ 77,832 $ 42,277 $ 4,546 $ 4,431 $ 257,661 Assumed premiums earned — — — 2,072 1 3,824 5,897 Ceded premiums earned ( 3,314 ) ( 164 ) ( 6,661 ) ( 6,330 ) ( 450 ) ( 201 ) ( 17,120 ) Net premiums earned 67,983 57,114 71,171 38,019 4,097 8,054 246,438   Direct losses and LAE 53,022 32,654 47,282 35,148 2,541 3,296 173,943 Assumed losses and LAE 63 — — 1,582 — 2,387 4,032 Ceded losses and LAE ( 389 ) — ( 1,681 ) ( 4,639 ) ( 52 ) ( 1,504 ) ( 8,265 ) Net losses and LAE 52,696 32,654 45,601 32,091 2,489 4,179 169,710   Gross margin 15,287 24,460 25,570 5,928 1,608 3,875 76,728   Underwriting and general expenses 18,886 21,077 20,106 4,396 863 1,930 67,258 Underwriting gain (loss) ( 3,599 ) 3,383 5,464 1,532 745 1,945 9,470   Fee and other income 1,638 2,125 5,021 Net investment income 7,433 Net capital gain on investments 14,783 Income before income taxes 33,811 Income taxes 7,311 Net income 26,500 Net income attributable to non-controlling interest 99 Net income attributable to NI Holdings, Inc. $ 26,401   Non-GAAP Ratios: Loss and LAE ratio 77.5 % 57.2 % 64.1 % 84.4 % 60.8 % 51.9 % 68.9 % Expense ratio 27.8 % 36.9 % 28.3 % 11.6 % 21.1 % 24.0 % 27.3 % Combined ratio 105.3 % 94.1 % 92.3 % 96.0 % 81.8 % 75.9 % 96.2 %     Balances at December 31, 2019: Premiums and agents’ balances receivable $ 18,194 $ 7,876 $ 9,088 $ — $ 940 $ 593 $ 36,691 Deferred policy acquisition costs 4,108 4,711 5,945 — 315 320 15,399 Reinsurance recoverables 500 — 1,068 998 6 1,473 4,045 Receivable from Federal Crop Insurance Corporation — — — 14,230 — — 14,230 Goodwill and other intangibles — 2,912 — — — — 2,912   Unpaid losses and LAE 19,892 43,978 10,503 8,579 1,076 9,222 93,250 Unearned premiums 27,949 16,364 39,945 — 2,334 2,684 89,276 118 Table of Contents Year Ended December 31, 2018 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 65,457 $ 27,964 $ 70,355 $ 47,505 $ 4,230 $ 4,089 $ 219,600 Assumed premiums earned 16 — ( 17 ) 2,306 1 4,208 6,514 Ceded premiums earned ( 3,008 ) — ( 5,661 ) ( 21,112 ) ( 422 ) ( 191 ) ( 30,394 ) Net premiums earned 62,465 27,964 64,677 28,699 3,809 8,106 195,720   Direct losses and LAE 44,644 14,338 42,993 14,206 1,690 2,023 119,894 Assumed losses and LAE 358 — ( 295 ) 696 — 2,640 3,399 Ceded losses and LAE ( 478 ) — 17 ( 2,990 ) ( 186 ) ( 568 ) ( 4,205 ) Net losses and LAE 44,524 14,338 42,715 11,912 1,504 4,095 119,088   Gross margin 17,941 13,626 21,962 16,787 2,305 4,011 76,632   Underwriting and general expenses 18,530 9,533 19,950 3,176 875 2,053 54,117 Underwriting gain (loss) ( 589 ) 4,093 2,012 13,611 1,430 1,958 22,515   Fee and other income 1,406 6,496 5,499 Net investment income 6,180 Net capital gain on investments 3,974 Income before income taxes 39,165 Income taxes 7,921 Net income 31,244 Net income attributable to non-controlling interest 163 Net income attributable to NI Holdings, Inc. $ 31,081   Non-GAAP Ratios: Loss and LAE ratio 71.3 % 51.3 % 66.0 % 41.5 % 39.5 % 50.5 % 60.8 % Expense ratio 29.7 % 34.1 % 30.8 % 11.1 % 23.0 % 25.3 % 27.7 % Combined ratio 100.9 % 85.4 % 96.9 % 52.6 % 62.5 % 75.8 % 88.5 %     Balances at December 31, 2018: Premiums and agents’ balances receivable $ 16,558 $ 7,769 $ 8,630 $ — $ 854 $ 476 $ 34,287 Deferred policy acquisition costs 3,658 3,364 5,279 — 280 285 12,866 Reinsurance recoverables 176 — 730 384 ( 28 ) 970 2,232 Receivable from Federal Crop Insurance Corporation — — — 16,169 — — 16,169 Goodwill and other intangibles — 4,623 — — — — 4,623   Unpaid losses and LAE 18,154 46,786 10,732 2,126 643 8,680 87,121 Unearned premiums 26,022 17,177 36,883 — 2,200 2,485 84,767 119 Table of Contents 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’ equity. 