NI Holdings, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37973 NI HOLDINGS, INC. (Exact name of registrant as specified in its charter) North Dakota 81-2683619 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1101 First Avenue North Fargo , North Dakota 58102 (Address of principal executive offices) (Zip Code) (701) 298-4200 Registrant’s telephone number, including area code Not applicable Former name, former address, and former fiscal year, if changed since last report Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.01 par value per share NODK Nasdaq Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes No ☐ Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒ The number of shares of Registrant’s common stock outstanding on July 31, 2023 was 20,862,795 . No preferred shares are issued or outstanding. i TABLE OF CONTENTS FORWARD-LOOKING STATEMENTS 1 Part I. - FINANCIAL INFORMATION 3 Item 1. - Financial Statements 3 Consolidated Balance Sheet – June 30, 2023 (Unaudited) and December 31, 2022 3 Consolidated Statements of Operations (Unaudited) – Three Months and Six Months Ended June 30, 2023 and 2022 4 Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Three Months and Six Months Ended June 30, 2023 and 2022 5 Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) – Three Months and Six Months Ended June 30, 2023 and 2022 6 Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2023 and 2022 8 Notes to Unaudited Consolidated Financial Statements 9 Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 3. - Quantitative and Qualitative Disclosures about Market Risk 42 Item 4. - Controls and Procedures 42 Part II. - OTHER INFORMATION 43 Item 1. - Legal Proceedings 43 Item 1A. - Risk Factors 43 Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds 44 Item 3. - Defaults upon Senior Securities 45 Item 4. - Mine Safety Disclosures 45 Item 5. - Other Information 45 Item 6. - Exhibits 45 Signatures 47 ii Table of Contents CERTAIN IMPORTANT INFORMATION Unless the context otherwise requires, as used in this Quarterly Report on Form 10-Q (“Form 10-Q"): ● “NI Holdings”, “the Company”, “we”, “us”, and “our” refer to NI Holdings, Inc., together with Nodak Insurance Company and its subsidiaries and its affiliate (Battle Creek Mutual Insurance Company), Direct Auto Insurance Company (acquired August 31, 2018), and Westminster American Insurance Company (acquired January 1, 2020), for periods discussed after completion of the conversion, and for periods discussed prior to completion of the conversion refer to Nodak Mutual Insurance Company and all of its subsidiaries and Battle Creek Mutual Insurance Company; ● the “conversion” refers to the series of transactions consummated on March 13, 2017, by which Nodak Mutual Insurance Company converted from a mutual insurance company to a stock insurance company, as Nodak Insurance Company, and became a wholly-owned subsidiary of NI Holdings, an intermediate stock holding company formed on the date of conversion; ● “Nodak Mutual Group” refers to Nodak Mutual Group, Inc., which is the majority shareholder of NI Holdings; ● “Nodak Mutual” refers to Nodak Mutual Insurance Company, the predecessor company to Nodak Insurance Company prior to the conversion; ● “Nodak Insurance” refers to Nodak Insurance Company or Nodak Mutual Insurance Company interchangeably; ● “members” refers to the policyholders of Nodak Insurance, who are the named insureds under insurance policies issued by Nodak Insurance; ● “Battle Creek” refers to Battle Creek Mutual Insurance Company. Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Battle Creek is controlled by Nodak Insurance via a surplus note. The terms of the surplus note allow Nodak Insurance to appoint two-thirds of the Battle Creek Board of Directors; ● “Direct Auto” refers to Direct Auto Insurance Company. On August 31, 2018, NI Holdings completed the acquisition of 100% of the common stock of Direct Auto from the private shareholders of Direct Auto. Direct Auto became a consolidated subsidiary of NI Holdings on this date. Direct Auto is a property and casualty insurance company specializing in non-standard automobile insurance in the state of Illinois; ● “American West” refers to American West Insurance Company. American West is a wholly-owned subsidiary of Nodak Insurance; ● “Primero” refers to Primero Insurance Company. Primero is an indirect, wholly-owned subsidiary of Nodak Insurance; ● “Westminster” refers to Westminster American Insurance Company. On January 1, 2020, NI Holdings completed the acquisition of 100% of the common stock of Westminster from the private shareholder of Westminster, and Westminster became a consolidated subsidiary of NI Holdings. Westminster is a property and casualty insurance company specializing in commercial multi-peril insurance in the Mid-Atlantic states; and ● “Nodak Agency” refers to Nodak Agency, Inc. Nodak Agency is a wholly-owned subsidiary of Nodak Insurance. 1 Table of Contents FORWARD-LOOKING STATEMENTS This report contains, and management may make, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as “may”, “will”, “should”, “likely”, “anticipates”, “expects”, “intends”, “plans”, “projects”, “believes”, “views”, “estimates”, and similar expressions are used to identify these forward-looking statements. These statements include, among other things, the Company’s statements about: ● our anticipated operating and financial performance, business plans, and prospects; ● strategic reviews, capital allocation objectives, dividends, and share repurchases; ● plans for and prospects of acquisitions, dispositions, and other business development activities, and our ability to successfully capitalize on these opportunities; ● the impact of a future pandemic and related economic conditions, including the potential impact on the Company's investments; ● our ability to enter new markets successfully and capitalize on growth opportunities either through acquisitions or the expansion of our agent network; ● cyclical changes in the insurance industry, competition, and innovation and emerging technologies; ● expectations for impact of or changes to existing or new government regulations or laws; ● our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war, and other large-scale crises; ● developments in general economic conditions, domestic and global financial markets, interest rates, unemployment, or inflation, that could affect the performance of our insurance operations and/or investment portfolio; and ● our ability to effectively manage future growth, including additional necessary capital, systems, and personnel. Given their nature, we cannot assure that any outcome expressed in these or other forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results and those anticipated, estimated, implied, or projected. