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, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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 2016. Fort Washington, Pennsylvania March 9, 2022 52 Table of Contents NI Holdings, Inc. Consolidated Balance Sheets December 31, 2021 and 2020 (dollar amounts in thousands, except par value) 2021 2020 Assets: Cash and cash equivalents $ 70,623 $ 101,077 Fixed income securities, at fair value 364,651 320,410 Equity securities, at fair value 77,690 69,952 Other investments 2,005 2,924 Total cash and investments 514,969 494,363   Premiums and agents' balances receivable 51,452 48,523 Deferred policy acquisition costs 24,947 23,968 Reinsurance premiums receivable - 93 Reinsurance recoverables on losses 21,200 8,710 Income tax recoverable 364 - Accrued investment income 2,524 2,141 Property and equipment, net 9,869 9,899 Receivable from Federal Crop Insurance Corporation - 6,646 Goodwill and other intangibles 17,722 18,194 Other assets 8,735 5,066 Total assets $ 651,782 $ 617,603   Liabilities: Unpaid losses and loss adjustment expenses $ 139,662 $ 105,750 Unearned premiums 127,789 119,363 Reinsurance premiums payable 326 — Income tax payable - 754 Deferred income taxes 5,506 8,757 Payable to Federal Crop Insurance Corporation 4,962 - Westminster consideration payable 13,020 19,287 Accrued expenses and other liabilities 13,104 14,820 Total liabilities 304,369 268,731   Commitments and contingencies - -   Shareholders’ equity: Common stock, $ 0.01 par value, authorized 25,000,000 shares, issued: 23,000,000 shares; and outstanding: 2021 – 21,219,808 shares, 2020 – 21,318,638 shares 230 230 Preferred stock, without par value, authorized 5,000,000 shares, no shares issued or outstanding — — Additional paid-in capital 98,166 97,911 Unearned employee stock ownership plan shares ( 1,184 ) ( 1,427 ) Retained earnings 267,207 258,741 Accumulated other comprehensive income, net of income taxes 5,237 12,840 Treasury stock, at cost, 2021 – 1,661,767 shares, 2020 – 1,538,622 shares ( 26,452 ) ( 23,968 ) Non-controlling interest 4,209 4,545 Total shareholders’ equity 347,413 348,872   Total liabilities and shareholders’ equity $ 651,782 $ 617,603 The accompanying notes are an integral part of these consolidated financial statements. 53 Table of Contents NI Holdings, Inc. Consolidated Statements of Operations Years Ended December 31, 2021, 2020 and 2019 (dollar amounts in thousands, except per share data) 2021 2020 2019 Revenues: Net premiums earned $ 299,589 $ 283,661 $ 246,438 Fee and other income 1,775 1,801 2,125 Net investment income 7,131 7,271 7,433 Net capital gain on investments 15,479 13,624 14,783 Total revenues 323,974 306,357 270,779   Expenses: Losses and loss adjustment expenses 216,379 168,473 169,710 Amortization of deferred policy acquisition costs 64,574 51,472 46,188 Other underwriting and general expenses 31,715 33,596 21,070 Total expenses 312,668 253,541 236,968   Income before income taxes 11,306 52,816 33,811 Income taxes 2,974 11,472 7,311 Net income 8,332 41,344 26,500 Net income (loss) attributable to non-controlling interest ( 84 ) 955 99 Net income attributable to NI Holdings, Inc. $ 8,416 $ 40,389 $ 26,401   Earnings per common share: Basic $ 0.39 $ 1.86 $ 1.19 Diluted $ 0.39 $ 1.84 $ 1.19   Share data: Weighted average common shares outstanding used in basic per common share calculations 21,424,060 21,772,475 22,179,747 Plus: Dilutive securities 232,366 169,995 85,601 Weighted average common shares used in diluted per common share calculations 21,656,426 21,942,470 22,265,348 The accompanying notes are an integral part of these consolidated financial statements. 54 Table of Contents NI Holdings, Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, 2021, 2020 and 2019 (dollar amounts in thousands)   2021 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income (loss) $ 8,416 $ ( 84 ) $ 8,332 Other comprehensive loss, before income taxes: Holding losses on investments ( 8,827 ) ( 319 ) ( 9,146 ) Reclassification adjustment for net realized capital gain included in net income ( 648 ) ( 2 ) ( 650 ) Other comprehensive loss, before income taxes ( 9,475 ) ( 321 ) ( 9,796 ) Income tax benefit related to items of other comprehensive loss 1,872 69 1,941 Other comprehensive loss, net of income taxes ( 7,603 ) ( 252 ) ( 7,855 ) Comprehensive income (loss) $ 813 $ ( 336 ) $ 477 2020 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income $ 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 The accompanying notes are an integral part of these consolidated financial statements. 55 Table of Contents NI Holdings, Inc. Consolidated Statements of Changes in Shareholders’ Equity Years Ended December 31, 2021, 2020 and 2019 (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, 2019 $ 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 - - - 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   Net income (loss) - - - 8,416 - - ( 84 ) 8,332 Other comprehensive loss, net of income taxes - - - - ( 7,603 ) - ( 252 ) ( 7,855 ) Share-based compensation - 2,408 - - - - - 2,408 Purchase of treasury stock - - - - - ( 4,316 ) - ( 4,316 ) Issuance of vested award shares - ( 2,370 ) - 50 - 1,832 - ( 488 ) Distribution of employee stock ownership plan shares - 217 243 - - - - 460 Balance, December 31, 2021 $ 230 $ 98,166 $ ( 1,184 ) $ 267,207 $ 5,237 $ ( 26,452 ) $ 4,209 $ 347,413 The accompanying notes are an integral part of these consolidated financial statements. 56 Table of Contents NI Holdings, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2021, 2020 and 2019 (dollar amounts in thousands) 2021 2020 2019 Cash flows from operating activities: Net income $ 8,332 $ 41,344 $ 26,500 Adjustments to reconcile net income to net cash flows from operating activities:​​ Net capital gain on investments ( 15,479 ) ( 13,624 ) ( 14,783 ) Deferred income tax (benefit) expense ( 1,310 ) 638 1,871 Depreciation of property and equipment 694 709 538 Amortization of intangibles 472 5,224 1,711 Distribution of employee stock ownership plan shares 460 373 405 Share-based incentive compensation 2,408 2,297 1,613 Amortization of deferred policy acquisition costs 64,574 51,472 46,188 Deferral of policy acquisition costs ( 65,553 ) ( 60,041 ) ( 48,721 ) Net amortization of premiums and discounts on investments 2,080 1,460 1,146 Loss on sale of property and equipment 31 6 37 Changes in operating assets and liabilities: Premiums and agents’ balances receivable ( 2,929 ) ( 3,325 ) ( 2,404 ) Reinsurance premiums receivable / payable 419 ( 828 ) 170 Reinsurance recoverables on losses ( 12,490 ) ( 3,902 ) ( 1,813 ) Income tax recoverable / payable ( 1,118 ) ( 753 ) 889 Accrued investment income ( 383 ) 17 ( 191 ) Federal Crop Insurance Corporation receivable / payable 11,608 7,584 1,939 Other assets ( 3,669 ) 186 ( 109 ) Unpaid losses and loss adjustment expenses 33,912 3,932 6,129 Unearned premiums 8,426 13,476 4,509 Accrued expenses and other liabilities ( 1,317 ) 4,765 41 Net cash flows from operating activities 29,168 51,010 25,665   Cash flows from investing activities: Proceeds from maturities and sales of fixed income securities 73,015 87,874 59,649 Proceeds from sales of equity securities 44,600 27,718 20,174 Purchases of fixed income securities ( 128,480 ) ( 91,559 ) ( 92,012 ) Purchases of equity securities ( 37,491 ) ( 22,312 ) ( 17,042 ) Purchases of property and equipment ( 696 ) ( 543 ) ( 1,290 ) Acquisition of Westminster American Insurance Company (cash consideration paid net of cash and cash equivalents acquired) - ( 703 ) - Proceeds from sale of other investments and other 901 ( 275 ) 63 Net cash flows from investing activities ( 48,151 ) 200 ( 30,458 )   Cash flows from financing activities: Purchases of treasury stock ( 4,316 ) ( 12,234 ) ( 2,006 ) Installment payment on Westminster consideration payable ( 6,667 ) - - Issuance of restricted stock awards ( 488 ) ( 31 ) ( 19 ) Net cash flows from financing activities ( 11,471 ) ( 12,265 ) ( 2,025 )   Net (decrease) increase in cash and cash equivalents ( 30,454 ) 38,945 ( 6,818 )   Cash and cash equivalents at beginning of period 101,077 62,132 68,950   Cash and cash equivalents at end of period $ 70,623 $ 101,077 $ 62,132     Non-cash item: Present value of installment payable issued in connection with acquisition of Westminster American Insurance Company $ - $ 18,787 $ -   Federal and state income taxes paid $ 5,402 $ 11,586 $ 4,000 The accompanying notes are an integral part of these consolidated financial statements. 57 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements December 31, 2021, 2020 and 2019 (dollar amounts in thousands) 1. Organization NI Holdings is a North Dakota business corporation that is the stock holding company of Nodak Insurance and became such in connection with the conversion of Nodak Mutual from a mutual to stock form of organization and the creation of a mutual holding company. The conversion was completed on March 13, 2017. Immediately following the conversion, all of the outstanding shares of common stock of Nodak Insurance were issued to Nodak Mutual Group, which then contributed the shares to NI Holdings in exchange for 55 % of the outstanding shares of common stock of NI Holdings. Nodak Insurance then became a wholly-owned stock subsidiary of NI Holdings. Prior to completion of the conversion, NI Holdings conducted no business and had no assets or liabilities. As a result of the conversion, NI Holdings became the holding company for Nodak Insurance and its existing subsidiaries. These Consolidated Financial Statements include the financial position and results of operations of NI Holdings and seven other entities: Nodak Insurance Company Nodak Insurance is the largest domestic property and casualty insurance company in North Dakota, offering private passenger auto, homeowners, farmowners, commercial multi-peril, crop hail, and Federal multi-peril crop insurance coverages through its captive agents in the state. Nodak Agency, Inc. Nodak Agency is an inactive shell corporation. American West Insurance Company American West is a property and casualty insurance company licensed in eight states in the Midwest and Western regions of the United States. American West began writing policies in 2002 and primarily writes personal auto, homeowners, and farm coverages in South Dakota. American West also writes personal auto coverage in North Dakota, as well as crop hail and Federal multi-peril crop insurance coverages in Minnesota and South Dakota. Primero Insurance Company Primero is a wholly-owned subsidiary of Tri-State, Ltd. Tri-State, Ltd. is an inactive shell corporation 100 % owned by Nodak Insurance. Primero is a property and casualty insurance company writing non-standard automobile coverage in the states of Nevada, Arizona, North Dakota, and South Dakota. Battle Creek Mutual Insurance Company Battle Creek is a property and casualty insurance company writing personal auto, homeowners, and farm coverages solely in the state of Nebraska. Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Because we have concluded that we control Battle Creek, we consolidate the financial statements of Battle Creek, and Battle Creek’s policyholders’ interest in Battle Creek is reflected as a non-controlling interest in shareholders’ equity in our Consolidated Balance Sheets and its net income or loss is excluded from net income attributed to NI Holdings in our Consolidated Statements of Operations. Direct Auto Insurance Company Direct Auto is a property and casualty insurance company licensed in Illinois. Direct Auto began writing non-standard automobile coverage in 2007, and was acquired by NI Holdings on August 31, 2018 via a stock purchase agreement. Westminster American Insurance Company Westminster is a property and casualty insurance company licensed in seventeen states and the District of Columbia. Westminster is headquartered in Owings Mills, Maryland and underwrites commercial multi-peril insurance in the states of Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia, and the District of Columbia. Westminster was acquired by NI Holdings on January 1, 2020 via a stock purchase agreement. 58 Table of Contents Nodak Insurance markets and distributes its policies through its captive agents, while all other companies utilize the independent agent distribution channel. Additionally, all of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by AM Best. The same executive management team provides oversight and strategic direction for the entire organization. Nodak Insurance provides common product oversight, pricing practices, and underwriting standards, as well as underwriting and claims administration, to itself, American West, and Battle Creek. Primero, Direct Auto, and Westminster personnel manage the day-to-day operations of their respective companies. 2. Summary of Significant Accounting Policies Basis of Consolidation : Our Consolidated Financial Statements, which we have prepared in accordance with GAAP, include our accounts and those of our wholly-owned subsidiaries, as well as Battle Creek, an entity we control via a surplus note agreement. We have eliminated all significant inter-company accounts and transactions in consolidation. 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 continued 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 the 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 its participation in the underwriting results of the pool (2% during 2021 and 2020). For more information, see Part II, Item 8, Note 12 “Related Party Transactions”. 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 and its net income or loss is excluded from net income or loss attributed to NI Holdings in our Consolidated Statement of Operations. 59 Table of Contents 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 : The Company’s fixed income securities and equity securities are classified as available-for-sale and carried at estimated fair value as determined by management based upon quoted market prices or a recognized independent pricing service at the reporting date for those or similar investments. Changes in unrealized investment gains or losses on the fixed income securities, net of applicable income taxes, are reflected directly in shareholders’ equity as a component of other comprehensive income (loss) and, accordingly, have no effect on net income (loss). Changes in unrealized investments gains or losses on equity securities are reported in net income (loss). Investment income is recognized when earned, and realized capital gains and losses on investments are recognized when investments are sold, or an other-than-temporary impairment is recognized. Fair values are based on quoted market prices or independent pricing services, 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. We frequently review our investment portfolio for declines in fair value. Our process for identifying declines in the fair value of investments that are other-than-temporary involves consideration of several factors. These factors include (i) the time period in which there has been a significant decline in value, (ii) an analysis of the liquidity, business prospects, and overall financial condition of the issuer, (iii) the significance of the decline, and (iv) our intent and ability to hold the investment for a sufficient period of time for the value to recover. When our analysis of the above factors results in the conclusion that declines in fair values are other-than-temporary, the credit loss component of the impairment is reflected in net income (loss) as a realized capital loss on investment if the Company does not intend to sell the security, and the remaining portion of the other-than-temporary loss is recognized in other comprehensive income (loss), net of income taxes. If the Company intends to sell the security, or determines that it is more likely than not that it will be required to sell the security prior to recovering its cost or amortized cost basis less any current-period credit losses, the full amount of the other-than-temporary loss is recognized in net income (loss). Fair values of interest rate sensitive instruments may be affected by increases and decreases in prevailing interest rates that generally translate, respectively, into decreases and increases in fair values of fixed income securities. The fair values of interest rate sensitive instruments also may be affected by the credit worthiness of the issuer, prepayment options, relative values of other investments, the liquidity of the instrument, and other general market conditions. For more information on investment valuation measurements, see Part II, Item 8, Note 6 “Fair Value Measurements”. 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 $ 2,005 at December 31, 2021 and $ 2,924 at December 31, 2020. 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 excess moisture (known as “prevented planting”). In these situations, recognition of the remaining unearned premium may be accelerated if it is determined that the risk period has ended when these types of claims are filed. 60 Table of Contents The Company uses the direct write-off method for recognizing bad debts. Accounts billed directly to the policyholder are provided grace payment and cancellation notice periods per state insurance regulations. Any earned but uncollected premiums are written off within 90 days after the effective date of policy cancellation. Direct Auto also provides for agency billing for a portion of their agents. Accounts billed to agents are due within 60 days of the statement date. The balances are carried as agents’ balances receivable until it is determined the amount is not collectible from the agent. At that time, the balance is written off as uncollectible. 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 may differ from these 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 potential impact 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. 61 Table of Contents 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. 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. State premium taxes are included as a part of amortization of deferred policy acquisition costs. State income taxes are reported along with federal income taxes as income tax expense (benefit). 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. 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, 2021 and 2020. 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. Earnings Per Share: Earnings per share are 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. Unearned shares related to the Company’s ESOP are not considered outstanding until they are released and allocated to plan participants. Unearned shares related to the Company’s Restricted Stock Units (“RSUs”) and Performance Share Units (“PSUs”) are not considered outstanding until they are earned by award participants. See Part II, Item 8, Note 13 “Benefit Plans” and Note 19 “Share Based Compensation”. 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. 62 Table of Contents 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 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, 2021, 2020, or 2019. Goodwill arising from the acquisition of Primero in 2014 represents the excess of the purchase price over the fair value of the net assets acquired. The purchase price in excess of the fair value of net assets acquired was negotiated at arms-length with an unrelated party and was based upon the strategic decision by Company management to expand both the geographic footprint and product lines of the Company. The nature of the business acquired was such that there were limited intangibles not reflected in the net assets acquired. The purchase price was paid with a combination of cash and cancellation of obligations owed to the acquired company by the sellers. The goodwill that arose from this transaction is included in the basis of the net assets acquired and is not deductible for income tax purposes. Intangible assets arising from the acquisition of Direct Auto in 2018 represent the estimated fair values of certain intangible assets, including a favorable lease contract, a state insurance license, the value of the Direct Auto trade name, and the VOBA. The state insurance license asset has an indefinite life, while the Direct Auto trade name is being amortized over five years from the August 31, 2018 acquisition/valuation date. The favorable lease contract and VOBA assets have been fully amortized. 