What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-08 compared with 2022-03-09 · 1364 added, 746 removed, 618 unchanged (77% of the section changed)

Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

Shareholders of NI Holdings, Inc.

Opinions on the Consolidated Financial Statements

and Internal Control over Financial Reporting

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

and Subsidiaries (collectively, the “Company”) as of December 31, 2022, and 2021, and the related consolidated statements

of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year

period ended December 31, 2022, and the related notes and the schedule listed in Item 15(a)(2) (collectively referred to as the “consolidated

financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022,

based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements

referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021, and

the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity

with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material

respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated

Framework (2013) issued by COSO.

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.

The Company’s management is responsible

for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment

of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal

Control over Financial Reporting.

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

and an opinion on the Company’s internal control over financial reporting 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 audits to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial

reporting was maintained in all material respects.

Our audits of the consolidated financial statements

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 consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,

assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control

based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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

Definition and Limitations of Internal

Control over Financial Reporting

A company’s internal control over financial

reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,

in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally

accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations

of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is

a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated

to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in

any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter

below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of Losses and Loss Adjustment

Expenses Reserves

Critical Audit Matter Description

On December 31, 2022, the Company’s

liability for unpaid losses and loss adjustment expenses was approximately $190 million.

As described in Note 3 and 9, the

Company’s property and casualty insurance loss and loss expenses reserves (referred to as “losses and loss expenses

reserves”), are determined by the Company using actuarial methods, models, assumptions, and judgment to estimate the reserves

required to pay for and settle all outstanding insured claims as of the financial statement date.

There is significant uncertainty

inherent in determining management’s best estimate of the losses and loss expenses reserves, requiring the use of informed

actuarially based estimates and management’s judgment.

The actuarial estimate of losses and loss expenses reserves is subject

to review and adjustment by Company management.

Losses and loss expenses are inherently uncertain

as to timing and amount and the recorded losses and loss expense reserves may vary materially from the actual ultimate cost of claims.

Given the subjectivity in estimating ultimate losses and loss expenses, due to uncertainties concerning the future emergence of losses

and loss expenses, inflation trends, and the judicial environment, among other factors, auditing losses and loss expenses reserves involved

an especially high degree of auditor judgment, including the need to involve an actuarial specialist.

How the Critical Matter Was Addressed in the

We obtained an understanding, evaluated the design,

and tested the operating effectiveness of certain internal controls over the Company’s reserving process for losses and loss adjustment

expenses reserves.

To test the Company’s estimate of losses

and loss adjustment expenses reserves, our audit procedures included among others:

● With the assistance of the actuarial specialist,

we used the Company’s claims data and other inputs, to develop a range of independent estimates for the losses and loss expenses

We used these independent estimates to assess the reasonableness of the Company’s reserves by comparing our estimates

to the Company’s recorded losses and loss expenses reserves.

● We tested the underlying data that served as

the basis for the actuarial analysis, including historical claims data, to test the reasonableness of key inputs to the actuarial estimate.

● We compared the Company’s prior years estimates

of expected incurred losses to actual experience during the current year to identify potential bias in the determination of losses and

loss expenses reserves.

/s/ Mazars USA LLP

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

We have serves as the Company’s auditor since

Fort Washington, Pennsylvania

5 unchanged sentences

Cash and cash equivalents

Fixed income securities, at fair value

Fixed income securities, at fair value (net of allowance for expected credit losses of $0 at December 31, 2022)

Equity securities, at fair value

1 unchanged sentence

Total cash and investments

Premiums and agents'

balances receivable

Premiums and agents' balances receivable (net of allowance for expected credit losses of $ 425 at December 31, 2022)

Deferred policy acquisition costs

Reinsurance premiums receivable

Reinsurance recoverables on losses

Reinsurance recoverables on losses (net of allowance for expected credit losses of $ 0 at December 31, 2022)

Income tax recoverable

1 unchanged sentence

Property and equipment, net

Deferred income taxes

Receivable from Federal Crop Insurance Corporation

3 unchanged sentences

Reinsurance premiums payable

Income tax payable

Deferred income taxes

3 unchanged sentences

Total liabilities

Commitments and contingencies

Shareholders’

Shareholders’ equity:

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

1 unchanged sentence

and outstanding:

2021 –

21,219,808 shares, 2020 –

21,318,638 shares

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

2022 – 21,076,255 shares, 2021 – 21,219,808 shares

Additional paid-in capital

1 unchanged sentence

Retained earnings

Accumulated other comprehensive income, net of income taxes

Treasury stock, at cost, 2021 –

1,661,767 shares, 2020 –

1,538,622 shares

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

Treasury stock, at cost, 2022 – 1,829,635 shares, 2021 – 1,661,767 shares

Non-controlling interest

Total shareholders’

Total liabilities and shareholders’

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

Total shareholders’ equity

Total liabilities and shareholders’ equity

The accompanying notes are an integral part of these consolidated financial

NI Holdings, Inc.

5 unchanged sentences

Net investment income

Net capital gain on investments

Net investment gains (losses)

Total revenues

3 unchanged sentences

Total expenses

Income before income taxes

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) attributable to non-controlling interest

Net income attributable to NI Holdings, Inc.

Earnings per common share:

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

Earnings (loss) per common share:

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

1 unchanged sentence

Weighted average common shares used in diluted per common share calculations

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

The accompanying notes are an integral part of these consolidated financial

NI Holdings, Inc.

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2021, 2020 and 2019 (dollar amounts in thousands)

Years Ended December 31, 2022, 2021, and 2020

(dollar amounts in thousands)

Attributable to

1 unchanged sentence

Attributable to

Non-Controlling Interest

Non-Controlling

Net income (loss)

Other comprehensive loss, before income taxes:

Holding losses on investments

Reclassification adjustment for net realized capital gain included in net income

Other comprehensive loss, before income taxes

Income tax benefit related to items of other comprehensive loss

Other comprehensive loss, net of income taxes

Other comprehensive income (loss), before income taxes:

Holding gains (losses) on investments

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

Other comprehensive income (loss), before income taxes

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

Other comprehensive income (loss), net of income taxes

Comprehensive income (loss)

3 unchanged sentences

Non-Controlling

Other comprehensive income, before income taxes:

Holding gains on investments

Reclassification adjustment for net realized capital gain included in net income

Other comprehensive income, before income taxes

Income tax expense related to items of other comprehensive income

Other comprehensive income, net of income taxes

Comprehensive income

Net income (loss)

Other comprehensive income (loss), before income taxes:

Holding gains (losses) on investments

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

Other comprehensive income (loss), before income taxes

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

Other comprehensive income (loss), net of income taxes

Comprehensive income (loss)

Attributable to

2 unchanged sentences

Non-Controlling

Other comprehensive income, before income taxes:

Holding gains on investments

Reclassification adjustment for net realized capital gain included in net income

Other comprehensive income, before income taxes

Income tax expense related to items of other comprehensive income

Other comprehensive income, net of income taxes

Comprehensive income

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

Net income (loss)

Other comprehensive income (loss), before income taxes:

Holding gains (losses) on investments

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

Other comprehensive income (loss), before income taxes

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

Other comprehensive income (loss), net of income taxes

Comprehensive income (loss)

The accompanying notes are an integral part of these consolidated financial

NI Holdings, Inc.