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in Part II, Item 1A, “Risk Factors” of this Form 10-Q and in the Part I, Item 1A, “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Annual Report”). The occurrence of any of the risks identified in the Part I, Item 1A, “Risk Factors” section of the 2022 Annual Report, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results of operations, or we may be required to increase our accruals for contingencies. It is not possible to predict or identify all such factors. Consequently, you should not consider such discussion to be a complete discussion of all potential risks or uncertainties. Therefore, you are cautioned not to unduly rely on forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. You are advised, however, to consult any further disclosures we make on related subjects. 2 Table of Contents PART I. - FINANCIAL INFORMATION Item 1. - Financial Statements NI Holdings, Inc. Consolidated Balance Sheets (dollar amounts in thousands, except par value) June 30, 2023 December 31, 2022 (Unaudited) Assets: Cash and cash equivalents $ 52,636 $ 47,002 Fixed income securities, at fair value (net of allowance for expected credit losses of $ 0 at June 30, 2023 and $ 0 at December 31, 2022) 332,989 303,324 Equity securities, at fair value 24,654 52,393 Other investments 2,005 2,005 Total cash and investments 412,284 404,724 Premiums and agents' balances receivable (net of allowance for expected credit losses of $ 434 at June 30, 2023 and $ 425 at December 31, 2022) 106,946 62,173 Deferred policy acquisition costs 34,124 29,768 Reinsurance premiums receivable 1,661 1,647 Reinsurance recoverables on losses (net of allowance for expected credit losses of $ 0 at June 30, 2023 and $ 0 at December 31, 2022) 53,508 37,575 Income tax recoverable 12,327 13,964 Accrued investment income 2,734 2,456 Property and equipment, net 10,276 9,843 Deferred income taxes 12,070 9,005 Receivable from Federal Crop Insurance Corporation 14,032 15,462 Goodwill and other intangibles 17,014 17,250 Other assets 10,222 10,365 Total assets $ 687,198 $ 614,232 Liabilities: Unpaid losses and loss adjustment expenses $ 232,038 $ 190,459 Unearned premiums 185,350 148,513 Accrued expenses and other liabilities 29,427 22,053 Total liabilities 446,815 361,025 Shareholders’ equity: Common stock, $ 0.01 par value, authorized: 25,000,000 shares; issued: 23,000,000 shares; and outstanding: 2023 – 20,885,978 shares, 2022 – 21,076,255 shares 230 230 Additional paid-in capital 95,750 95,671 Unearned employee stock ownership plan shares ( 941 ) ( 941 ) Retained earnings 201,518 214,121 Accumulated other comprehensive loss, net of income taxes ( 26,986 ) ( 29,286 ) Treasury stock, at cost, 2023 – 2,019,912 shares, 2022 – 1,829,635 shares ( 31,122 ) ( 28,818 ) Non-controlling interest 1,934 2,230 Total shareholders’ equity 240,383 253,207 Total liabilities and shareholders’ equity $ 687,198 $ 614,232 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents NI Holdings, Inc. Consolidated Statements of Operations (Unaudited) (dollar amounts in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Net premiums earned $ 94,146 $ 84,496 $ 171,773 $ 154,083 Fee and other income 499 415 773 843 Net investment income 2,505 2,015 4,744 3,668 Net investment gains (losses) ( 174 ) ( 11,136 ) 1,242 ( 16,664 ) Total revenues 96,976 75,790 178,532 141,930 Expenses: Losses and loss adjustment expenses 77,506 108,595 136,331 148,724 Amortization of deferred policy acquisition costs 20,579 16,244 39,167 31,867 Other underwriting and general expenses 9,295 10,002 18,951 17,783 Total expenses 107,380 134,841 194,449 198,374 Loss before income taxes ( 10,404 ) ( 59,051 ) ( 15,917 ) ( 56,444 ) Income tax benefit ( 2,169 ) ( 12,415 ) ( 3,182 ) ( 11,847 ) Net loss ( 8,235 ) ( 46,636 ) ( 12,735 ) ( 44,597 ) Net loss attributable to non-controlling interest ( 113 ) ( 726 ) ( 403 ) ( 596 ) Net loss attributable to NI Holdings, Inc. $ ( 8,122 ) $ ( 45,910 ) $ ( 12,332 ) $ ( 44,001 ) Loss per common share: Basic $ ( 0.38 ) $ ( 2.15 ) $ ( 0.58 ) $ ( 2.06 ) Diluted $ ( 0.38 ) $ ( 2.15 ) $ ( 0.58 ) $ ( 2.06 ) Share data: Weighted average common shares outstanding used in basic per common share calculations 21,281,542 21,379,803 21,325,007 21,376,298 Plus: Dilutive securities — — — — Weighted average common shares used in diluted per common share calculations 21,281,542 21,379,803 21,325,007 21,376,298 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents NI Holdings, Inc. Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (dollar amounts in thousands) Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Attributable to NI Holdings, Inc. Attributable to Non- Controlling Interest Total Attributable to NI Holdings, Inc. Attributable to Non- Controlling Interest Total Net loss $ ( 8,122 ) $ ( 113 ) $ ( 8,235 ) $ ( 12,332 ) $ ( 403 ) $ ( 12,735 ) Other comprehensive income (loss), before income taxes: Holding gains (losses) on investments ( 2,954 ) ( 140 ) ( 3,094 ) 2,490 138 2,628 Reclassification adjustment for net realized losses included in net loss 188 — 188 487 — 487 Other comprehensive income (loss), before income taxes ( 2,766 ) ( 140 ) ( 2,906 ) 2,977 138 3,115 Income tax benefit (expense) related to items of other comprehensive income (loss) 628 32 660 ( 677 ) ( 31 ) ( 708 ) Other comprehensive income (loss), net of income taxes ( 2,138 ) ( 108 ) ( 2,246 ) 2,300 107 2,407 Comprehensive loss $ ( 10,260 ) $ ( 221 ) $ ( 10,481 ) $ ( 10,032 ) $ ( 296 ) $ ( 10,328 ) Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 Attributable to NI Holdings, Inc. Attributable to Non- Controlling Interest Total Attributable to NI Holdings, Inc. Attributable to Non- Controlling Interest Total Net loss $ ( 45,910 ) $ ( 726 ) $ ( 46,636 ) $ ( 44,001 ) $ ( 596 ) $ ( 44,597 ) Other comprehensive income (loss), before income taxes: Holding gains (losses) on investments ( 15,738 ) ( 650 ) ( 16,388 ) ( 35,935 ) ( 1,347 ) ( 37,282 ) Reclassification adjustment for net realized losses included in net loss 105 — 105 62 — 62 Other comprehensive income (loss), before income taxes ( 15,633 ) ( 650 ) ( 16,283 ) ( 35,873 ) ( 1,347 ) ( 37,220 ) Income tax benefit (expense) related to items of other comprehensive income (loss) 3,553 148 3,701 8,154 306 8,460 Other comprehensive income (loss), net of income taxes ( 12,080 ) ( 502 ) ( 12,582 ) ( 27,719 ) ( 1,041 ) ( 28,760 ) Comprehensive loss $ ( 57,990 ) $ ( 1,228 ) $ ( 59,218 ) $ ( 71,720 ) $ ( 1,637 ) $ ( 73,357 ) The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents NI Holdings, Inc. Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) (dollar amounts in thousands) Three Months Ended June 30, 2023 Common Stock Additional Paid-in Capital Unearned Employee Stock Ownership Plan Shares Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Income Taxes Treasury Stock Non-Controlling Interest Total Shareholders’ Equity Balance, April 1, 2023 $ 230 $ 95,568 $ ( 941 ) $ 209,710 $ ( 24,848 ) $ ( 28,803 ) $ 2,155 $ 253,071 Net loss — — — ( 8,122 ) — — ( 113 ) ( 8,235 ) Other comprehensive income (loss), net of income taxes — — — — ( 2,138 ) — ( 108 ) ( 2,246 ) Purchase of treasury stock — — — — — ( 2,602 ) — ( 2,602 ) Share-based compensation — 396 — — — — — 396 Issuance of vested award shares — ( 214 ) — ( 70 ) — 283 — ( 1 ) Balance, June 30, 2023 $ 230 $ 95,750 $ ( 941 ) $ 201,518 $ ( 26,986 ) $ ( 31,122 ) $ 1,934 $ 240,383 Six Months Ended June 30, 2023 Common Stock Additional Paid-in Capital Unearned Employee Stock Ownership Plan Shares Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Income Taxes Treasury Stock Non-Controlling Interest Total Shareholders’ Equity Balance, January 1, 2023 $ 230 $ 95,671 $ ( 941 ) $ 214,121 $ ( 29,286 ) $ ( 28,818 ) $ 2,230 $ 253,207 Net loss — — — ( 12,332 ) — — ( 403 ) ( 12,735 ) Other comprehensive income (loss), net of income taxes — — — — 2,300 — 107 2,407 Purchase of treasury stock — — — — — ( 3,223 ) — ( 3,223 ) Share-based compensation — 901 — — — — — 901 Issuance of vested award shares — ( 822 ) — ( 271 ) — 919 — ( 174 ) Balance, June 30, 2023 $ 230 $ 95,750 $ ( 941 ) $ 201,518 $ ( 26,986 ) $ ( 31,122 ) $ 1,934 $ 240,383 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents NI Holdings, Inc. Unaudited Consolidated Statements of Changes in Shareholders’ Equity (dollar amounts in thousands) Three Months Ended June 30, 2022 Common Stock Additional Paid-in Capital Unearned Employee Stock Ownership Plan Shares Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Income Taxes Treasury Stock Non-Controlling Interest Total Shareholders’ Equity Balance, April 1, 2022 $ 230 $ 96,517 $ ( 1,184 ) $ 269,142 $ ( 10,402 ) $ ( 25,825 ) $ 3,800 $ 332,278 Net loss — — — ( 45,910 ) — — ( 726 ) ( 46,636 ) Other comprehensive income (loss), net of income taxes — — — — ( 12,080 ) — ( 502 ) ( 12,582 ) Purchase of treasury stock — — — — — ( 934 ) — ( 934 ) Share-based compensation — 486 — — — — — 486 Issuance of vested award shares — ( 176 ) — ( 15 ) — 190 — ( 1 ) Balance, June 30, 2022 $ 230 $ 96,827 $ ( 1,184 ) $ 223,217 $ ( 22,482 ) $ ( 26,569 ) $ 2,572 $ 272,611 Six Months Ended June 30, 2022 Common Stock Additional Paid-in Capital Unearned Employee Stock Ownership Plan Shares Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Income Taxes Treasury Stock Non-Controlling Interest Total Shareholders’ Equity Balance, January 1, 2022 $ 230 $ 98,166 $ ( 1,184 ) $ 267,207 $ 5,237 $ ( 26,452 ) $ 4,209 $ 347,413 Net loss — — — ( 44,001 ) — — ( 596 ) ( 44,597 ) Other comprehensive income (loss), net of income taxes — — — — ( 27,719 ) — ( 1,041 ) ( 28,760 ) Purchase of treasury stock — — — — — ( 1,931 ) — ( 1,931 ) Share-based compensation — 1,051 — — — — — 1,051 Issuance of vested award shares — ( 2,390 ) — 11 — 1,814 — ( 565 ) Balance, June 30, 2022 $ 230 $ 96,827 $ ( 1,184 ) $ 223,217 $ ( 22,482 ) $ ( 26,569 ) $ 2,572 $ 272,611 The accompanying notes are an integral part of these consolidated financial statements. 7 Table of Contents NI Holdings, Inc. Consolidated Statements of Cash Flows (Unaudited) (dollar amounts in thousands) Six Months Ended June 30, 2023 2022 Cash flows from operating activities: Net loss $ ( 12,735 ) $ ( 44,597 ) Adjustments to reconcile net loss to net cash flows from operating activities: Net investment losses (gains) ( 1,242 ) 16,664 Deferred income tax benefit ( 3,773 ) ( 6,069 ) Depreciation of property and equipment 370 344 Amortization of intangibles 236 236 Share-based compensation 901 1,051 Amortization of deferred policy acquisition costs 39,167 31,867 Deferral of policy acquisition costs ( 43,523 ) ( 37,837 ) Net amortization of premiums and discounts on investments 557 885 Gain on sale of property and equipment ( 44 ) ( 186 ) Changes in operating assets and liabilities: Premiums and agents’ balances receivable ( 44,773 ) ( 56,884 ) Reinsurance premiums receivable / payable ( 14 ) 587 Reinsurance recoverables on losses ( 15,933 ) 4,159 Income tax recoverable / payable 1,637 ( 8,111 ) Accrued investment income ( 278 ) ( 27 ) Federal Crop Insurance Corporation receivable / payable 1,430 2,140 Other assets 143 ( 2,401 ) Unpaid losses and loss adjustment expenses 41,579 43,214 Unearned premiums 36,837 45,936 Accrued expenses and other liabilities 7,374 22,676 Net cash flows from operating activities 7,916 13,647 Cash flows from investing activities: Proceeds from maturities and sales of fixed income securities 19,239 31,846 Proceeds from sales of equity securities 33,223 7,837 Purchases of fixed income securities ( 46,833 ) ( 41,461 ) Purchases of equity securities ( 3,755 ) ( 10,171 ) Purchases of property and equipment ( 888 ) ( 784 ) Proceeds from