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 and Westminster trade name are being amortized over twenty years and ten years, respectively, from the January 1, 2020 acquisition/valuation date. The VOBA asset has been fully amortized. 63 Table of Contents 3. Acquisition of 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 is 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 financial results of Westminster have been included in the Consolidated Financial Statements and the Company’s commercial business segment following the acquisition close date. We account for business acquisitions in accordance with the acquisition method of accounting, which requires 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 measurement period for the Westminster acquisition ended December 31, 2020. 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, non-recurring 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 Westminster’s results 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 and $ 83 during the years ended December 31, 2020 and 2019, respectively. These expenses were reclassified into 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 an additional $ 20,000 to be paid 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 first two installments were paid in January 2021 and January 2022. The final installment is due to be paid in December 2022. 64 Table of Contents 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 included 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 were anticipated to be uncollectible. The Company did not acquire any other material receivables as a result of the acquisition of Westminster. The fair values of the acquired distribution network, state insurance licenses, Westminster trade name, and VOBA intangible assets were $6,700, $1,800, $500, and $4,750, respectively. The state insurance license intangible has an indefinite life, while the other intangible assets are being amortized over their useful lives of up to twenty years . The goodwill is not deductible for income tax purposes. 65 Table of Contents 4. Recent Accounting Pronouncements As an EGC, we have elected to use the extended transition period for complying with any new or revised financial accounting standards from the Financial Accounting Standards Board (“FASB”) pursuant to Section 13(a) of the Exchange Act. 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 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. 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 was 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. We will adopt this guidance for the year ended December 31, 2022. We do not expect the adoption of this new guidance to have a significant impact on our financial position, results of operations, or cash flows. Upon adoption, the Company will recognize a right of use asset and operating lease liabilities on its Consolidated Balance Sheet. The cumulative adjustment to retained earnings is not expected to be significant. 66 Table of Contents In June 2016, the FASB issued a new standard that requires timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance also requires financial institutions and other organizations to use forward-looking information to better form their credit loss estimates. Many of the loss estimation techniques applied prior to adoption of this standard are still permitted, although the inputs to those techniques have changed to reflect the full amount of expected credit losses. Organizations are to continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the guidance requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Finally, the guidance amends the accounting for credit losses on available-for-sale fixed income securities and purchased financial assets with credit deterioration. The guidance was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 for filers with the SEC excluding smaller reporting companies, and emerging growth companies that did not relinquish private company relief. For all other entities, this guidance will be effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted for all entities. We will adopt this guidance for the year ended December 31, 2022, as we will lose our EGC status beginning December 31, 2022. Based on our evaluation, adoption of this new standard will not have a significant impact on our financial position, results of operations, and cash flows. In December 2019, the FASB issued amended guidance to simplify the accounting for income taxes. The amended guidance was effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, for public business entities. For private companies and emerging growth companies, the amended guidance will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We will adopt this guidance for the year ended December 31, 2022. 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. 67 Table of Contents 5. Investments The amortized cost and estimated fair value of fixed income securities as of December 31, 2021 and 2020 were as follows: December 31, 2021 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed income securities: U.S. Government and agencies $ 13,118 $ 467 $ ( 87 ) $ 13,498 Obligations of states and political subdivisions 84,668 2,979 ( 353 ) 87,294 Corporate securities 144,476 4,214 ( 1,069 ) 147,621 Residential mortgage-backed securities 26,190 266 ( 300 ) 26,156 Commercial mortgage-backed securities 32,878 815 ( 161 ) 33,532 Asset-backed securities 52,604 131 ( 313 ) 52,422 Redeemable preferred stocks 4,008 136 ( 16 ) 4,128 Total fixed income securities $ 357,942 $ 9,008 $ ( 2,299 ) $ 364,651 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 117,628 8,549 ( 147 ) 126,030 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 Redeemable preferred stocks 2,198 206 - 2,404 Total fixed income securities $ 303,905 $ 16,801 $ ( 296 ) $ 320,410 The amortized cost and estimated fair value of fixed income securities by contractual maturity are shown below. Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay these securities. December 31, 2021 Amortized Cost Fair Value Due to mature: One year or less $ 14,457 $ 14,586 After one year through five years 82,429 84,760 After five years through ten years 82,270 84,173 After ten years 63,106 64,894 Mortgage / asset-backed securities 111,672 112,110 Redeemable preferred stocks 4,008 4,128 Total fixed income securities $ 357,942 $ 364,651 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 28,124 30,280 Mortgage / asset-backed securities 109,744 113,349 Redeemable preferred stocks 2,198 2,404 Total fixed income securities $ 303,905 $ 320,410   68 Table of Contents Fixed income securities with a fair value of $ 7,977 at December 31, 2021 and $ 6,093 at December 31, 2020 were deposited with various state regulatory agencies as required by law. The Company has not pledged any assets to secure any obligations. The investment category and duration of the Company’s gross unrealized losses on fixed income securities were as follows: December 31, 2021 Less than 12 Months Greater than 12 months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fixed income securities: U.S. Government and agencies $ 3,125 $ ( 87 ) $ - $ - $ 3,125 $ ( 87 ) Obligations of states and political subdivisions 19,769 ( 350 ) 222 ( 3 ) 19,991 ( 353 ) Corporate securities 46,816 ( 1,015 ) 1,895 ( 54 ) 48,711 ( 1,069 ) Residential mortgage-backed securities 17,407 ( 261 ) 1,434 ( 39 ) 18,841 ( 300 ) Commercial mortgage-backed securities 11,287 ( 160 ) 216 ( 1 ) 11,503 ( 161 ) Asset-backed securities 28,797 ( 308 ) 995 ( 5 ) 29,792 ( 313 ) Redeemable preferred stocks 1,493 ( 16 ) - - 1,493 ( 16 ) Total fixed income securities $ 128,694 $ ( 2,197 ) $ 4,762 $ ( 102 ) $ 133,456 $ ( 2,299 )   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 ) 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 credit loss component of the impairment is reflected in net income (loss) as a realized capital loss on investment if the Company does not intend to sell the security, and the remaining portion of the other-than-temporary loss is recognized in other comprehensive income (loss), net of income taxes. If the Company intends to sell the security, or determines that it is more likely than not that it will be required to sell the security prior to recovering its cost or amortized cost basis less any current-period credit losses, the full amount of the other-than-temporary loss is recognized in net income (loss). The Company did not record any other-than-temporary impairments in 2021, 2020, or 2019. 