Consolidated Statements of Changes in Shareholders’

Years Ended December 31, 2022, 2021, and 2020

1 unchanged sentence

Comprehensive

Shareholders’

Balance, January 1, 2019

Cumulative effect of change in accounting for equity securities

Other comprehensive income, net of income taxes

Income (Loss),

Net of Income

Treasury Stock

Shareholders’

January 1, 2020

Net income (loss)

Other comprehensive income (loss), net of income taxes

Share-based compensation

2 unchanged sentences

Distribution of employee stock ownership plan shares

Balance, December 31, 2019

Other comprehensive income, net of income taxes

December 31, 2020

Net income (loss)

Other comprehensive income (loss), net of income taxes

Share-based compensation

2 unchanged sentences

Distribution of employee stock ownership plan shares

Balance, December 31, 2020

December 31, 2021

Net income (loss)

Other comprehensive loss, net of income taxes

Other comprehensive income (loss), net of income taxes

Share-based compensation

2 unchanged sentences

Distribution of employee stock ownership plan shares

Balance, December 31, 2021

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

December 31, 2022

The accompanying notes are an integral part of these consolidated financial

NI Holdings, Inc.

3 unchanged sentences

Cash flows from operating activities:

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

Net capital gain on investments

Deferred income tax (benefit) expense

Net income (loss)

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

Net investment losses (gains)

Deferred income tax expense (benefit)

Depreciation of property and equipment

1 unchanged sentence

Distribution of employee stock ownership plan shares

Share-based incentive compensation

Share-based compensation

Amortization of deferred policy acquisition costs

1 unchanged sentence

Net amortization of premiums and discounts on investments

Loss on sale of property and equipment

Loss (gain) on sale of property and equipment

Changes in operating assets and liabilities:

Premiums and agents’

balances receivable

Premiums and agents’ balances receivable

Reinsurance premiums receivable / payable

13 unchanged sentences

Purchases of property and equipment

Proceeds from sales of property and equipment

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

4 unchanged sentences

Installment payment on Westminster consideration payable

Issuance of restricted stock awards

Issuance of vested award shares

Net cash flows from financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

Federal and state income taxes paid

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

The accompanying notes are an integral part of these consolidated financial

NI Holdings, Inc.

2 unchanged sentences

(dollar amounts in thousands)

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.

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 consummated on March 13, 2017.

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:

These consolidated financial statements include

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

Nodak Insurance Company

Nodak Insurance is the largest domestic property and casualty insurance company in North Dakota, offering private passenger auto, homeowners, farmowners, commercial multi-peril, crop hail, and Federal multi-peril crop insurance coverages through its captive agents in the state.

Nodak 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.

1 unchanged sentence

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.

American West is a property and casualty insurance

company licensed in eight states in the Midwest and Western regions of the U.S.

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.

Primero is a wholly-owned subsidiary of Tri-State,

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.

Primero is a property and casualty insurance company

writing non-standard automobile coverage in the states of Nevada, Arizona, North Dakota, and South Dakota.

Primero was acquired by Nodak

Insurance in 2014.

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.

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 or loss 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.

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.

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.

Westminster is a property and casualty insurance

company licensed in 18 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, Kentucky, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina,

Tennessee, Virginia, West Virginia, and the District of Columbia.

Westminster was acquired by NI Holdings on January 1, 2020, via a stock

purchase agreement.

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.

Recent Accounting Pronouncements

Prior to December 31, 2022, we were classified as an EGC and elected

to use the extended transition period for complying with certain new or revised financial accounting standards from the Financial Accounting

Standards Board (“FASB”) pursuant to Section 13(a) of the Exchange Act.

However, beginning on December 31, 2022, we are

no longer an EGC and will no longer have the ability to delay adoption of these new or revised accounting standards, or to take advantage

of reduced corporate governance disclosures.

Premium Amortization on Callable Fixed Income Securities

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.

Fair Value Measurement of Assets and Liabilities

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.

Effective for the year ended December 31, 2022, the Company

adopted the updated guidance for leases and elected to utilize a cumulative-effect adjustment to the opening balance of retained earnings

for the year of adoption, if necessary.

Accordingly, the Company’s reporting for the comparative periods prior to adoption continue

to be presented in the consolidated financial statements in accordance with previous lease accounting guidance.

The Company also elected

to apply all practical expedients applicable to the Company in the updated guidance for transition for leases in effect at adoption, including

using hindsight to determine the lease term of existing leases, the option to not reassess whether an existing contract is a lease or

contains a lease, and whether the lease is an operating or finance lease.

The adoption of the updated guidance resulted in the Company

recognizing a right-of-use asset of $ 1,637 as part of other assets, a lease liability of $ 1,837 as part of other liabilities, and an elimination

of the $ 200 deferred rent liability in the Consolidated Balance Sheet.

The cumulative effect adjustment to the opening balance of retained

earnings was zero .

The adoption of the updated guidance did not affect the Company’s results of operations or cash flows.

Measurement of Credit Losses on Financial Instruments

In December 2022, the Company adopted amended guidance from

the FASB that applies a new credit loss model (current expected credit losses or “CECL”) for determining credit-related impairments

for financial instruments measured at amortized cost and requires an entity to estimate the credit losses expected over the life of an

exposure or pool of exposures.

The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance

account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented

on the Consolidated Balance Sheet at the amount expected to be collected.

The updated guidance also amends the previous other-than-temporary

impairment model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses

through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and

its fair value.

In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination

of whether a credit loss exists.

The Company adopted the updated guidance for the year ended

December 31, 2022.

The adoption of this guidance resulted in an allowance of expected credit losses of $ 425 for premiums and agents' balances

Based on the results of the receivable

analyses and management’s review of our

available-for-sale fixed income securities, it was determined that no allowance was required for reinsurance recoverables or available-for-sale

fixed income securities at this time.

Income Taxes – Simplifying the Accounting for Income

In December 2022, the Company adopted amended guidance

from the FASB relating to accounting for income taxes.

The modifications primarily remove or amend several exceptions contained in existing

guidance to simplify income tax matters.

The adoption of this guidance did not materially impact the Company’s financial position,

results of operations, or cash flows.

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.

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 intercompany 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.

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.

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 credit 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.

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.

(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 2022, 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.

Cash and Cash Equivalents :

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

Cost approximates fair value for these short-term investments.