sales of property and equipment 129 658 Net cash flows from investing activities 1,115 ( 12,075 ) Cash flows from financing activities: Purchases of treasury stock ( 3,223 ) ( 1,931 ) Installment payment on Westminster consideration payable — ( 6,667 ) Issuance of vested award shares ( 174 ) ( 565 ) Net cash flows from financing activities ( 3,397 ) ( 9,163 ) Net increase (decrease) in cash and cash equivalents 5,634 ( 7,591 ) Cash and cash equivalents at beginning of period 47,002 70,623 Cash and cash equivalents at end of period $ 52,636 $ 63,032 Federal and state income taxes paid $ — $ 2,360 The accompanying notes are an integral part of these consolidated financial statements. Notes to Unaudited Consolidated Financial Statements 8 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 1. Organization NI Holdings is a North Dakota business corporation that is the stock holding company of Nodak Insurance and became such in connection with the conversion of Nodak Mutual from a mutual to stock form of organization and the creation of a mutual holding company. The conversion was consummated on March 13, 2017. Immediately following the conversion, all of the outstanding shares of common stock of Nodak Insurance were issued to Nodak Mutual Group, which then contributed the shares to NI Holdings in exchange for 55 % of the outstanding shares of common stock of NI Holdings. Nodak Insurance then became a wholly-owned stock subsidiary of NI Holdings. Prior to completion of the conversion, NI Holdings conducted no business and had no assets or liabilities. As a result of the conversion, NI Holdings became the holding company for Nodak Insurance and its existing subsidiaries. These unaudited 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 Agency, Inc. Nodak Agency is an inactive shell corporation. American West Insurance Company American West is a property and casualty insurance company licensed in eight states in the Midwest and Western regions of the United States (“U.S.”). American West began writing policies in 2002 and primarily writes private passenger auto, homeowners, and farm coverages in South Dakota. American West also writes personal auto coverage in North Dakota, as well as crop hail and Federal multi-peril crop insurance coverages in Minnesota and South Dakota. Primero Insurance Company Primero is a wholly-owned subsidiary of Tri-State, Ltd. Tri-State, Ltd. is an inactive shell corporation 100 % owned by Nodak Insurance. Primero is a property and casualty insurance company writing non-standard automobile coverage in the states of Nevada, Arizona, North Dakota, and South Dakota. Primero was acquired by Nodak Insurance in 2014. Battle Creek Mutual Insurance Company Battle Creek is a property and casualty insurance company writing private passenger 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. Westminster American Insurance Company 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. 9 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 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 A.M. Best Company, Inc. (“AM Best”). The same executive management team provides oversight and strategic direction for the entire organization. Nodak Insurance provides common product oversight, pricing practices, and underwriting standards, as well as underwriting and claims administration, to itself, American West, and Battle Creek. Primero, Direct Auto, and Westminster personnel manage the day-to-day operations of their respective companies. 2. Basis of Presentation and Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All material intercompany transactions and balances have been eliminated. These financial statements should be read in conjunction with the financial statements and notes thereto included in our 2022 Annual Report. The Consolidated Balance Sheet at December 31, 2022, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of the interim unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim unaudited consolidated financial statements and the reported amounts of revenues, claims, and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the interim periods ended June 30, 2023, are not necessarily indicative of the results that may be expected for the year ended December 31, 2023. Our 2022 Annual Report describes the accounting policies and estimates that are critical to the understanding of our results of operations, financial condition, and liquidity. The accounting policies and estimation processes described in the 2022 Annual Report were consistently applied to the unaudited consolidated financial statements as of and for the six months ended June 30, 2023 and 2022. Recent Accounting Pronouncements Prior to December 31, 2022, we were classified as an emerging growth company (“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 are now unable to delay adoption of these new or revised accounting standards, or to take advantage of reduced corporate governance disclosures. Adopted For information regarding accounting pronouncements that the Company adopted during the periods presented, see Item II, Part 8, Note 2 “Recent Accounting Pronouncements” section of the 2022 Annual Report. 10 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 3. Investments The amortized cost and estimated fair value of fixed income securities as of June 30, 2023, and December 31, 2022, were as follows: June 30, 2023 Cost or Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed income securities: U.S. Government and agencies $ 9,941 $ — $ — $ ( 909 ) $ 9,032 Obligations of states and political subdivisions 58,753 — 64 ( 5,407 ) 53,410 Corporate securities 150,137 — 132 ( 14,403 ) 135,866 Residential mortgage-backed securities 62,623 — 35 ( 5,886 ) 56,772 Commercial mortgage-backed securities 30,300 — — ( 4,837 ) 25,463 Asset-backed securities 53,025 — 29 ( 4,703 ) 48,351 Redeemable preferred stocks 4,747 — — ( 652 ) 4,095 Total fixed income securities $ 369,526 $ — $ 260 $ ( 36,797 ) $ 332,989 December 31, 2022 Cost or Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed income securities: U.S. Government and agencies $ 11,174 $ — $ 1 $ ( 1,008 ) $ 10,167 Obligations of states