69 Table of Contents 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, 2021 2020 2019 Fixed income securities $ 8,489 $ 8,682 $ 8,394 Equity securities 1,221 1,220 996 Real estate 625 587 365 Cash and cash equivalents 4 30 71 Total gross investment income 10,339 10,519 9,826 Investment expenses 3,208 3,248 2,393 Net investment income $ 7,131 $ 7,271 $ 7,433 Net realized capital gain on investments consisted of the following: Year Ended December 31, 2021 2020 2019 Gross realized gains: Fixed income securities $ 677 $ 1,035 $ 341 Equity securities 17,453 8,705 4,311 Total gross realized gains 18,130 9,740 4,652   Gross realized losses, excluding other-than-temporary impairment losses: Fixed income securities ( 27 ) ( 132 ) ( 147 ) Equity securities ( 335 ) ( 1,837 ) ( 1,259 ) Total gross realized losses, excluding other-than-temporary impairment losses​​ ( 362 ) ( 1,969 ) ( 1,406 )   Net realized gain on investments 17,768 7,771 3,246   Change in net unrealized gain on equity securities ( 2,289 ) 5,853 11,537 Net capital gain on investments $ 15,479 $ 13,624 $ 14,783 70 Table of Contents 6. Fair Value Measurements The Company uses fair value measurements to record fair value adjustments to certain assets to determine fair value disclosures. Investment securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets or liabilities at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets. Accounting guidance on fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows: Level I : Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level II : Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level II includes fixed income securities with quoted prices that are traded less frequently than exchange traded instruments. Valuation techniques include matrix pricing which is a mathematical technique used widely in the industry to value fixed income securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. Level III : Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). The Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets where there exists limited or no observable market data and, therefore, are based primarily upon the estimates of the Company or other third-parties, and are often calculated based on the characteristics of the asset, the economic and competitive environment, and other such factors. Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts which we could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective period-end and have not been re-evaluated or updated for purposes of our financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end. Additionally, changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future valuations. The Company uses quoted values and other data provided by an independent pricing service in its process for determining fair values of its investments. The evaluations of such pricing services represent an exit price and a good faith opinion as to what a buyer in the marketplace would pay for a security in a current sale. This pricing service provides us with one quote per instrument. For fixed income securities that have quoted prices in active markets, market quotations are provided. For fixed income securities that do not trade on a daily basis, the independent pricing service prepares estimates of fair value using a wide array of observable inputs including relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. The observable market inputs that the Company’s independent pricing service utilizes may include (listed in order of priority for use) benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers, and other reference data on markets, industry, and the economy. Additionally, the independent pricing service uses an option-adjusted spread model to develop prepayment and interest rate scenarios. The pricing service did not use broker quotes in determining fair values for any of the Company’s investments at December 31, 2021, 2020, or 2019. Should the independent pricing service be unable to provide a fair value estimate, we would attempt to obtain a non-binding fair value estimate from a number of broker-dealers and would review this estimate in conjunction with a fair value estimate reported by an independent business news service or other sources. In instances where only one broker-dealer provides a fair value for a fixed income security, we would use that estimate. In instances where the Company would be able to obtain fair value estimates from more than one broker-dealer, we would review the range of estimates and select the most appropriate value based on the facts and circumstances. Should neither the independent pricing service nor a broker-dealer provide a fair value estimate, we would develop a fair value estimate based on cash flow analyses and other valuation techniques that utilize certain unobservable inputs. Accordingly, the Company classifies such a security as a Level III investment. The fair value estimates of our investments provided by the independent pricing service at each period-end were utilized, among other resources, in reaching a conclusion as to the fair value of its investments. 71 Table of Contents Management reviews the reasonableness of the pricing provided by the independent pricing service by employing various analytical procedures. Management reviews all securities to identify recent downgrades, significant changes in pricing, and pricing anomalies on individual securities relative to other similar securities. This will include looking for relative consistency across securities in common sectors, durations, and credit ratings. This review will also include all fixed income securities rated lower than “A” by Moody’s Investors Service, Inc. or Standard & Poor’s Financial Services LLC. If, after this review, management does not believe the pricing for any security is a reasonable estimate of fair value, then it will seek to resolve the discrepancy through discussions with the independent pricing service. In its review, management did not identify any such discrepancies, and no adjustments were made to the estimates provided by the independent pricing service, for the years ended December 31, 2021, 2020, or 2019. The classification within the fair value hierarchy is then confirmed based on the final conclusions from the pricing review. The valuation of cash equivalents and equity securities are generally based on Level I inputs, which use the market-approach valuation technique. The valuation of our fixed income securities generally incorporates significant Level II inputs using the market and income approach techniques. We may assign a lower level to inputs typically considered to be Level II based on our assessment of liquidity and relative level of uncertainty surrounding inputs. There were no assets or liabilities classified at Level III at December 31, 2021 or 2020. 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, 2021 Total Level I Level II Level III Fixed income securities: U.S. Government and agencies $ 13,498 $ - $ 13,498 $ - Obligations of states and political subdivisions 87,294 - 87,294 - Corporate securities 147,621 - 147,621 - Residential mortgage-backed securities 26,156 - 26,156 - Commercial mortgage-backed securities 33,532 - 33,532 - Asset-backed securities 52,422 - 52,422 - Redeemable preferred stocks 4,128 - 4,128 - Total fixed income securities 364,651 - 364,651 -   Equity securities: Basic materials 653 653 - - Communications 4,379 4,379 - - Consumer, cyclical 12,685 12,685 - - Consumer, non-cyclical 16,075 16,075 - - Energy 2,477 2,477 - - Financial 4,694 4,694 - - Industrial 16,658 16,658 - - Technology 17,522 17,522 - - Perpetual preferred stocks 2,547 2,547 - - Total equity securities 77,690 77,690 - -   Cash and cash equivalents 45,741 45,741 - - Total assets at fair value $ 488,082 $ 123,431 $ 364,651 $ - 72 Table of Contents 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 126,030 - 126,030 - Residential mortgage-backed securities 36,494 - 36,494 - Commercial mortgage-backed securities 25,655 - 25,655 - Asset-backed securities 51,200 - 51,200 - Redeemable preferred stocks 2,404 - 2,404 - 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 equivalents 65,354 65,354 - - Total assets at fair value $ 455,716 $ 135,306 $ 320,410 $ - There were no liabilities measured at fair value on a recurring basis at December 31, 2021 or 2020. 73 Table of Contents 7. Reinsurance The Company cedes and assumes certain premiums and losses to and from various companies and associations under a variety of reinsurance agreements. The Company seeks to limit the maximum net loss that can arise from large risks or risks in concentrated areas of exposure through use of these agreements, either on an automatic basis under general reinsurance contracts known as treaties or through facultative contracts on substantial individual risks. Reinsurance contracts do not relieve the Company from its obligations to policyholders. During the year ended December 31, 2021, the Company retained the first $ 10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $ 117,000 in excess of its $ 10,000 retained risk. The Company experienced one catastrophe event during 2021 in excess of the retention level, resulting in a reinsurance recovery of $ 5,612 . 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. 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. The Company did not experience any catastrophe events during 2020 or 2019 which exceeded the retention level. For 2022, the catastrophe retention amount will increase to $ 15,000 while the overall catastrophic reinsurance program limit increased to $ 125,000 in excess of the $ 15,000 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 AM Best ratings of “A” or higher. A reconciliation of direct to net premiums on both a written and an earned basis is as follows: Year Ended December 31, 2021 2020 2019 Premiums Written Premiums Earned Premiums Written Premiums Earned Premiums Written Premiums Earned Direct premium $ 342,215 $ 333,254 $ 314,187 $ 301,061 $ 262,145 $ 257,661 Assumed premium 8,183 8,035 6,590 6,459 5,921 5,897 Ceded premium ( 42,629 ) ( 41,700 ) ( 23,633 ) ( 23,859 ) ( 17,120 ) ( 17,120 ) Net premiums $ 307,769 $ 299,589 $ 297,144 $ 283,661 $ 250,946 $ 246,438 A reconciliation of direct to net losses and loss adjustment expenses is as follows: Year Ended December 31, 2021 2020 2019 Direct losses and loss adjustment expenses $ 280,998 $ 185,370 $ 173,943 Assumed losses and loss adjustment expenses 6,899 3,308 4,032 Ceded losses and loss adjustment expenses ( 71,518 ) ( 20,205 ) ( 8,265 ) Net losses and loss adjustment expenses $ 216,379 $ 168,473 $ 169,710 If 100 % of our ceded reinsurance was cancelled as of December 31, 2021, no ceded commissions would need to be returned to the reinsurers. Reinsurance contracts are typically effective from January 1 through December 31 each year. 74 Table of Contents 8. Deferred Policy Acquisition Costs Expenses directly