Cash and cash equivalents include certain investments

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

Cost approximates fair value for these short-term

Investments :

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.

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 from fixed income securities is recognized when earned,

and realized investment gains (losses) are recognized when investments are sold, the fair value of equity securities change, or credit

impairments are 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.

Amortization of premium and accretion of discount are computed using the 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 investment gains

(losses), along with the change in unrealized gains and losses on equity securities.

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.

The carrying value of these other

invested assets was $ 2,005 at December 31, 2022 and 2021.

Beginning on December 31, 2022, credit losses are recognized through

an allowance account.

See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional information.

with our investment advisors, frequently review our investment portfolio for declines in fair value that could be indicative of credit

The available-for-sale impairment model requires an estimate of expected credit losses only when the fair value of the available-for-sale

fixed income security is below its amortized cost basis.

The Company considers a number of factors when determining if an allowance for

credit losses is necessary including payment and default history, credit spreads, credit ratings and rating actions, and probability of

The Company determines the credit loss component of fixed income securities by utilizing discounted cash flow modeling to determine

the present value of the security and comparing the present value with the amortized cost of the security.

If the amortized cost is greater

than the present value of the expected cash flows, the difference is considered a credit loss and recognized as an impairment loss in

net realized investment gains (losses).

Credit impairments are recognized as an allowance on the Consolidated Balance Sheet with a corresponding

adjustment to earnings.

For fixed income securities that the Company does not intend to

sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the

Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss

component in net realized investment gains (losses).

The impairment related to all other factors (non-credit factors) is reported in other

comprehensive income.

The allowance is adjusted for any additional credit losses and subsequent recoveries.

Upon recognizing a credit

loss, the cost basis is not adjusted.

For fixed income securities the Company intends to sell or for which

it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment

is included in net investment gains (losses).

The new cost basis of the investment is the previous amortized cost basis less the impairment

recognized in net investment gains (losses).

The new cost basis is not adjusted for any subsequent recoveries in fair value.

The Company reports investment income accrued

separately from fixed maturity investments, available for sale, and has elected not to measure an allowance for credit losses for investment

income accrued.

Investment income accrued is written off through net realized investment gains (losses) at the time the issuer of the

bond defaults or is expected to default on payments.

For more information on investment valuation measurements, see Part

II, Item 8, Note 6 “Fair Value Measurements”.

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.

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.

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.

The period of risk for our crop insurance program, which is comprised

of 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).

Premiums and Agents’ Balances

Premiums and agents’ balances receivable include both direct

and agent billed premiums as well as crop notes receivable related to the multi-peril crop and crop hail insurance.

Accounts billed directly to the policyholder are provided grace

payment and cancellation notice periods per state insurance regulations.

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

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.

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.

Beginning on December 31, 2022, the premium and agents’ receivable

balances are reported net of an allowance for expected credit losses.

See Part II, Item 8, Note 2 “Recent Accounting Pronouncements”

for additional information.

We recognized $ 425 of credit losses for these receivables at the time of adoption of CECL.

Therefore, there

was no beginning balance of credit losses as of January 1, 2022, and all activity was the result of adoption.

As a result of the transition

from the previous accounting treatment, we did not record a cumulative effect adjustment to retained earnings at the time of adoption.

Given the nature of these receivables, the Company has elected to use a loss-rate method to determine the expected credit losses.

allowance is based upon the Company’s ongoing review of amounts outstanding and write-offs.

Management may also evaluate current

economic conditions and reasonable/supportable forecasts to adjust this calculation as deemed necessary.

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 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.

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.

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.

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.

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 data, consistency in the recording of claims, payment and

case reserving methodologies, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the

quality and characteristics of business written within a given line of business, and consistency in reinsurance coverage and collectability

of reinsured losses, among other items.

To the extent we determine that underlying factors impacting our assumptions have changed, we

attempt to make appropriate adjustments for such changes in our reserves.

Accordingly, our ultimate liability for unpaid losses and loss

adjustment expenses will likely differ from the amount recorded.

Income Taxes :

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

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

With the exception of Battle Creek, which files a stand-alone federal

income tax return, we 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.

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.

income taxes are reported along with federal income taxes as income tax expense (benefit).

The Company did not have any material uncertain tax positions as

of December 31, 2022 and 2021.

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, 2022 and 2021.

We account for deferred income taxes using the asset and liability

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”.

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.

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.

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.

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 reinsurers, either

on an automatic basis under general reinsurance contracts known as treaties or through facultative contracts placed on substantial individual

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

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

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

The ceding of insurance does not legally discharge

us from primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation.

Amounts recoverable from reinsurers are estimated

in a manner consistent with the associated claim liability.

Beginning on December 31, 2022, credit losses are recognized through an allowance

account developed using the CECL model.

See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional information.

The allowance is based upon the Company’s ongoing review of amounts outstanding, length of collection periods, changes in reinsurer

credit standing, disputes, applicable coverage defenses and other relevant factors.

Management has concluded that it is not necessary

to record an allowance for expected credit losses related to reinsurance recoverables.

All of our significant reinsurance partners are

rated “A-” (Excellent) or better by AM Best, and there is no history of write-offs.

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.

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

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.

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.

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, 2022, 2021, or 2020.

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 diversification of business written by 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 diversification of business written by 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.

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.

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.

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

Westminster is a property and casualty insurance company specializing in multi-peril commercial insurance in 11 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

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.

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:

Net income attributable to NI Holdings, Inc.

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

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.

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

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, and the final installment was paid in December 2022 with no adjustments from

the originally anticipated amount.

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:

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Other investments

Premiums and agents'

balances receivable

Premiums and agents' balances receivable

Reinsurance recoverables on losses

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Total identifiable net assets

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 .

These were 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.

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.

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’

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.

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.

The amortized cost and estimated fair value of fixed income securities as of December 31, 2021 and 2020 were as follows:

The amortized cost and estimated fair value of

fixed income securities as of December 31, 2022 and 2021, were as follows:

December 31, 2022

Cost or Amortized

Gross Unrealized

Allowance for

Credit Losses

Fixed income securities:

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December 31, 2021

Cost or Amortized

Gross Unrealized

Allowance for

Credit Losses

Fixed income securities:

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Total fixed income securities

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.

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, 2022

18 unchanged sentences

Total fixed income securities

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:

Fixed income securities with a fair value of $ 6,613 at December 31,

2022, and $ 7,977 at December 31, 2021, were deposited with various state regulatory agencies as required by law.

The Company has not pledged

any assets to secure any obligations.

The investment category and duration of the Company’s

gross unrealized losses on fixed income securities are shown below.

Investments with unrealized losses are categorized with a duration

of greater than 12 months when all positions of a security have continually been in a loss position for at least 12 months.

December 31, 2022

20 unchanged sentences

Asset-backed securities

Redeemable preferred stocks

Total fixed income securities

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.