and political subdivisions 60,342 — 38 ( 6,454 ) 53,926 Corporate securities 136,837 — 109 ( 15,787 ) 121,159 Residential mortgage-backed securities 53,254 — 85 ( 5,846 ) 47,493 Commercial mortgage-backed securities 30,837 — — ( 4,702 ) 26,135 Asset-backed securities 45,786 — — ( 5,061 ) 40,725 Redeemable preferred stocks 4,747 — — ( 1,028 ) 3,719 Total fixed income securities $ 342,977 $ — $ 233 $ ( 39,886 ) $ 303,324 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. June 30, 2023 Amortized Cost Fair Value Due to mature: One year or less $ 12,199 $ 11,948 After one year through five years 79,650 74,773 After five years through ten years 85,000 75,928 After ten years 41,982 35,659 Mortgage / asset-backed securities 145,948 130,586 Redeemable preferred stocks 4,747 4,095 Total fixed income securities $ 369,526 $ 332,989 December 31, 2022 Amortized Cost Fair Value Due to mature: One year or less $ 10,130 $ 9,971 After one year through five years 81,879 77,031 After five years through ten years 76,648 65,966 After ten years 39,696 32,284 Mortgage / asset-backed securities 129,877 114,353 Redeemable preferred stocks 4,747 3,719 Total fixed income securities $ 342,977 $ 303,324 11 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Fixed income securities with a fair value of $ 5,918 at June 30, 2023, and $ 6,613 at December 31, 2022, 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. June 30, 2023 Less than 12 Months Greater than 12 months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fixed income securities: U.S. Government and agencies $ — $ — $ 9,032 $ ( 909 ) $ 9,032 $ ( 909 ) Obligations of states and political subdivisions 7,234 ( 431 ) 40,295 ( 4,976 ) 47,529 ( 5,407 ) Corporate securities 17,414 ( 418 ) 108,662 ( 13,985 ) 126,076 ( 14,403 ) Residential mortgage-backed securities 14,358 ( 260 ) 32,757 ( 5,626 ) 47,115 ( 5,886 ) Commercial mortgage-backed securities 2,033 ( 56 ) 23,155 ( 4,781 ) 25,188 ( 4,837 ) Asset-backed securities 12,063 ( 185 ) 34,836 ( 4,518 ) 46,899 ( 4,703 ) Redeemable preferred stocks — — 4,095 ( 652 ) 4,095 ( 652 ) Total fixed income securities $ 53,102 $ ( 1,350 ) $ 252,832 $ ( 35,447 ) $ 305,934 $ ( 36,797 ) December 31, 2022 Less than 12 Months Greater than 12 months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fixed income securities: U.S. Government and agencies $ 7,078 $ ( 537 ) $ 2,587 $ ( 471 ) $ 9,665 $ ( 1,008 ) Obligations of states and political subdivisions 40,213 ( 3,554 ) 9,045 ( 2,900 ) 49,258 ( 6,454 ) Corporate securities 76,645 ( 7,944 ) 39,683 ( 7,843 ) 116,328 ( 15,787 ) Residential mortgage-backed securities 21,017 ( 1,805 ) 18,519 ( 4,041 ) 39,536 ( 5,846 ) Commercial mortgage-backed securities 18,932 ( 2,674 ) 7,204 ( 2,028 ) 26,136 ( 4,702 ) Asset-backed securities 18,904 ( 1,522 ) 21,809 ( 3,539 ) 40,713 ( 5,061 ) Redeemable preferred stocks 3,015 ( 732 ) 705 ( 296 ) 3,720 ( 1,028 ) Total fixed income securities $ 185,804 $ ( 18,768 ) $ 99,552 $ ( 21,118 ) $ 285,356 $ ( 39,886 ) 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. We consider 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 default. We determine 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 of the new credit loss accounting standard or during the three or six months ended June 30, 2023. Therefore, there was no beginning or ending balance of credit losses for the three or six months ended June 30, 2023, or the year ended December 31, 2022. See Item II, Part 8, Note 3 “Summary of Significant Accounting Policies” section of the 2022 Annual Report for additional information. 12 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Net investment income consisted of the following: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Fixed income securities $ 2,781 $ 2,406 $ 5,411 $ 4,567 Equity securities 283 395 603 724 Real estate 156 75 306 241 Cash and cash equivalents 94 10 146 12 Total gross investment income 3,314 2,886 6,466 5,544 Investment expenses 809 871 1,722 1,876 Net investment income $ 2,505 $ 2,015 $ 4,744 $ 3,668 Net investment gains (losses) consisted of the following: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Gross realized gains: Fixed income securities $ — $ 5 $ — $ 51 Equity securities 357 1,196 13,088 2,269 Total gross realized gains 357 1,201 13,088 2,320 Gross realized losses, excluding credit impairment losses: Fixed income securities ( 188 ) ( 110 ) ( 487 ) ( 113 ) Equity securities ( 288 ) ( 64 ) ( 1,134 ) ( 242 ) Total gross realized losses, excluding credit impairment losses ( 476 ) ( 174 ) ( 1,621 ) ( 355 ) Net realized gains (losses) ( 119 ) 1,027 11,467 1,965 Change in net unrealized gain on equity securities ( 55 ) ( 12,163 ) ( 10,225 ) ( 18,629 ) Net investment gains (losses) $ ( 174 ) $ ( 11,136 ) $ 1,242 $ ( 16,664 ) 13 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 4. Fair Value Measurements The Company uses fair value measurements to record fair value adjustments to certain assets to determine fair value disclosures. Investment securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets or liabilities at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets. Accounting guidance on fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 : Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 includes fixed income securities with quoted prices that are traded less frequently than exchange traded instruments. Valuation techniques include matrix pricing which is a mathematical technique used widely in the industry to value fixed income securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. Level 3 : 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, 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 limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts which could have been 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 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. 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. 14 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Management reviews the reasonableness of the pricing provided by the independent pricing service by employing various analytical procedures. We also use information from our third-party investment advisors who utilize different independent pricing services to further validate the reasonableness of the valuation of our fixed income portfolio. 