related to successfully acquire insurance policies, primarily commissions, premium taxes and underwriting costs, are deferred and amortized over the terms of the policies. We update our acquisition cost assumptions periodically to reflect actual experience, and we evaluate the costs for recoverability. The table below shows the deferred policy acquisition costs and asset reconciliation: Year Ended December 31, 2021 2020 2019 Balance, beginning of year $ 23,968 $ 15,399 $ 12,866 Deferral of policy acquisition costs 65,553 60,041 48,721 Amortization of deferred policy acquisition costs ( 64,574 ) ( 51,472 ) ( 46,188 ) Balance, end of year $ 24,947 $ 23,968 $ 15,399 9. Unpaid Losses and Loss Adjustment Expenses Activity in the liability for unpaid losses and LAE is summarized as follows: Year Ended December 31, 2021 2020 2019 Balance at beginning of year: Liability for unpaid losses and LAE $ 105,750 $ 93,250 $ 87,121 Reinsurance recoverables on losses 8,710 4,045 2,232 Net balance at beginning of year 97,040 89,205 84,889   Acquired unpaid losses and LAE related to: Current year - - - Prior years - 8,568 - Total acquired - 8,568 -   Incurred related to: Current year 220,517 165,181 176,219 Prior years ( 4,138 ) 3,292 ( 6,509 ) Total incurred 216,379 168,473 169,710   Paid related to: Current year 150,278 116,755 125,940 Prior years 44,679 52,451 39,454 Total paid 194,957 169,206 165,394   Balance at end of year: Liability for unpaid losses and LAE 139,662 105,750 93,250 Reinsurance recoverables on losses 21,200 8,710 4,045 Net balance at end of year $ 118,462 $ 97,040 $ 89,205 During the year ended December 31, 2021, the Company’s incurred reported losses and LAE included $4,138 of net favorable development on prior accident years, primarily attributable to the Direct Auto non-standard auto business. During the year ended December 31, 2020, incurred reported losses and LAE included $3,292 of net unfavorable development on prior accident years, primarily attributable to our 2019 multi-peril crop business. During the year ended December 31, 2019, incurred reported losses and LAE included $6,509 of net favorable development on prior accident years, primarily attributable to the Direct Auto non-standard auto business. 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. 75 Table of Contents The tables on the following pages present information, organized by our primary operating segments, about incurred and paid claims development as of December 31, 2021, 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 arrangement. The tables include unaudited information about incurred and paid claims development (a) for the years ended December 31, 2012 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, 2021 Accident Year 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016  2017 2018 2019 2020 2021 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2012 $ 26,962 $ 24,787 $ 24,323 $ 24,098 $ 24,133 $ 23,298 $ 23,621 $ 23,651 $ 22,523 $ 22,570 $ 5 9,727 2013 — 29,079 27,840 27,363 27,334 26,014 26,138 26,105 26,077 26,096 11 10,826 2014 — — 32,548 31,349 30,427 29,099 29,144 29,298 29,479 29,423 16 11,745 2015 — — — 32,438 31,532 30,461 30,503 30,679 30,455 30,379 24 11,688 2016 — — — — 40,227 39,260 39,057 39,314 38,535 38,416 93 14,325 2017 — — — — — 40,779 40,199 40,120 40,427 40,488 159 13,753 2018 — — — — — — 44,925 43,428 43,641 43,575 353 14,675 2019 — — — — — — — 53,769 53,328 53,364 881 16,540 2020 — — — — — — — — 46,247 48,519 1,546 13,541 2021 — — — — — — — — — 57,316 3,819 14,064 Total $ 390,146 (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 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2012 $ 18,681 $ 21,434 $ 21,888 $ 22,640 $ 22,726 $ 23,073 $ 23,271 $ 23,324 $ 22,490 $ 22,555 2013 — 20,077 23,576 24,765 24,918 25,718 25,843 26,035 26,019 26,073 2014 — — 22,744 25,727 27,076 27,443 28,281 28,765 29,239 29,407 2015 — — — 23,401 27,171 28,933 29,598 29,795 30,120 30,355 2016 — — — — 29,009 35,845 37,307 38,108 37,833 38,173 2017 — — — — — 31,033 37,050 38,331 39,738 40,111 2018 — — — — — — 34,358 40,213 41,479 42,820 2019 — — — — — — — 42,414 48,414 50,370 2020 — — — — — — — — 35,495 42,585 2021 — — — — — — — — — 42,326 Total $ 364,775 All outstanding liabilities prior to 2012, net of reinsurance 18 Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 25,389 (1) Prior years unaudited 76 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, 2021 Accident Year 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 2021 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2012 $ 8,749 $ 8,491 $ 8,369 $ 8,361 $ 8,302 $ 8,312 $ 8,324 $ 8,324 $ 8,323 $ 8,324 $ — 2,048 2013 — 11,063 10,823 10,800 10,804 10,843 10,833 10,828 10,844 10,844 — 2,617 2014 — — 7,297 7,619 7,591 7,577 7,612 7,625 7,606 7,606 — 1,838 2015 — — — 9,727 9,806 9,655 9,691 9,641 9,622 9,623 — 1,793 2016 — — — — 9,967 10,048 10,054 10,033 10,008 9,976 — 1,740 2017 — — — — — 8,722 8,654 8,556 8,541 8,543 9 1,460 2018 — — — — — — 10,445 11,804 11,763 11,766 12 1,794 2019 — — — — — — — 12,264 11,391 11,236 58 1,502 2020 — — — — — — — — 9,018 8,824 129 950 2021 — — — — — — — — — 10,073 1,006 933 Total $ 96,815 (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 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2012 $ 4,377 $ 7,522 $ 7,983 $ 8,276 $ 8,302 $ 8,312 $ 8,324 $ 8,324 $ 8,323 $ 8,324 2013 — 6,320 9,675 10,508 10,717 10,805 10,815 10,818 10,844 10,844 2014 — — 3,733 6,707 7,423 7,521 7,579 7,605 7,606 7,606 2015 — — — 5,335 8,685 9,479 9,557 9,620 9,622 9,623 2016 — — — — 5,409 8,882 9,790 9,912 9,974 9,976 2017 — — — — — 4,348 7,660 8,204 8,460 8,506 2018 — — — — — — 5,492 10,536 11,616 11,730 2019 — — — — — — — 6,309 10,007 10,971 2020 — — — — — — — — 4,111 7,645 2021 — — — — — — — — — 4,869 Total $ 90,094 All outstanding liabilities prior to 2012, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 6,721 (1) Prior years unaudited 77 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, 2021 Accident Year 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 (1) 2017 (1) 2018 2019 2020 2021 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2012 $ 7,164 $ 4,159 $ 3,927 $ 3,916 $ 4,215 $ 4,643 $ 4,909 $ 4,930 $ 5,009 $ 4,998 $ 12 3,357 2013 — 10,596 6,020 5,869 5,261 5,278 5,160 5,049 5,131 5,106 22 3,373 2014 — — 14,010 9,068 6,224 8,381 6,745 6,476 6,672 6,524 34 4,776 2015 — — — 17,917 14,498 13,043 10,538 10,704 10,945 10,576 92 9,057 2016 — — — — 20,547 14,660 13,552 13,956 12,876 12,291 ( 638 ) 11,137 2017 — — — — — 23,376 18,621 15,858 14,648 13,678 28 11,720 2018 — — — — — — 25,791 22,662 21,980 20,541 ( 282 ) 14,917 2019 — — — — — — — 24,932 25,473 24,574 395 10,918 2020 — — — — — — — — 24,036 22,919 ( 2,387 ) 13,623 2021 — — — — — — — — — 30,579 ( 4,381 ) 14,784 Total $ 151,786 (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 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 2019 2020 2021 2012 $ 1,696 $ 2,421 $ 3,041 $ 3,587 $ 4,081 $ 4,503 $ 4,671 $ 4,730 $ 4,915 $ 4,946 2013 — 1,944 3,123 3,796 4,291 4,602 4,808 4,890 4,960 5,000 2014 — — 2,201 3,573 4,452 5,369 5,781 6,151 6,327 6,364 2015 — — — 2,967 5,202 7,057 8,327 9,560 10,057 10,176 2016 — — — — 3,526 6,272 8,559 10,603 11,058 11,519 2017 — — — — — 4,385 6,981 10,034 11,366 12,098 2018 — — — — — — 6,034 12,285 15,204 16,759 2019 — — — — — — — 10,203 16,214 18,982 2020 — — — — — — — — 9,964 15,401 2021 — — — — — — — — — 13,767 Total $ 115,012 All outstanding liabilities prior to 2012, net of reinsurance 20 Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 36,794 (1) Prior years unaudited 78 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, 2021 Accident Year 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 2021 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2012 $ 25,179 $ 24,439 $ 24,320 $ 24,091 $ 24,081 $ 24,079 $ 24,088 $ 24,086 $ 24,324 $ 24,325 $ — 3,631 2013 — 29,976 29,217 28,531 28,315 28,286 28,315 27,593 27,588 27,595 — 4,189 2014 — — 36,663 36,001 35,770 35,589 35,684 35,534 35,497 35,503 — 5,243 2015 — — — 32,789 31,818 31,297 31,577 31,446 31,612 31,600 3 3,923 2016 — — — — 45,825 44,510 44,945 44,602 44,728 44,745 45 6,348 2017 — — — — — 42,110 41,593 41,886 41,779 41,804 109 4,943 2018 — — — — — — 42,515 43,846 43,747 43,682 107 4,580 2019 — — — — — — — 45,438 45,828 45,471 375 5,483 2020 — — — — — — — — 36,264 35,668 674 4,070 2021 — — — — — — — — — 53,079 4,413 4,837 Total $ 383,472 (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 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2012 $ 21,761 $ 23,863 $ 24,029 $ 24,168 $ 24,075 $ 24,076 $ 24,087 $ 24,086 $ 24,324 $ 24,325 2013 — 23,354 26,934 27,183 27,221 27,456 27,495 27,560 27,583 27,590 2014 — — 32,207 35,199 35,219 35,371 35,481 35,482 35,485 35,503 2015 — — — 27,204 30,164 30,350 30,573 31,383 31,597 31,597 2016 — — — — 37,656 44,942 44,270 44,530 44,583 44,650 2017 — — — — — 34,657 38,928 40,442 40,941 41,414 2018 — — — — — — 37,881 42,814 43,178 43,549 2019 — — — — — — — 38,709 43,253 44,119 2020 — — — — — — — — 29,274 33,988 2021 — — — — — — — — — 41,043 Total $ 367,778 All outstanding liabilities prior to 2012, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 15,694 (1) Prior years unaudited 79 Table of Contents Crop Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2021 Accident Year 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 2021 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2012 $ 13,546 $ 13,676 $ 13,673 $ 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 39,665 — 2,097 2014 — — 22,686 20,333 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 13,849 — 2,427 2016 — — — — 20,209 19,582 19,487 19,487 19,487 19,487 — 2,806 2017 — — — — — 33,733 34,181 34,181 34,181 34,181 — 2,968 2018 — — — — — — 12,506 11,730 11,730 11,730 — 2,147 2019 — — — — — — — 33,913 37,629 37,629 — 3,101 2020 — — — — — — — — 28,688 28,759 — 2,442 2021 — — — — — — — — — 28,574 314 2,620 Total $ 247,880 (1) Prior years unaudited Crop Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2012 $ 13,078 $ 13,673 $ 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 39,665 2014 — — 17,788 20,333 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 13,849 2016 — — — — 16,444 19,487 19,487 19,487 19,487 19,487 2017 — — — — — 32,767 34,181 34,181 34,181 34,181 2018 — — — — — — 10,764 11,730 11,730 11,730 2019 — — — — — — — 26,332 37,629 37,629 2020 — — — — — — — — 28,038 28,759 2021 — — — — — — — — — 29,525 Total $ 248,831 All outstanding liabilities prior to 2012, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ ( 951 ) (1) Prior years unaudited 80 Table of Contents Commercial (Westminster) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2021 Accident Year 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 (1) 2017 (1) 2018 (1) 2019 (1) 2020 2021 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2012 $ 2,795 $ 2,492 $ 2,539 $ 2,583 $ 2,666 $ 2,680 $ 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 2,036 — 138 2014 — — 4,385 4,274 4,286 4,428 4,450 4,443 4,445 4,443 — 272 2015 — — — 3,082 3,258 4,019 4,218 4,293 4,238 4,294 7 278 2016 — — — — 4,661 5,719 6,200 6,091 6,248 6,354 16 264 2017 — — — — — 5,552 6,249 6,838 7,347 7,905 249 320 2018 — — — — — — 10,358 11,177 12,414 12,769 378 479 2019 — — — — — — — 11,658 13,051 14,564 1,659 415 2020 — — — — — — — — 14,774 14,063 1,944 465 2021 — — — — — — — — — 30,911 5,437 520 Total $ 100,019 (1) Prior years unaudited Commercial (Westminster) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 (1) 2019 (1) 2020 2021 2012 $ 1,634 $ 2,364 $ 2,442 $ 2,537 $ 2,591 $ 2,680 $ 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 2,036 2014 — — 3,330 3,921 4,151 4,269 4,395 4,403 4,410 4,443 2015 — — — 2,126 2,794 3,332 3,950 4,206 4,231 4,287 2016 — — — — 3,172 5,289 5,630 5,693 6,112 6,338 2017 — — — — — 3,573 4,927 5,865 6,576 7,206 2018 — — — — — — 6,494 9,472 10,591 11,911 2019 — — — — — — — 6,294 9,925 11,056 2020 — — — — — — — — 8,146 10,853 2021 — — — — — — — — — 16,269 Total $ 77,079 All outstanding liabilities prior to 2012, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 22,940 (1) Prior years unaudited 81 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, 2021 Accident Year 2012  (1) 2013  (1) 2014  (1) 2015  (1) 2016 2017 2018 2019 2020 2021 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2012 $ 1,600 $ 1,125 $ 1,001 $ 988 $ 985 $ 970 $ 969 $ 969 $ 970 $ 969 $ — 142 2013 — 2,690 2,637 2,566 2,548 2,508 2,511 2,511 2,511 2,511 — 227 2014 — — 2,180 1,732 1,694 1,675 1,650 1,650 1,650 1,650 — 163 2015 — — — 1,695 1,643 1,637 1,582 1,580 1,580 1,580 — 135 2016 — — — — 2,683 2,526 2,515 2,516 2,512 2,512 — 288 2017 — — — — — 2,530 2,513 2,510 2,497 2,494 — 167 2018 — — — — — — 1,652 1,576 1,609 1,555 1 147 2019 — — — — — — — 2,607 2,782 2,777 15 189 2020 — — — — — — — — 2,293 2,054 29 129 2021 — — — — — — — — — 2,726 220 177 Total $ 20,828 (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 2012 (1) 2013 (1) 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2012 $ 776 $ 932 $ 985 $ 969 $ 969 $ 970 $ 969 $ 969 $ 970 $ 969 2013 — 2,520 2,751 2,530 2,504 2,508 2,511 2,511 2,511 2,511 2014 — — 1,782 1,925 1,563 1,640 1,650 1,650 1,650 1,650 2015 — — — 1,274 1,796 1,818 1,580 1,580 1,580 1,580 2016 — — — — 1,822 2,806 2,498 2,512 2,512 2,512 2017 — — — — — 1,530 2,465 2,497 2,497 2,494 2018 — — — — — — 1,049 1,213 1,240 1,554 2019 — — — — — — — 1,917 2,712 2,717 2020 — — — — — — — — 1,543 1,892 2021 — — — — — — — — — 1,687 Total $ 19,566 All outstanding liabilities prior to 2012, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 1,262 (1) Prior years unaudited 82 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, 2021 Liabilities for unpaid losses and loss adjustment expenses: Private passenger auto $ 26,390 Non-standard auto (Primero) 6,721 Non-standard auto (Direct Auto) 36,794 Home and farm 19,161 Crop 6,002 Commercial (Westminster) 31,662 Commercial (non-Westminster) 1,262 All other 11,670 Total liabilities for unpaid losses and loss adjustment expenses 139,662   Reinsurance recoverables on losses: Private passenger auto 1,001 Non-standard auto (Primero) - Non-standard auto (Direct Auto) - Home and farm 3,467 Crop 6,953 Commercial (Westminster) 8,722 Commercial (non-Westminster) - All other 1,057 Total reinsurance recoverables on losses 21,200   Net liability for unpaid losses and loss adjustment expenses $ 118,462 The following table presents required supplementary information about average historical claims duration as of December 31, 2021: 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 54.4 % 20.4 % 10.6 % 5.9 % 4.7 % 3.2 % 0.8 % — — — Non-Standard Auto (Primero) 78.2 % 16.6 % 3.8 % 0.9 % 0.2 % 0.2 % 0.1 % — — — Non-Standard Auto (Direct Auto) 35.4 % 25.1 % 16.2 % 9.9 % 6.1 % 2.9 % 2.1 % 1.5 % 0.6 % 0.2 % Home and Farm 68.1 % 14.5 % 9.4 % 4.9 % 2.4 % 0.5 % 0.2 % — — — Crop 100.0 % — — — — — — — — — Commercial (Westminster) 70.4 % 23.6 % 6.0 % — — — — — — — Commercial (non-Westminster) 87.3 % 3.7 % 2.6 % 3.0 % 2.9 % 0.5 % — — — — 83 Table of Contents 10. Property and Equipment Property and equipment consisted of the following: December 31, 2021 2020 Estimated Useful Life Cost: Land $ 1,403 $ 1,401 indefinite Building and improvements 14,193 13,912 10 – 43 years Electronic data processing equipment 1,518 1,271 5 – 7 years Furniture and fixtures 2,885 2,867 5 – 7 years Automobiles 1,228 1,275 2 – 3 years Gross cost 21,227 20,726   Accumulated depreciation ( 11,358 ) ( 10,827 ) Total property and equipment, net $ 9,869 $ 9,899 Depreciation expense was $ 694 , $ 709 , and $ 538 during the years ended December 31, 2021, 2020 and 2019, respectively. 11. Goodwill and Other Intangibles Goodwill The following table presents the carrying amount of the Company’s goodwill by segment: December 31, 2021 2020 Non-standard auto from acquisition of Primero $ 2,628 $ 2,628 Commercial from acquisition of Westminster 6,756 6,756 Total $ 9,384 $ 9,384 Other Intangible Assets The following table presents the carrying amount of the Company’s other intangible assets: December 31, 2021 Gross Carrying Amount Accumulated Amortization Net Subject to amortization: Trade names $ 748 $ 265 $ 483 Distribution network 6,700 745 5,955 Total subject to amortization 7,448 1,010 6,438   Not subject to amortization – state insurance licenses 1,900 - 1,900 Total $ 9,348 $ 1,010 $ 8,338 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 Amortization expense was $ 472 , $ 5,224 , and $ 1,711 during the years ended December 31, 2021, 2020 and 2019, respectively. The VOBA intangible asset of $4,750 acquired in the Westminster transaction was fully amortized during 2020. 84 Table of Contents Other intangible assets that have finite lives, including trade names and distribution networks, are amortized over their useful lives. As of December 31, 2021, the estimated amortization of other intangible assets with finite lives for the next five years in the period ended December 31, 2026, and thereafter is as follows: Year ending December 31, Amount 2022 $ 472 2023 455 2024 422 2025 422 2026 422 Thereafter 4,245 Total other intangible assets with finite lives $ 6,438 12. Related Party Transactions Intercompany Reinsurance Pooling Arrangement Effective January 1, 2020, all of our insurance subsidiary and affiliate companies entered into an intercompany reinsurance pooling agreement. This agreement was finalized, approved, and implemented during the fourth quarter of 2020, retroactive to the January 1 effective date. Nodak Insurance is the lead company of the pool, and assumes the net premiums, net losses, and underwriting expenses from each of the other five companies. Nodak Insurance then retrocedes balances back to each company, while retaining its own share of the pool’s net underwriting results, based on individual pool percentages established in the respective pooling agreement. This arrangement allows each insurance company to rely upon the capacity of the pool’s total statutory capital and surplus. As a result, they are evaluated by AM Best on a group basis and hold a single combined financial strength rating, long-term issuer credit rating, and financial size category. In connection with the pooling agreement, the quota share agreement between Battle Creek and Nodak Insurance was cancelled. As a result, the Company’s consolidated financial position and results of operations are impacted by the portion of Battle Creek’s underwriting results that are allocated to the policyholders of Battle Creek rather than the shareholders of NI Holdings. For the years ended December 31, 2021 and 2020, the pooling share percentages by insurance company were: Pool Percentage Nodak Insurance Company 66.0 % American West Insurance Company 7.0 % Primero Insurance Company 3.0 % Battle Creek Mutual Insurance Company 2.0 % Direct Auto Insurance Company 13.0 % Westminster American Insurance Company 9.0 % Total 100.0 % North Dakota Farm Bureau We were organized by the 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 $ 1,369 , $ 1,370 , and $ 1,352 during the years ended December 31, 2021, 2020, and 2019 respectively. Royalty amounts payable of $ 113 and $ 113 were accrued as a liability to the NDFB at December 31, 2021 and 2020, 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. 85 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, 2021 exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements, by a significant margin. The amount available for payment of dividends from Nodak Insurance to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $ 21,493 based upon the surplus of Nodak Insurance at December 31, 2021. Prior to its payment of any dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if Nodak Insurance is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. 