The Company did not record any other-than-temporary impairments in 2021, 2020, or 2019.

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.

We, along with our investment advisors, frequently

review our investment portfolio for declines in fair value that could be indicative of credit losses.

Beginning on December 31, 2022,

credit losses are recognized through an allowance account.

The Company considers a number of factors when determining if an allowance

for credit losses is necessary including payment and default history, credit spreads, credit ratings and rating actions, and probability

The Company determines the credit loss component of fixed maturity investments by utilizing discounted cash flow modeling

to determine the present value of the security and comparing the present value with the amortized cost of the security.

We did not recognize

any credit losses for fixed income securities at the time of adoption.

Therefore, there was no beginning balance of credit losses as

of January 1, 2022, or activity during the year ended December 31, 2022.

See Item II, Part 8, Note 3 “Summary of Significant Accounting

Policies” for additional information.

Net investment income consisted of the following:

6 unchanged sentences

Net investment income

Net realized capital gain on investments consisted of the following:

Net investment gains (losses) consisted of the following:

Year Ended December 31,

3 unchanged sentences

Total gross realized gains

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

Gross realized losses, excluding credit impairment losses:

Fixed income securities

Equity securities

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

Net realized gain on investments

Total gross realized losses, excluding credit impairment losses

Net realized gains

Change in net unrealized gain on equity securities

Net capital gain on investments

Net investment gains (losses)

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.

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

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.

These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual

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:

2 unchanged sentences

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.

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;

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.

our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements,

in accordance with the fair value hierarchy.

Fair value measurements for assets where there exists limited or no observable market data

and, therefore, are based primarily upon the

estimates of the Company or other third-parties, are often calculated based

on the characteristics of the asset, the economic and competitive environment, and other such factors.

Management uses its best judgment

in estimating the fair value of the Company’s financial instruments;

however, there are inherent 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.

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.

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 consolidated 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

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.

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 3 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.

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:

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, 2022, 2021, or 2020.

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 1 inputs, which use the market-approach valuation technique.

The valuation of our fixed income securities

generally incorporates significant Level 2 inputs using the market and income approach techniques.

We may assign a lower level to inputs

typically considered to be Level 2 based on our assessment of liquidity and relative level of uncertainty surrounding inputs.

no assets or liabilities classified at Level 3 at December 31, 2022 or 2021.

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, 2022

6 unchanged sentences

Asset-backed securities

Redeemable preferred stocks

Redeemable preferred stock

Total fixed income securities

Equity securities:

Basic materials

Communications

Consumer, cyclical

Consumer, non-cyclical

Perpetual preferred stocks

Non-redeemable preferred stock

Total equity securities

Cash and cash equivalents

Cash equivalents

Total assets at fair value

10 unchanged sentences

Equity securities:

Basic materials

Communications

Consumer, cyclical

Consumer, non-cyclical

Non-redeemable preferred stocks

Total equity securities

Cash equivalents

Cash and cash equivalents

Total assets at fair value

There were no liabilities measured at fair value on a recurring basis at December 31, 2021 or 2020.

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”

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

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

The Company’s consolidated financial statements

reflect the effects of assumed and ceded reinsurance transactions.

Assumed reinsurance refers to the acceptance of certain insurance

risks that other insurance companies have underwritten.

Ceded reinsurance involves transferring certain insurance risks (along with the

related written and earned premiums) the Company has underwritten to other insurance companies who agree to share these risks.

purpose of these agreements is to protect the Company, at a cost, from losses in excess of the amount it is prepared to accept and to

protect the Company’s capital.

Our ceded reinsurance is placed either on an automatic basis under general reinsurance contracts

known as treaties or through facultative contracts placed on substantial individual risks.

These contracts do not relieve the Company

from its obligations to policyholders.

During the year ended December 31, 2022, the Company

maintained property catastrophe reinsurance protection covering $125,000 in excess of a $15,000 retention.

Additionally, per risk excess

of loss treaties provided coverage of $4,000 in excess of $1,000 for property risks and $11,000 in excess of $1,000 for casualty risks,

with facultative contracts in place to provide coverage up to $20,000 in excess of $5,000 per property.

Aggregate stop loss reinsurance

agreements were placed for both crop hail and multi-peril crop coverage.

The crop hail aggregate attached at a 100% net loss ratio providing

50 points of cover.

The multi-peril crop aggregate attached at a 105% net loss ratio providing 45 points of cover.

In addition to the

aggregate covers, underlying multi-peril crop reinsurance was provided through the FCIC.

The Company experienced multiple catastrophe events

during 2022 which have resulted in estimated reinsurance recoveries of $ 5,372 as of December 31, 2022.

During the years ended December 31, 2021 and 2020,

the Company maintained property catastrophe reinsurance protection covering $ 117,000 and $ 97,000 , respectively, in excess of a $ 10,000

The remaining significant components of the Company’s reinsurance program were consistent for 2021 and 2020.

excess of loss treaties provided coverage of $ 4,300 in excess of $ 700 for property risks and $ 11,300 in excess of $ 700 for casualty risks,

with facultative contracts in place to provide coverage up to $ 20,000 in excess of $ 5,000 per property.

Aggregate stop loss reinsurance

agreements were placed for both crop hail and multi-peril crop coverage.

The crop hail aggregate attached at a 100% net loss ratio providing

50 points of cover.

The multi-peril crop aggregate attached at a 105% net loss ratio providing 45 points of cover.

In addition to the

aggregate covers, underlying multi-peril crop reinsurance was provided through the FCIC.

The Company experienced one catastrophe event

during 2021 in excess of the retention level, resulting in a reinsurance recovery of $ 5,985 , and did not experience any catastrophe events

during 2020 which exceeded the retention level.

For 2023, the Company’s catastrophe retention

limit increased to $ 133,000 in excess of a $ 20,000 retention, while there were no changes made to limit, retention, or attachment point

in our other reinsurance contracts.

The Company actively monitors and evaluates the

financial condition of the reinsurers and develops estimates of the uncollectible amounts due from reinsurers.

Beginning on December 31,

2022, credit losses are recognized through an allowance account developed using the CECL model.

See Part II, Item 8, Note 2 “Recent

Accounting Pronouncements” for additional information.

Credit loss estimates are made based on periodic evaluation of balances due

from reinsurers, changes in reinsurer credit standing, 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 by entering into reinsurance arrangements only with reinsurers that have strong credit ratings and statutory

surplus above certain levels.

At December 31, 2022, management has concluded that it is not necessary to record an allowance for expected

credit losses related to reinsurance recoverables.

All of our significant reinsurance partners are rated “A-” (Excellent)

or better by AM Best, and there is no history of write-offs.