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. 120 Table of Contents 23. 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: 2020 2019 2018 Nodak Insurance: Statutory capital and surplus $ 216,278 $ 189,836 $ 175,875 Statutory unassigned surplus 211,278 184,836 170,875 Statutory net income 24,529 9,398 19,943   American West: Statutory capital and surplus 18,368 16,168 13,889 Statutory unassigned surplus 12,367 10,167 7,888 Statutory net income 2,158 2,232 1,238   Primero: Statutory capital and surplus 9,818 8,727 9,767 Statutory unassigned surplus (deficit) 559 ( 532 ) 508 Statutory net income (loss) 1,023 ( 1,256 ) 1,061   Battle Creek: Statutory capital and surplus 6,875 6,189 6,052 Statutory unassigned surplus 3,875 3,189 3,052 Statutory net income 693 133 159   Direct Auto: Statutory capital and surplus 35,819 28,683 19,146 Statutory unassigned surplus 32,819 25,683 16,146 Statutory net income 7,898 7,377 7,530 Westminster: Statutory capital and surplus 23,592 20,897 20,175 Statutory unassigned surplus 18,592 15,897 15,175 Statutory net income 2,719 225 701 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 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. 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. 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. 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. 121 Table of Contents 24. Interim Financial Data (Unaudited) The following table provides a summary of unaudited quarterly results for the periods presented. Year Ended December 31, 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Net premiums earned $ 58,772 $ 82,006 $ 73,342 $ 69,541 Net investment income 1,971 2,018 1,886 1,396 Total revenues 46,186 95,667 80,854 83,650 Total expenses 50,581 71,989 75,980 54,991 Net income (loss) before non-controlling interest ( 3,555 ) 18,767 3,686 22,446 Net income (loss) attributable to NI Holdings, Inc. ( 3,587 ) 18,733 3,664 21,579 Basic earnings (loss) per common share ( 0.16 ) 0.86 0.17 1.01 Diluted earnings (loss) per common share ( 0.16 ) 0.85 0.17 1.00 Year Ended December 31, 2019 First Quarter Second Quarter Third Quarter Fourth Quarter Net premiums earned $ 50,506 $ 65,114 $ 67,116 $ 63,702 Net investment income 1,743 1,778 1,983 1,929 Total revenues 60,572 68,648 70,248 71,311 Total expenses 42,928 65,133 78,849 50,058 Net income (loss) before non-controlling interest 13,796 2,515 ( 6,959 ) 17,148 Net income (loss) attributable to NI Holdings, Inc. 13,773 2,478 ( 6,979 ) 17,129 Basic earnings (loss) per common share 0.62 0.11 ( 0.32 ) 0.77 Diluted earnings (loss) per common share 0.62 0.11 ( 0.31 ) 0.77 122 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes or disagreements with accountants on accounting and financial disclosure.