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, 2021 or 2019. Direct Auto was re-domesticated from Illinois to North Dakota during 2021, and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Direct Auto to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $ 3,796 based upon the surplus of Direct Auto at December 31, 2021. No dividends were declared or paid by Direct Auto during the years ended December 31, 2021, 2020, or 2019. Westminster was re-domesticated from Maryland to North Dakota during 2021, and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Westminster to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $ 2,471 based upon the surplus of Westminster at December 31, 2021. No dividends were declared or paid by Westminster during the years ended December 31, 2021 or 2020. 86 Table of Contents Battle Creek Mutual Insurance Company The following tables disclose the standalone balance sheets and statements of operations of Battle Creek, prior to intercompany eliminations, to illustrate the impact of including Battle Creek in our Consolidated Balance Sheets and Statements of Operations: December 31, 2021 2020 Assets: Cash and cash equivalents $ 4,398 $ 6,055 Investments 10,610 5,543 Premiums and agents’ balances receivable 5,038 4,738 Deferred policy acquisition costs 499 479 Pooling receivable (1) - 920 Reinsurance recoverables on losses (2) 10,173 5,646 Accrued investment income 51 27 Deferred income taxes 142 101 Property and equipment 325 337 Other assets 52 49 Total assets $ 31,288 $ 23,895   Liabilities: Unpaid losses and LAE $ 2,937 $ 2,445 Unearned premiums 2,544 2,381 Notes payable (1) 3,000 3,000 Pooling payable (1) 5,580 - Reinsurance losses payable (2) 12,754 11,221 Accrued expenses and other liabilities 264 303 Total liabilities 27,079 19,350   Equity: Non-controlling interest 4,209 4,545 Total equity 4,209 4,545   Total liabilities and equity $ 31,288 $ 23,895   (1) Amount fully eliminated in consolidation . (2) Amount partly eliminated in consolidation . Year Ended December 31, 2021 2020 2019 Revenues: Net premiums earned $ 5,992 $ 5,673 $ - Fee and other income ( 11 ) ( 23 ) ( 9 ) Net investment income 49 ( 3 ) 139 Net capital gain on investments 2 1 3 Total revenues 6,032 5,648 133   Expenses: Losses and loss adjustment expenses 4,328 3,369 - Amortization of deferred policy acquisition costs 1,291 1,029 - Other underwriting and general expenses 470 77 - Total expenses 6,089 4,475 -   Income (loss) before income taxes ( 57 ) 1,173 133 Income taxes 27 218 34 Net income (loss) $ ( 84 ) $ 955 $ 99   87 Table of Contents 13. Benefit Plans Nodak Insurance sponsors a 401(k) plan with an automatic and matching contribution for eligible employees at Nodak Insurance, Primero, and Direct Auto. Westminster also sponsors a separate 401(k) plan. The Company reported expenses related to the 401(k) plans totaling $ 722 , $ 651 , and $ 516 during the years ended December 31, 2021, 2020, and 2019, respectively. Nodak Insurance also contributes an additional elective amount of employee compensation as a profit-sharing contribution for eligible employees that is invested in a portfolio of investments directed by the Company. The reported expenses related to this profit-sharing contribution were $ 697 , $ 900 , and $ 618 during years ended December 31, 2021, 2020, and 2019 respectively. All fees associated with the plans are deducted from the eligible employee accounts. The Company also offers a non-qualified deferred compensation plan to key executives of the Company (as designated by the Board of Directors). The Company’s policy is to fund the plan by amounts that represent the excess of the maximum contribution allowed by the Employee Retirement Income Security Act (“ERISA”) over the key executives’ allowable 401(k) contribution. The plan also allows employee-directed deferral of key executive’s compensation or incentive payments. The Company reported expenses related to this plan totaling $ 914 , $ 308 , and $ 458 during the years ended December 31, 2021, 2020, and 2019, respectively. In connection with our initial public offering in March 2017, the Company established its ESOP. The ESOP is intended to be an employee stock ownership plan within the meaning of Internal Revenue Code Section 4975(e)(7) and invests solely in common stock of the Company. Upon establishment of the plan, Nodak Insurance loaned $ 2,400 to the ESOP’s related trust (the “ESOP Trust”). The ESOP loan was for a period of ten years , bearing interest at the long-term Applicable Federal Rate effective on the closing date of the offering ( 2.79 % annually). The ESOP Trust used the proceeds of the loan to purchase shares in our initial public offering, which resulted in the ESOP Trust owning approximately 1.0 % of the Company’s authorized shares. The ESOP has purchased the shares for investment and not for resale. The shares purchased by the ESOP Trust in the offering are held in a suspense account as collateral for the ESOP loan. Nodak Insurance makes semi-annual cash contributions to the ESOP in amounts no smaller than the amounts required for the ESOP Trust to make its loan payments to Nodak Insurance. While the ESOP makes two loan payments per year, a pre-determined portion of the shares are released from the suspense account and allocated to participant accounts at the end of the calendar year. This release and allocation occurs on an annual basis over the ten-year term of the ESOP loan. Nodak Insurance has a lien on the shares of common stock of the Company held by the ESOP to secure repayment of the loan from the ESOP to Nodak Insurance. If the ESOP is terminated as a result of a change in control of the Company, the ESOP may be required to pay the costs of terminating the plan. It is anticipated that the only assets held by the ESOP will be shares of the Company’s common stock. Participants in the ESOP cannot direct the investment of any assets allocated to their accounts. The ESOP participants are employees of Nodak Insurance. The employees of Primero, Direct Auto, and Westminster do not participate in the ESOP. American West and Battle Creek have no employees. Each employee of Nodak Insurance automatically becomes a participant in the ESOP if such employee is at least 21 years old, has completed a minimum of one thousand hours of service with Nodak Insurance, and has completed an Eligibility Computation Period. Employees are not permitted to make any contributions to the ESOP. Participants in the ESOP receive annual reports from the Company showing the number of shares of common stock of the Company allocated to the participants’ accounts and the market value of those shares. The shares are allocated to participants based on compensation as provided for in the ESOP. In connection with the establishment of the ESOP, the Company created a contra-equity account on the Consolidated Balance Sheet equal to the ESOP’s basis in the shares. The basis of those shares was set at $ 10.00 per share as part of the initial public offering. As shares are released from the ESOP suspense account, the contra-equity account is credited, which reduces the impact of the contra-equity account on the Company’s Consolidated Balance Sheet over time. The Company records compensation expense related to the shares released, equal to the number of shares released from the suspense account multiplied by the average market value of the Company’s stock during the period. The Company recognized compensation expense of $ 460 , $ 373 , and $ 405 during the years ended December 31, 2021, 2020, and 2019, respectively, related to the ESOP. Through December 31, 2021, the Company had released and allocated 121,575 ESOP shares to participants, with a remainder of 118,425 ESOP shares in suspense at December 31, 2021. Using the Company’s year-end market price of $ 18.91 per share, the fair value of the unearned ESOP shares was $ 2,239 at December 31, 2021. 88 Table of Contents 14. 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, 2021, 2020, or 2019. This line of credit is scheduled to expire on January 30, 2023 . 15. 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 (benefit) were as follows: Year Ended December 31, 2021 2020 2019 Current tax provision Federal $ 3,930 $ 10,109 $ 5,116 State 354 725 324 Total current 4,284 10,834 5,440 Deferred tax (benefit) provision ( 1,310 ) 638 1,871 Total provision for income taxes $ 2,974 $ 11,472 $ 7,311 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, 2021 2020 2019 Income before income taxes $ 11,306 $ 52,816 $ 33,811   Expected provision for federal income taxes at 21% $ 2,374 $ 11,091 $ 7,100   State income taxes, net of federal impact 474 570 224 Tax-exempt interest ( 197 ) ( 209 ) ( 235 ) Dividends received deduction ( 122 ) ( 104 ) ( 89 ) Compensation-related expenses 326 130 151 Change in valuation allowance 77 ( 17 ) 7 Other 42 11 153 Total provision for income taxes $ 2,974 $ 11,472 $ 7,311   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 $ 1,008 , $ 931 , and $ 594 at December 31, 2021, 2020, and 2019, respectively. 89 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, 2021 and 2020 were as follows: December 31, 2021 2020 Deferred income tax assets: Unearned premium $ 5,783 $ 5,013 Unpaid losses and LAE 1,096 792 Net operating loss carryovers 1,224 1,260 Other 1,967 1,538 Total deferred income tax assets 10,070 8,603   Deferred income tax liabilities: Deferred policy acquisition costs 5,670 5,033 Net unrealized gains on investments 7,382 9,897 Intangibles 1,464 1,451 Other 52 48 Total deferred income tax liabilities 14,568 16,429   Net deferred income tax liability ( 4,498 ) ( 7,826 )   Valuation allowance ( 1,008 ) ( 931 ) Deferred income tax liability, net $ ( 5,506 ) $ ( 8,757 ) At December 31, 2021 and 2020, 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, 2021, 2020, or 2019. At December 31, 2021 and 2020, 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 $ 3,215 and $ 3,390 at December 31, 2021 and 2020, respectively. The net operating loss carryforward began expiring in 2021 and will continue through 2032 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 $ 2,122 and $ 2,340 of net operating loss carryover at December 31, 2021 and 2020, respectively. This net operating loss carryforward expires in 2023 due to limitations on the use of this net operating loss carryforward. 