A reconciliation of direct to net premiums on

both a written and an earned basis is as follows:

Year Ended December 31,

Premiums Written

Premiums Earned

Premiums Written

Premiums Earned

Premiums Written

Premiums Earned

Direct premium

1 unchanged sentence

Ceded premium

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

A reconciliation of direct to net losses and loss

adjustment expenses is as follows:

Year Ended December 31,

3 unchanged sentences

Net losses and loss adjustment expenses

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.

If 100 % of our ceded reinsurance was cancelled

as of December 31, 2022, no ceded commissions would need to be returned to the reinsurers.

Reinsurance contracts are typically effective

from January 1 through December 31 each year.

Deferred Policy Acquisition Costs

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.

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:

table below shows the deferred policy acquisition costs and asset reconciliation:

Year Ended December 31,

4 unchanged sentences

Unpaid Losses and Loss Adjustment Expenses

Activity in the liability for unpaid losses and LAE is summarized as follows:

Activity in the liability for unpaid losses and

loss adjustment expenses is summarized as follows:

Year Ended December 31,

Balance at beginning of year:

Liability for unpaid losses and LAE

Balance, beginning of year:

Liability for unpaid losses and loss adjustment expenses

Reinsurance recoverables on losses

Net balance at beginning of year

Acquired unpaid losses and LAE related to:

Net balance, beginning of year

Acquired unpaid losses and loss adjustment expenses related to:

Total acquired

2 unchanged sentences

Paid related to:

Balance at end of year:

Liability for unpaid losses and LAE

Balance, end of year:

Liability for unpaid losses and loss adjustment expenses

Reinsurance recoverables on losses

Net balance at end of year

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.

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

Net balance, end of year

During the year ended December 31, 2022, the Company’s

incurred reported losses and loss adjustment expenses included $ 1,149 of net unfavorable development on prior accident years, primarily

attributable to unfavorable development for the Westminster commercial business partially offset by favorable development for Battle Creek

and Nodak Insurance.

During the year ended December 31, 2021, the Company’s incurred reported losses and loss adjustment expenses

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 loss adjustment expenses included $ 3,292 of net unfavorable development

on prior accident years, primarily attributable to our 2019 multi-peril crop business.

Changes in unpaid losses and loss adjustment expense

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

As additional information becomes known regarding

individual claims, original estimates are increased or decreased accordingly.

The tables on the following pages present information,

organized by our primary operating segments, about incurred and paid claims development as of December 31, 2022, 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).

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, 2013 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.

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2022

Accident Year

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

Plus Expected

(in thousands, except claim

(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

All outstanding liabilities prior to 2012, net of reinsurance

1 unchanged sentence

(1) Prior years unaudited

Non-Standard Auto

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2022

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

(in thousands,

(in thousands, except claim

(1) Prior years unaudited

Auto (Primero)

Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

3 unchanged sentences

(1) Prior years unaudited

Non-Standard Auto (Direct Auto)

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2022

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

(in thousands, except claim counts)

(in thousands, except claim

(1) Prior years unaudited

5 unchanged sentences

(1) Prior years unaudited

Home and Farm

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2022

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

Plus Expected

(in thousands, except claim

(1) Prior years unaudited

years unaudited

Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

2 unchanged sentences

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

(1) Prior years unaudited

years unaudited

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2022

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

Plus Expected

(in thousands, except claim

5 unchanged sentences

(1) Prior years unaudited

Commercial (Westminster)

(Westminster)

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2022

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

(in thousands, except claim

6 unchanged sentences

(1) Prior years unaudited

Commercial (non-Westminster)

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

1 unchanged sentence

At December 31, 2022

Total IBNR Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

(in thousands, except claim

(1) Prior years unaudited

(non-Westminster)

Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

2 unchanged sentences

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

(1) Prior years unaudited

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

years unaudited

The following table presents a reconciliation

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

Balance Sheet:

December 31, 2022

16 unchanged sentences

Net liability for unpaid losses and loss adjustment expenses

The following table presents required supplementary information about average historical claims duration as of December 31, 2021:

The following table presents required supplementary information

about average historical claims duration as of December 31, 2022:

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

Private Passenger Auto

Non-Standard Auto (Primero)

Non-Standard Auto (Direct Auto)

Non-Standard Auto

(Direct Auto)

Home and Farm

3 unchanged sentences

Property and equipment consisted of the following:

Estimated Useful

Building and improvements

10 – 43 years

Electronic data processing equipment

2 unchanged sentences

Total property and equipment, net

Depreciation expense was $ 694 , $ 709 , and $ 538 during the years ended December 31, 2021, 2020 and 2019, respectively.

Depreciation expense was $ 708 , $ 694 , and $ 709

during the years ended December 31, 2022, 2021, and 2020, respectively.

Goodwill and Other Intangibles

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

The following table presents the carrying

amount of the Company’s goodwill by segment:

Non-standard auto from acquisition of Primero

1 unchanged sentence

Other Intangible Assets

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

The following table presents the carrying

amount of the Company’s other intangible assets:

December 31, 2022

3 unchanged sentences

Total subject to amortization

Not subject to amortization –

state insurance licenses

Not subject to amortization – state insurance licenses

December 31, 2021

3 unchanged sentences

Total subject to amortization

Not subject to amortization –

state insurance licenses

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.

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:

Not subject to amortization – state insurance licenses

Amortization expense was $ 472 , $ 472 , and $ 5,224

during the years ended December 31, 2022, 2021, and 2020, respectively.

The VOBA intangible asset of $ 4,750 acquired in the Westminster

transaction was fully amortized during 2020.

Other intangible assets that have finite lives, including

trade names and distribution networks, are amortized over their useful lives.

As of December 31, 2022, the estimated amortization of other

intangible assets with finite lives for the next five years in the period ended December 31, 2027, and thereafter is as follows:

Year ending December 31,

2 unchanged sentences

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:

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, 2022, 2021, and 2020, the pooling share

percentages by insurance company were:

Pool Percentage

6 unchanged sentences

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.

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.

Nodak Insurance was 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 $ 1,453 , $ 1,369 , and $ 1,370 during the years ended December 31, 2022, 2021, and 2020, respectively.

Royalty amounts payable of

$ 119 and $ 113 were accrued as a liability to the NDFB at December 31, 2022 and 2021, respectively.

During 2020, Nodak Insurance paid $ 1,129

of membership dues on behalf of its NDFB members in North Dakota in response to the COVID-19 pandemic.

State insurance laws require our insurance

subsidiaries to maintain certain minimum capital and surplus amounts on a statutory basis.

Our insurance subsidiaries are subject to regulations

that restrict the payment of dividends from statutory surplus and may require prior approval from their domiciliary insurance regulatory

Our insurance subsidiaries are also subject to risk-based capital

requirements that may further affect their ability to pay

Our insurance subsidiaries statutory capital and surplus at December 31, 2022, exceeded the amount of statutory capital and

surplus necessary to satisfy risk-based capital requirements by a significant margin.