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 three or six months ended June 30, 2023, or the year ended December 31, 2022. 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. There were no assets or liabilities classified at Level 3 at June 30, 2023, or December 31, 2022. 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: June 30, 2023 Total Level 1 Level 2 Level 3 Fixed income securities: U.S. Government and agencies $ 9,032 $ — $ 9,032 $ — Obligations of states and political subdivisions 53,410 — 53,410 — Corporate securities 135,866 — 135,866 — Residential mortgage-backed securities 56,772 — 56,772 — Commercial mortgage-backed securities 25,463 — 25,463 — Asset-backed securities 48,351 — 48,351 — Redeemable preferred stock 4,095 — 4,095 — Total fixed income securities 332,989 — 332,989 — Equity securities: Common stock 22,807 22,807 — — Non-redeemable preferred stock 1,847 1,847 — — Total equity securities 24,654 24,654 — — Cash equivalents 34,004 34,004 — — Total assets at fair value $ 391,647 $ 58,658 $ 332,989 $ — 15 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) December 31, 2022 Total Level 1 Level 2 Level 3 Fixed income securities: U.S. Government and agencies $ 10,167 $ — $ 10,167 $ — Obligations of states and political subdivisions 53,926 — 53,926 — Corporate securities 121,159 — 121,159 — Residential mortgage-backed securities 47,493 — 47,493 — Commercial mortgage-backed securities 26,135 — 26,135 — Asset-backed securities 40,725 — 40,725 — Redeemable preferred stock 3,719 — 3,719 — Total fixed income securities 303,324 — 303,324 — Equity securities: Common stock 50,699 50,699 — — Non-redeemable preferred stock 1,694 1,694 — — Total equity securities 52,393 52,393 — — Cash equivalents 27,255 27,255 — — Total assets at fair value $ 382,972 $ 79,648 $ 303,324 $ — There were no liabilities measured at fair value on a recurring basis at June 30, 2023, or December 31, 2022. 5. Reinsurance External Reinsurance 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. The primary 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 six-month period ended June 30, 2023, the Company maintained property catastrophe reinsurance protection covering $ 133,000 in excess of a $ 20,000 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 Federal Crop Insurance Corporation (“FCIC”). 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 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 a new credit loss model (current expected credit losses or “CECL”). See the Part II, Item 8, Note 2 “Recent Accounting Pronouncements” section of the 2022 Annual Report 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 June 30, 2023, and 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. 16 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) A reconciliation of direct to net premiums on both a written and an earned basis is as follows: Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Premiums Written Premiums Earned Premiums Written Premiums Earned Direct premium $ 144,250 $ 106,162 $ 234,806 $ 191,636 Assumed premium 2,440 827 2,839 1,403 Ceded premium ( 20,439 ) ( 12,843 ) ( 28,898 ) ( 21,266 ) Net premiums $ 126,251 $ 94,146 $ 208,747 $ 171,773 Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 Premiums Written Premiums Earned Premiums Written Premiums Earned Direct premium $ 144,962 $ 94,251 $ 220,495 $ 167,650 Assumed premium 3,226 1,691 5,087 3,552 Ceded premium ( 20,175 ) ( 11,446 ) ( 25,835 ) ( 17,119 ) Net premiums $ 128,013 $ 84,496 $ 199,747 $ 154,083 A reconciliation of direct to net losses and loss adjustment expenses is as follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Direct losses and loss adjustment expenses $ 95,149 $ 110,670 $ 166,010 $ 156,165 Assumed losses and loss adjustment expenses 67 1,535 157 1,545 Ceded losses and loss adjustment expenses ( 17,710 ) ( 3,610 ) ( 29,836 ) ( 8,986 ) Net losses and loss adjustment expenses $ 77,506 $ 108,595 $ 136,331 $ 148,724 If 100 % of our ceded reinsurance was cancelled as of June 30, 2023, or 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. Intercompany Reinsurance Pooling Arrangement Effective January 1, 2020, all of our insurance subsidiary and affiliate companies entered into an intercompany reinsurance pooling agreement. 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. For the six months ended June 30, 2023, and the year ended December 31, 2022, the pooling share percentages by insurance company were: Pool Percentage Nodak Insurance Company 66.0 % American West Insurance Company 7.0 % Primero Insurance Company 3.0 % Battle Creek Mutual Insurance Company 2.0 % Direct Auto Insurance Company 13.0 % Westminster American Insurance Company 9.0 % Total 100.0 % 17 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 6. Deferred Policy Acquisition Costs Expenses directly related to successfully acquired 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: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Balance, beginning of period $ 31,350 $ 26,272 $ 29,768 $ 24,947 Deferral of policy acquisition costs 23,353 20,889 43,523 37,837 Amortization of deferred policy acquisition costs ( 20,579 ) ( 16,244 ) ( 39,167 ) ( 31,867 ) Balance, end of period $ 34,124 $ 30,917 $ 34,124 $ 30,917 7. Unpaid Losses and Loss Adjustment Expenses Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows: Six Months Ended June 30, 2023 2022 Balance, beginning of period: Liability for unpaid losses and loss adjustment expenses $ 190,459 $ 139,662 Reinsurance recoverables on losses 37,575 21,200 Net balance, beginning of period 152,884 118,462 Incurred related to: Current year 126,854 157,214 Prior years 9,477 ( 8,490 ) Total incurred 136,331 148,724 Paid related to: Current year 50,010 59,634 Prior years 60,675 41,717 Total paid 110,685 101,351 Balance, end of period: Liability for unpaid losses and loss adjustment expenses 232,038 182,876 Reinsurance recoverables on losses 53,508 17,041 Net balance, end of period $ 178,530 $ 165,835 During the six months ended June 30, 2023, the Company’s incurred reported losses and loss adjustment expenses included $ 9,477 of net unfavorable development on prior accident years, primarily attributable to Direct Auto and Westminster. During the six months ended June 30, 2022, the Company’s incurred reported losses and loss adjustment expenses included $ 8,490 of net favorable development on prior accident years, primarily attributable to Direct Auto, Battle Creek, and American West. 