90 Table of Contents 16. Operating Leases Primero leases a facility in Spearfish, South Dakota under a non-cancellable operating lease expiring in 2023 , and leases a facility in Las Vegas, Nevada on a month-to-month basis. Direct Auto leases a facility in Chicago, Illinois under a non-cancellable operating lease expiring in 2029 . Nodak Insurance leases a facility in Fargo, North Dakota under a non-cancellable operating lease expiring in 2024 . There were expenses of $ 250 , $ 370 , and $ 316 related to these leases during the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, we have minimum future commitments under non-cancellable leases for the next five years in the period ended December 31, 2026, and thereafter as follows: Year ending December 31, Estimated Future Minimum Commitments 2022 $ 319 2023 358 2024 320 2025 286 2026 291 Thereafter 775 17. 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. 18. Common Stock Changes in the number of common stock shares outstanding were as follows: Year Ended December 31, 2021 2020 2019 Shares outstanding, beginning 21,318,638 22,119,380 22,192,894 Treasury shares repurchased through stock repurchase authorization ( 225,205 ) ( 856,499 ) ( 116,034 ) Issuance of treasury shares for vesting of stock awards 102,060 31,442 18,205 Issuance of shares related to employee stock ownership plan 24,315 24,315 24,315 Shares outstanding, ending 21,219,808 21,318,638 22,119,380 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 authorization. During the nine months ended September 30, 2021, we completed the repurchase of 144,110 shares of our common stock for $ 2,762 to close out this authorization. On August 11, 2021, our Board of Directors approved an additional authorization for the repurchase of up to approximately $ 5,000 of the Company’s outstanding common stock. During the six months ended December 31, 2021, we completed the repurchase of 81,095 shares of our common stock for $ 1,554 under this new authorization. The cost of this treasury stock is a reduction of shareholders’ equity within our Consolidated Balance Sheets. 91 Table of Contents 19. 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, RSUs, stock appreciation rights, dividend equivalents, and 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. 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 RSUs is presented below: Shares Weighted-Average Grant-Date Fair Value Per Share Units outstanding and unearned at January 1, 2019 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   RSUs granted during 2021 58,700 18.76 RSUs earned during 2021 ( 66,100 ) 15.77 Units outstanding and unearned at December 31, 2021 108,380 $ 16.86 The following table shows the impact of RSU activity to the Company’s financial results: Year Ended December 31, 2021 2020 2019 RSU compensation expense $ 1,065 $ 1,035 $ 792 Income tax benefit ( 242 ) ( 217 ) ( 166 ) RSU compensation expense, net of income taxes $ 823 $ 818 $ 626   Total grant-date fair value of vested RSUs at end of period $ 1,042 $ 764 $ 568 At December 31, 2021, there was $ 718 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 2.04 years. 92 Table of Contents 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 targets will be achieved or exceeded. 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, 2019 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   PSUs granted during 2021 (at target) 64,600 18.64 PSUs earned during 2021 ( 70,363 ) 16.25 Performance adjustment (1) 24,300 16.25 Forfeitures ( 2,537 ) 16.25 Units outstanding and unearned at December 31, 2021 190,600 $ 16.06   (1) Represents the change in PSUs issued based upon the attainment of performance goals established by the Company. The following table shows the impact of PSU activity to the Company’s financial results: Year Ended December 31, 2021 2020 2019 PSU compensation expense $ 1,344 $ 1,262 $ 822 Income tax benefit ( 305 ) ( 265 ) ( 173 ) PSU compensation expense, net of income taxes $ 1,039 $ 997 $ 649   Total grant-date fair value of vested PSUs at end of period $ 1,143 $ - $ - 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, 2021, there was $ 1,125 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 1.74 years. 93 Table of Contents 20. 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, 2021, 2020, and 2019. For purposes of evaluating profitability of the non-standard auto segment, management combines the policy fees paid by the insured with the underwriting gain or loss as its primary measure. As a result, these fees are allocated to the non-standard auto segment (included in fee and other income) in the tables below. The remaining fee and other income amounts are not allocated to any segment. We do not assign or allocate all 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, income taxes recoverable or payable, and shareholders’ equity. 94 Table of Contents Year Ended December 31, 2021 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 76,749 $ 58,842 $ 84,102 $ 43,541 $ 65,104 $ 4,916 $ 333,254 Assumed premiums earned - - - 2,106 - 5,929 8,035 Ceded premiums earned ( 4,216 ) ( 257 ) ( 10,310 ) ( 18,799 ) ( 7,819 ) ( 299 ) ( 41,700 ) Net premiums earned 72,533 58,585 73,792 26,848 57,285 10,546 299,589   Direct losses and LAE 61,358 34,453 59,380 79,177 45,621 1,009 280,998 Assumed losses and LAE - - - 617 - 6,282 6,899 Ceded losses and LAE ( 1,637 ) - ( 7,235 ) ( 51,963 ) ( 10,842 ) 159 ( 71,518 ) Net losses and LAE 59,721 34,453 52,145 27,831 34,779 7,450 216,379   Gross margin 12,812 24,132 21,647 ( 983 ) 22,506 3,096 83,210   Underwriting and general expenses 20,516 22,770 22,122 8,212 20,000 2,669 96,289 Underwriting gain (loss) ( 7,704 ) 1,362 ( 475 ) ( 9,195 ) 2,506 427 ( 13,079 )   Fee and other income 1,280 1,775   2,642 Net investment income 7,131 Net capital gain on investments 15,479 Income before income taxes 11,306 Income taxes 2,974 Net income 8,332 Net loss attributable to non-controlling interest ( 84 ) Net income attributable to NI Holdings, Inc. $ 8,416   Operating Ratios: Loss and LAE ratio 82.3 % 58.8 % 70.7 % 103.7 % 60.7 % 70.6 % 72.2 % Expense ratio 28.3 % 38.9 % 30.0 % 30.6 % 34.9 % 25.3 % 32.1 % Combined ratio 110.6 % 97.7 % 100.6 % 134.2 % 95.6 % 96.0 % 104.4 %     Balances at December 31, 2021: Premiums and agents’ balances receivable $ 19,039 $ 8,143 $ 8,914 $ - $ 14,687 $ 669 $ 51,452 Deferred policy acquisition costs 4,949 5,978 7,271 - 6,328 421 24,947 Reinsurance recoverables 1,001 - 3,467 6,953 8,722 1,057 21,200 Goodwill and other intangibles - 2,810 - - 14,912 - 17,722   Unpaid losses and LAE 26,390 43,515 19,161 6,002 32,924 11,670 139,662 Unearned premiums 28,820 18,679 42,399 - 34,672 3,219 127,789 Payable to Federal Crop Insurance Corporation - - - 4,962 - - 4,962 95 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   Operating 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 96 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   Operating 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 97 Table of Contents 21. 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, 2021, 2020, and 2019: 2021 2020 2019 Nodak Insurance: Statutory capital and surplus $ 221,761 $ 216,278 $ 189,836 Statutory unassigned surplus 216,761 211,278 184,836 Statutory net income 5,311 24,529 9,398   American West: Statutory capital and surplus 18,400 18,368 16,168 Statutory unassigned surplus 12,399 12,367 10,167 Statutory net income (loss) ( 54 ) 2,158 2,232   Primero: Statutory capital and surplus 10,138 9,818 8,727 Statutory unassigned surplus (deficit) 879 559 ( 532 ) Statutory net income (loss) 127 1,023 ( 1,256 )   Battle Creek: Statutory capital and surplus 6,821 6,875 6,189 Statutory unassigned surplus 3,821 3,875 3,189 Statutory net income (loss) ( 77 ) 693 133   Direct Auto: Statutory capital and surplus 37,960 35,819 28,683 Statutory unassigned surplus 34,960 32,819 25,683 Statutory net income 6,451 7,898 7,377   Westminster: Statutory capital and surplus 24,706 23,592 20,897 Statutory unassigned surplus 19,706 18,592 15,897 Statutory net income 1,723 2,719 225 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 RBC requirements that may further affect their ability to pay dividends. Our insurance subsidiaries statutory capital and surplus at December 31, 2021 and 2020 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 2022 to Nodak Insurance as dividends from its insurance subsidiaries without prior approval of insurance regulatory authorities are $ 1,840 from American West and $ 0 from Primero. No dividends were paid to Nodak Insurance from either entity during the years ended December 31, 2021, 2020, or 2019. The amount available for payment of dividends from Nodak Insurance to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $ 21,493 based upon the surplus of Nodak Insurance at December 31, 2021. Prior to its payment of any dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if Nodak Insurance is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. 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, 2021 or 2019. Direct Auto was re-domesticated from Illinois to North Dakota during 2021, and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Direct Auto to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $ 3,796 based upon the surplus of Direct Auto at December 31, 2021. No dividends were declared or paid by Direct Auto during the years ended December 31, 2021, 2020, or 2019. Westminster was re-domesticated from Maryland to North Dakota during 2021, and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Westminster to NI Holdings during 2022 without the prior approval of the North Dakota Insurance Department is $ 2,471 based upon the surplus of Westminster at December 31, 2021. No dividends were declared or paid by Westminster during the years ended December 31, 2021 or 2020. 98 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.