There is no amount available for payment of dividends from Nodak

Insurance to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss of Nodak

Insurance for the year ended December 31, 2022.

Prior to its payment of any dividend, Nodak Insurance will be required to provide notice

of the dividend to the North Dakota Insurance Department.

This notice must be provided to the North Dakota Insurance Department 30 days

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

The North Dakota Insurance

Department has the power to limit or prohibit dividend payments if an insurance company is in violation of any law or regulation.

restrictions or any subsequently imposed restrictions may affect our future liquidity.

The Nodak Insurance Board of Directors declared

and paid dividends of $ 3,000 and $ 6,000 to NI Holdings during the years ended December 31, 2022 and 2020, respectively.

No dividends were

declared or paid by Nodak Insurance during the year ended December 31, 2021.

Direct Auto re-domesticated from Illinois to North Dakota during

2021, and is now subject to the same dividend restrictions as Nodak Insurance.

There is no amount available for payment of dividends from

Direct Auto to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss of

Direct Auto for the year ended December 31, 2022.

No dividends were declared or paid by Direct Auto during the years ended December 31,

2022, 2021, or 2020.

Westminster re-domesticated from Maryland to North Dakota during

2021, and is now subject to the same dividend restrictions as Nodak Insurance.

There is no amount available for payment of dividends

from Westminster to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss

of Westminster for the year ended December 31, 2022.

No dividends were declared or paid by Westminster during the years ended December

31, 2021 or 2020.

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:

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:

Cash and cash equivalents

Premiums and agents’

balances receivable

Premiums and agents’ balances receivable

Deferred policy acquisition costs

Pooling receivable (1)

Reinsurance recoverables on losses (2)

Accrued investment income

Income tax recoverable

Deferred income taxes

Property and equipment

Unpaid losses and LAE

Unpaid losses and loss adjustment expenses

Unearned premiums

10 unchanged sentences

Net premiums earned

Fee and other income

Net investment income

Net capital gain on investments

Fee and other income (expense)

Net investment income (loss)

Net investment gains (losses)

Total revenues

4 unchanged sentences

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

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.

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.

American West and Battle Creek have no employees.

The Company reported expenses related to

the 401(k) plans totaling $ 693 , $ 722 , and $ 651 during the years ended December 31, 2022, 2021, and 2020, 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 $ 672 , $ 697 , and $ 900 during years ended

December 31, 2022, 2021, and 2020, 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 $ 325 , $ 914 , and $ 308 during the years

ended December 31, 2022, 2021, and 2020, 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.

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.

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.

The employees of Primero, Direct Auto, and Westminster do not

participate in the ESOP.

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

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.

basis of those shares was set at $ 10.00 per share as part of the IPO.

As shares are released from the ESOP suspense account, the contra-equity

account is credited, which reduces the impact of the contra-equity account on the Company’s Consolidated Balance Sheet over time.

The Company records compensation expense related to the shares released, equal to the number of shares released from the suspense account

multiplied by the average market value of the Company’s stock during the period.

The Company recognized compensation expense

of $ 380 , $ 460 , and $ 373 during the years ended December 31, 2022, 2021, and 2020, respectively, related to the ESOP.

Through December 31, 2022, the Company had released

and allocated 145,890 ESOP shares to participants, with a remainder of 94,110 ESOP shares in suspense at December 31, 2022.

Company’s year-end market price of $ 13.27 per share, the fair value of the unearned ESOP shares was $ 1,249 at December 31, 2022.

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 %.

Nodak Insurance has a $ 5,000 line of credit with

Wells Fargo Bank, N.A.

The terms of the line of credit include a floating interest rate of the bank’s Prime Rate with a floor rate

There were no outstanding amounts during the years ended December 31, 2022, 2021, or 2020.

This line of credit is scheduled to expire on January 30, 2023 .

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:

This line of credit is scheduled

to expire on May 31, 2023 .

The components of our provision for income tax

expense (benefit) were as follows:

Year Ended December 31,

3 unchanged sentences

Total provision for income taxes

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

The provision for income taxes differs from the

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

Year Ended December 31,

Income before income taxes

Income (loss) before income taxes

Expected provision for federal income taxes at 21%

5 unchanged sentences

Total provision for income taxes

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.

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:

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 $ 694 , $ 1,008 , and $ 931 at December

31, 2022, 2021, and 2020, respectively.

The income tax effects of temporary differences

that give rise to significant portions of our deferred income tax assets and deferred income tax liabilities at December 31, 2022 and

2021 were as follows:

Deferred income tax assets:

Unearned premium

Unpaid losses and LAE

Unpaid losses and loss adjustment expenses

Net unrealized losses on investments

Net operating loss carryovers

4 unchanged sentences

Total deferred income tax liabilities

Net deferred income tax liability

Net deferred income tax asset (liability)

Valuation allowance

Deferred income tax liability, net

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.

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.

Deferred income tax asset (liability), net

At December 31, 2022 and 2021, we had no unrecognized

tax benefits, no accrued interest and penalties, and no significant uncertain tax positions.

No interest and penalties were recognized

during the years ended December 31, 2022, 2021, or 2020.

At December 31, 2022 and 2021, 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 $ 3,963 and $ 3,215 at December 31, 2022 and 2021, respectively.

net operating loss carryforward began expiring in 2021 and will continue through 2032.

Westminster, which became part of the Company’s

consolidated federal income tax return beginning in 2020, had $ 1,270 and $ 2,122 of net operating loss carryover at December 31, 2022

and 2021, respectively.

This net operating loss carryforward expires in 2023.

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:

Nodak Insurance leases a

facility in Fargo, North Dakota under a non-cancellable operating lease expiring in 2024.

Effective for the year ended December 31, 2022,

the Company adopted the updated guidance for leases.

See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional

Under the new guidance, lease expense for these operating leases is recognized on a straight-line basis over the term of

the lease, and a right-of-use asset and lease liability is recognized as part of other assets and other liabilities, respectively, in

the Consolidated Balance Sheet at the origination of the lease.

The Company currently does not have leases that include options to purchase

or provisions that would automatically transfer ownership of the leased property to the Company.

The Company determines whether a contract is or

contains a lease at the inception of the contract.

A contract will be deemed to be or contain a lease if the contract conveys the right

to control and directs the use of identified property or equipment for a period of time in exchange for consideration.

The Company generally

must also have the right to obtain substantially all of the economic benefits from the use of the property and equipment.

Operating lease

assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the floating

interest rate on our Line of Credit with Wells Fargo Bank, N.A.

at the lease commencement date, as rates are not implicitly stated in

There were expenses of $ 391 , $ 250 , and $ 370 related

to these leases during the years ended December 31, 2022, 2021, and 2020, respectively.