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. 18 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 8. Property and Equipment Property and equipment consisted of the following: June 30, 2023 December 31, 2022 Estimated Useful Life Cost: Land $ 1,403 $ 1,403 indefinite Building and improvements 14,491 14,271 10 – 43 years Electronic data processing equipment 1,637 1,310 5 – 7 years Furniture and fixtures 2,968 2,919 5 – 7 years Automobiles 1,317 1,310 2 – 3 years Gross cost 21,816 21,213 Accumulated depreciation ( 11,540 ) ( 11,370 ) Total property and equipment, net $ 10,276 $ 9,843 Depreciation expense was $ 188 and $ 176 for the three months ended June 30, 2023 and 2022, respectively, and $ 370 and $ 344 for the six months ended June 30, 2023 and 2022, respectively. 19 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 9. Goodwill and Other Intangibles Goodwill The following table presents the carrying amount of the Company’s goodwill by segment: June 30, 2023 December 31, 2022 Non-standard auto from acquisition of Primero $ 2,628 $ 2,628 Commercial from acquisition of Westminster 6,756 6,756 Total $ 9,384 $ 9,384 Other Intangible Assets The following table presents the carrying amount of the Company’s other intangible assets: June 30, 2023 Gross Carrying Amount Accumulated Amortization Net Subject to amortization: Trade names $ 748 $ 415 $ 333 Distribution network 6,700 1,303 5,397 Total subject to amortization 7,448 1,718 5,730 Not subject to amortization: State insurance licenses 1,900 — 1,900 Total $ 9,348 $ 1,718 $ 7,630 December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Subject to amortization: Trade names $ 748 $ 365 $ 383 Distribution network 6,700 1,117 5,583 Total subject to amortization 7,448 1,482 5,966 Not subject to amortization: State insurance license 1,900 — 1,900 Total $ 9,348 $ 1,482 $ 7,866 Amortization expense was $ 118 and $ 118 for the three months ended June 30, 2023 and 2022, respectively, and $ 236 and $ 236 for the six months ended June 30, 2023 and 2022, respectively. Other intangible assets that have finite lives, including trade names and distribution networks, are amortized over their useful lives. As of June 30, 2023, the estimated amortization of other intangible assets with finite lives for each of the five years in the period ending December 31, 2027, and thereafter is as follows: Year ending December 31, 2023 (six months remaining) $ 219 2024 422 2025 422 2026 422 2027 422 Thereafter 3,823 Total other intangible assets with finite lives $ 5,730 20 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 10. Royalties, Dividends, and Affiliations North Dakota Farm Bureau Nodak Insurance was organized by the North Dakota Farm Bureau (“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 policies. Royalties paid to the NDFB were $ 442 and $ 405 during the three months ended June 30, 2023 and 2022, respectively, and $ 799 and $ 744 for the six months ended June 30, 2023 and 2022, respectively. Royalty amounts payable of $ 167 and $ 119 were accrued as a liability to the NDFB at June 30, 2023, and December 31, 2022, respectively. Dividends State insurance laws require our insurance subsidiaries to maintain certain minimum capital and surplus amounts on a statutory basis. Our insurance subsidiaries are subject to regulations that restrict the payment of dividends from statutory surplus and may require prior approval from their domiciliary insurance regulatory authorities. Our insurance subsidiaries are also subject to risk-based capital requirements that may further affect their ability to pay dividends. 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. For information regarding the availability of subsidiaries to pay dividends to NI Holdings during 2023, see Item II, Part 8, Note 12 “Related Party Transactions” section of the 2022 Annual Report. 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: June 30, 2023 December 31, 2022 Assets: Cash and cash equivalents $ 4,321 $ 5,008 Investments 13,931 13,350 Premiums and agents’ balances receivable 5,606 5,422 Deferred policy acquisition costs 682 595 Reinsurance recoverables on losses (2) 12,641 12,597 Accrued investment income 60 59 Income tax recoverable — 225 Deferred income taxes 800 780 Property and equipment 313 319 Other assets 61 52 Total assets $ 38,415 $ 38,407 Liabilities: Unpaid losses and loss adjustment expenses $ 5,218 $ 6,453 Unearned premiums 3,698 2,959 Notes payable (1) 3,000 3,000 Pooling payable (1) 7,699 8,337 Reinsurance losses payable (2) 13,783 13,125 Accrued expenses and other liabilities 3,083 2,303 Total liabilities 36,481 36,177 Equity: Non-controlling interest 1,934 2,230 Total equity 1,934 2,230 Total liabilities and equity $ 38,415 $ 38,407 (1) Amount fully eliminated in consolidation. (2) Amount partly eliminated in consolidation. 21 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Net premiums earned $ 1,882 $ 1,690 $ 3,435 $ 3,082 Fee and other income (expenses) 7 ( 2 ) 17 ( 7 ) Net investment income 80 27 147 40 Total revenues 1,969 1,715 3,599 3,115 Expenses: Losses and loss adjustment expenses 1,550 2,171 2,727 2,974 Amortization of deferred policy acquisition costs 411 325 783 637 Other underwriting and general expenses 155 157 318 274 Total expenses 2,116 2,653 3,828 3,885 Loss before income taxes ( 147 ) ( 938 ) ( 229 ) ( 770 ) Income tax expense (benefit) ( 34 ) ( 212 ) 174 ( 174 ) Net loss $ ( 113 ) $ ( 726 ) $ ( 403 ) $ ( 596 ) 11. 