Additional information regarding the Company’s

leases are as follows:

Year Ended December 31, 2022

Operating lease cost

Other information on operating leases

Operating cash outflow from operating leases

Right-of-use assets obtained in exchange for new lease liabilities

Weighted average discount rate

Weighted average remaining lease term in years

The following table presents the contractual maturities of the Company’s

lease liabilities:

Year ending December 31,

Estimated Future

Minimum Commitments

Lease Liability

Total undiscounted lease payments

present value adjustment

Operating lease liability at December 31, 2022

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.

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

We have been named as a defendant in various

lawsuits relating to our insurance operations.

Contingent liabilities arising from litigation, income taxes, and other matters are not

considered to be material to our financial position.

Common and Preferred Stock

Changes in the number of common stock shares outstanding

were as follows:

Year Ended December 31,

4 unchanged sentences

Shares outstanding, ending

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.

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.

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 authorization for the repurchase of up to approximately $ 10,000 of the Company’s outstanding common stock.

During the year ended

December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $ 7,238 under this authorization.

During the nine

months ended September 30, 2021, we repurchased an additional 144,110 shares of our common stock for $ 2,762 to close out this authorization.

On August 11, 2021, our Board of Directors approved

an 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 year ended December 31, 2022, we completed the repurchase of 214,937 shares of our common stock for $ 3,446 to close out this authorization.

On May 9, 2022, our Board of Directors approved

an authorization for the repurchase of up to approximately $ 10,000 of the Company’s outstanding common stock.

During the year ended

December 31, 2022, we completed the repurchase of 54,223 shares of our common stock for $ 734 under this authorization.

The cost of this treasury stock is a reduction

of shareholders’ equity within our Consolidated Balance Sheets.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction

Act (“IRA”) which, among other changes, created a new corporate alternative minimum tax (“AMT”) based on adjusted

financial statement income and imposes a 1 % excise tax on corporate stock repurchases.

The effective date of these provisions is January

The Company is not expected to be subject to the AMT based on its reported GAAP earnings for the past three years.

While we periodically

repurchase our stock, it is expected that any excise tax incurred on corporate stock repurchases will be recognized as part of the cost

basis of the treasury stock acquired and not reported as part of income tax or other expense.

Based on our evaluation, the Company does

not expect this legislation to have a significant impact on our financial position, results of operations, and cash flows.

Preferred Stock

The Company’s Articles of Incorporation

provide authority to issue up to five million shares of preferred stock.

No preferred shares are issued or outstanding.

Share-Based Compensation

At its 2020 Annual Shareholders’ Meeting,

the NI Holdings, Inc.

2020 Stock and Incentive Plan (the “Plan”) was approved by shareholders.

The purpose of the Plan is

to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants,

independent contractors, advisors, and non-employee directors capable of assuring the future success of the Company, to offer such persons

incentives to put forth maximum efforts for the success of the Company’s business and to afford such persons an opportunity to acquire

an ownership interest in the Company, thereby aligning the interests of such persons with the Company’s shareholders.

The Plan provides for the grant of nonqualified

stock options, incentive stock options, restricted stock units (“RSUs”), stock appreciation rights, dividend equivalents,

and performance share units (“PSUs”) to employees, officers, consultants, advisors, non-employee directors, and independent

contractors designated by the Compensation Committee of the Board of Directors (the “Compensation Committee”).

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

The total aggregate number of shares of common

stock that may be issued under the Plan shall not exceed 1,000,000 shares, subject to adjustments as provided in the Plan.

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.

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.

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.

The Company recognizes stock-based compensation

costs for RSUs based on the grant date fair value.

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

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:

No forfeitures are currently

A summary of the Company’s outstanding and

unearned RSUs is presented below:

Weighted-Average

9 unchanged sentences

Units outstanding and unearned at December 31, 2022

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

The following table shows the impact of RSU activity

to the Company’s financial results:

Year Ended December 31,

3 unchanged sentences

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

At December 31, 2021, there was $ 718 of unrecognized compensation cost related to outstanding RSUs.

At December 31, 2022, there was $ 816 of unrecognized

compensation cost related to outstanding RSUs.

That cost is expected to be recognized over a weighted-average period of 1.91 years.

Performance Stock Units

The Compensation Committee has awarded PSUs to select executives.

PSUs are promises to issue actual shares of common stock at the end of a vesting period, if certain performance conditions are met.

The PSUs granted to employees under the Plan were based on salary and include a three-year book value cumulative growth target with threshold and stretch goals.

They will vest on the third anniversary of the grant date, subject to the participant’s continuous employment through the vesting date and the level of performance achieved.

Dividend equivalents on PSUs are accrued and paid in cash at the end of the performance period in accordance with the level of performance achieved, but are subject to forfeiture until the underlying shares become vested.

Performance Share 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

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

Weighted-Average Grant-Date

Units outstanding and unearned at January 1, 2019

The Company recognizes stock-based compensation

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

Estimated forfeitures are included in the

determination of compensation costs.

The current cost estimates represent the Company’s forecasted performance against cumulative

growth targets.

A summary of the Company’s outstanding PSUs

is presented below:

Weighted-Average

Units outstanding at January 1, 2020

PSUs granted during 2020 (at target)

Units outstanding and unearned at December 31, 2019

Units outstanding at December 31, 2020

PSUs granted during 2021 (at target)

Units outstanding and unearned at December 31, 2020

PSUs earned during 2021

Performance adjustment (1)

Units outstanding at December 31, 2021

PSUs granted during 2022 (at target)

1 unchanged sentence

Performance adjustment (1)

Units outstanding and unearned at December 31, 2021

(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:

Units outstanding at December 31, 2022

(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,

PSU compensation expense

Income tax benefit

PSU compensation expense, net of income taxes

PSU compensation expense (benefit)

Income tax expense (benefit)

PSU compensation expense (benefit), net of income taxes

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

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

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

At December 31, 2021, there was $ 1,125 of unrecognized compensation cost related to outstanding PSUs.

The cost estimates for PSU grants represent initial

target awards until the Company can reasonably forecast the financial performance of each PSU award grant.

As of December 31, 2022, the

previously recognized compensation expense related to the PSU awards granted during 2020 and 2021 was eliminated due to the Company’s

expectation that the threshold performance goal will not be met, and the compensation expense related to the PSU awards granted during

2022 was decreased to the threshold level due to Company’s expectations that the target goal will likely not be achieved.

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

At December 31, 2022, there was $ 383 of unrecognized

compensation cost related to outstanding PSUs.

That cost is expected to be recognized over a weighted-average period of 2.16 years.

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.

We have six reportable operating segments, which

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

and all other (which primarily consists of assumed reinsurance and our excess liability business).

We operate only in the U.S., and no

single customer or agent provides 10 percent or more of our revenues.

The following tables provide available information of these segments

for the years ended December 31, 2022, 2021, and 2020.

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’

The remaining

fee and other income amounts are not allocated to any segment.

We do not assign or allocate all line items in

our Consolidated Statement of Operations or Consolidated Balance Sheet to our operating segments.

Those line items include investment

income, net investment gains (losses), other income excluding non-standard auto insurance fees, and income tax expense (benefit) 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.

Year Ended December 31, 2022

Private Passenger Auto

Non-Standard Auto

Home and Farm

Direct premiums earned

2 unchanged sentences

Net premiums earned

Direct losses and LAE

Assumed losses and LAE

Ceded losses and LAE

Net losses and LAE

Direct losses and loss adjustment expenses

Assumed losses and loss adjustment expenses

Ceded losses and loss adjustment expenses

Net losses and loss adjustment expenses

Underwriting and general expenses

2 unchanged sentences

Net investment income

Net capital gain on investments

Income before income taxes

Net loss attributable to non-controlling interest

Net income attributable to NI Holdings, Inc.

Net investment gains (losses)

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) attributable to non-controlling interest

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

Operating Ratios:

Loss and LAE ratio

Loss and loss adjustment expenses ratio

Expense ratio

1 unchanged sentence

Balances at December 31, 2022:

Premiums and agents’

balances receivable

Premiums and agents’ balances receivable

Deferred policy acquisition costs

Reinsurance recoverables

Reinsurance recoverables on losses

Goodwill and other intangibles

Unpaid losses and LAE

Receivable from Federal Crop Insurance Corporation

Unpaid losses and loss adjustment expenses

Unearned premiums

Payable to Federal Crop Insurance Corporation

Year Ended December 31, 2021

Private Passenger Auto

Non-Standard Auto

Home and Farm

Direct premiums earned

2 unchanged sentences

Net premiums earned

Direct losses and LAE

Assumed losses and LAE

Ceded losses and LAE

Net losses and LAE

Direct losses and loss adjustment expenses

Assumed losses and loss adjustment expenses

Ceded losses and loss adjustment expenses

Net losses and loss adjustment expenses

Underwriting and general expenses

2 unchanged sentences

Net investment income

Net capital gain on investments

Income before income taxes

Net income attributable to non-controlling interest

Net income attributable to NI Holdings, Inc.

Net investment gains (losses)

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) attributable to non-controlling interest

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

Operating Ratios:

Loss and LAE ratio

Loss and loss adjustment expenses ratio

Expense ratio

1 unchanged sentence

Balances at December 31, 2021:

Premiums and agents’

balances receivable

Premiums and agents’ balances receivable

Deferred policy acquisition costs

Reinsurance recoverables

Receivable from Federal Crop Insurance Corporation

Reinsurance recoverables on losses

Goodwill and other intangibles

Unpaid losses and LAE

Unpaid losses and loss adjustment expenses

Unearned premiums

Payable to Federal Crop Insurance Corporation

Year Ended December 31, 2020

Private Passenger Auto

Non-Standard Auto

Home and Farm

Direct premiums earned

2 unchanged sentences

Net premiums earned

Direct losses and LAE

Assumed losses and LAE

Ceded losses and LAE

Net losses and LAE

Direct losses and loss adjustment expenses

Assumed losses and loss adjustment expenses

Ceded losses and loss adjustment expenses

Net losses and loss adjustment expenses

Underwriting and general expenses

2 unchanged sentences

Net investment income

Net capital gain on investments

Income before income taxes

Net income attributable to non-controlling interest

Net income attributable to NI Holdings, Inc.

Net investment gains (losses)

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) attributable to non-controlling interest

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

Operating Ratios:

Loss and LAE ratio

Loss and loss adjustment expenses ratio

Expense ratio

1 unchanged sentence

Balances at December 31, 2020:

Premiums and agents’

balances receivable

Premiums and agents’ balances receivable

Deferred policy acquisition costs

2 unchanged sentences

Goodwill and other intangibles

Unpaid losses and LAE

Unpaid losses and loss adjustment expenses

Unearned premiums

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:

Statutory Net Income (Loss), 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, 2022, 2021, and 2020:

Nodak Insurance:

1 unchanged sentence

Statutory unassigned surplus

Statutory net income

Statutory net income (loss)

American West:

3 unchanged sentences

Statutory capital and surplus

Statutory unassigned surplus (deficit)

Statutory unassigned surplus

Statutory net income (loss)

5 unchanged sentences

Statutory unassigned surplus

Statutory net income

Statutory net income (loss)

Statutory capital and surplus

Statutory unassigned surplus

Statutory net income

State insurance laws require our insurance subsidiaries to maintain certain minimum capital and surplus amounts on a statutory basis.

Our insurance subsidiaries are also subject to 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.

Statutory net income (loss)

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 requirements that may further affect their ability to pay dividends.

Our insurance subsidiaries statutory capital and surplus at December 31, 2022 and 2021 exceeded the amount of statutory capital and surplus

necessary to satisfy risk-based capital requirements by a significant margin.

Amounts available for distribution in 2023 to

Nodak Insurance as dividends from its insurance subsidiaries without prior approval of insurance regulatory authorities are $ 0 from American

West and Primero.

No dividends were paid to Nodak Insurance from either entity during the years ended December 31, 2022, 2021, or 2020.

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.

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.

No dividends were declared or paid by Westminster during the years ended December 31, 2021 or 2020.

There is no amount available for payment of dividends from Nodak

Insurance to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss of Nodak

Insurance for the year ended December 31, 2022.

Prior to its payment of any dividend, Nodak Insurance will be required to provide notice

of the dividend to the North Dakota Insurance Department.

This notice must be provided to the North Dakota Insurance Department 30 days

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

The North Dakota Insurance

Department has the power to limit or prohibit dividend payments if an insurance company is in violation of any law or regulation.

restrictions or any subsequently imposed restrictions may affect our future liquidity.

The Nodak Insurance Board of Directors declared

and paid dividends of $ 3,000 and $ 6,000 to NI Holdings during the years ended December 31, 2022 and 2020, respectively.

No dividends were

declared or paid by Nodak Insurance during the year ended December 31, 2021.

Direct Auto re-domesticated from Illinois to North Dakota during

2021, and is now subject to the same dividend restrictions as Nodak Insurance.

There is no amount available for payment of dividends from

Direct Auto to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss of

Direct Auto for the year ended December 31, 2022.

No dividends were declared or paid by Direct Auto during the years ended December 31,

2022, 2021, or 2020.

Westminster re-domesticated from Maryland to North Dakota during

2021, and is now subject to the same dividend restrictions as Nodak Insurance.

There is no amount available for payment of dividends

from Westminster to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss

of Westminster for the year ended December 31, 2022.

No dividends were declared or paid by Westminster during the years ended December

31, 2022, 2021 or 2020.

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.

There have been no changes or disagreements with

accountants on accounting and financial disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data