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. American West and Battle Creek have no employees. The Company reported expenses related to the 401(k) plans totaling $ 189 and $ 187 during the three months ended June 30, 2023 and 2022, respectively, and $ 378 and $ 335 during the six months ended June 30, 2023 and 2022, 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 $ 32 and $ 242 during the three months ended June 30, 2023 and 2022, respectively, and $ 281 and $ 432 during the six months ended June 30, 2023 and 2022, 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 over the key executives’ allowable 401(k) contribution. The plan also allows employee-directed deferral of key executives’ compensation or incentive payments. The Company reported expenses related to this plan totaling $ 76 and $ 23 during the three months ended June 30, 2023 and 2022, respectively, and $ 98 and $ 127 during the six months ended June 30, 2023 and 2022, respectively. In connection with our initial public offering (“IPO”) in March 2017, the Company established its Employee Stock Ownership Plan (the “ESOP”). The ESOP is intended to be an employee stock ownership plan within the meaning of Internal Revenue Code Section 4975(e)(7) and invests solely in common stock of the Company. Upon establishment of the ESOP, 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 IPO, which resulted in the ESOP Trust owning approximately 1.0 % of the Company’s authorized shares. The ESOP has purchased the shares for investment and not for resale. The shares purchased by the ESOP Trust in the offering are held in a suspense account as collateral for the ESOP loan. Nodak Insurance makes semi-annual cash contributions to the ESOP in amounts no smaller than the amounts required for the ESOP Trust to make its loan payments to Nodak Insurance. While the ESOP makes two loan payments per year, a pre-determined portion of the shares are released from the suspense account and allocated to participant accounts at the end of the calendar year. This release and allocation occurs on an annual basis over the ten-year term of the ESOP loan. Nodak Insurance has a lien on the shares of common stock of the Company held by the ESOP to secure repayment of the loan from the ESOP to Nodak Insurance. If the ESOP is terminated as a result of a change in control of the Company, the ESOP may be required to pay the costs of terminating the plan. 22 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 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. 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 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 related to the ESOP of $ 83 and $ 101 during the three months ended June 30, 2023 and 2022, respectively, and $ 164 and $ 210 during the six months ended June 30, 2023 and 2022, respectively. Through June 30, 2023, and 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 June 30, 2023, and December 31, 2022. Using the Company’s quarter-end market price of $ 14.85 per share, the fair value of the unearned ESOP shares was $ 1,398 at June 30, 2023. 12. 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 of the bank’s Prime Rate with a floor rate of 3.25 %. There were no outstanding amounts during the six months ended June 30, 2023, or the year ended December 31, 2022. This line of credit is scheduled to expire on March 31, 2024 . 13. Income Taxes At June 30, 2023, and December 31, 2022, 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 three- and six-month periods ended June 30, 2023 or the year ended December 31, 2022. At June 30, 2023, and December 31, 2022, the Company, other than Battle Creek and Westminster, had no income tax related carryforwards for net operating losses, alternative minimum tax credits, or capital losses. Battle Creek, which files its income tax returns on a stand-alone basis, had net operating loss carryforwards of $ 3,963 at December 31, 2022. These net operating loss carryforwards expire through 2032. Westminster, which became part of the Company’s consolidated federal income tax return beginning in 2020, had a $ 1,270 net operating loss carryforward at December 31, 2022. This net operating loss carryforward expires in 2023. As of June 30, 2023, federal income tax years 2019 through 2021 remain open for examination. 23 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 14. Leases Primero leases a facility in Spearfish, South Dakota under a non-cancellable operating lease expiring in 2028, 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. Effective for the year ended December 31, 2022, the Company adopted the updated guidance for leases. This guidance was adopted in the fourth quarter of 2022, and accordingly, the expense amounts for the periods ended June 30, 2023, are not comparable to the periods ended June 30, 2022. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” in the 2022 Annual Report for additional information. 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. We currently do not have leases that include options to purchase or provisions that would automatically transfer ownership of the leased property to the Company. We determine 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. We 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, we estimate 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 most leases. Additional information regarding our operating leases are as follows: As of and For the Three Months Ended June 30, As of and For the Six Months Ended June 30, 2023 2022 2023 2022 Operating lease expense $ 98 $ 98 $ 196 $ 196 Other information on operating leases: Operating cash outflow from operating leases 103 69 204 137 Right-of-use assets obtained in exchange for new lease liabilities 247 — 247 — Weighted average discount rate 3.95 % 3.25 % 3.95 % 3.25 % Weighted average remaining lease term in years 5.8 years 6.6 years 5.8 years 6.6 years The following table presents the contractual maturities of our operating leases for each of the five years in the period ending December 31, 2027, and thereafter, reconciled to our operating lease liability at June 30, 2023: Year ending December 31, 2023 (six months remaining) $ 195 2024 381 2025 346 2026 351 2027 356 Thereafter 509 Total undiscounted lease payments 2,138 Less: present value adjustment 219 Operating lease liability at June 30, 2023 $ 1,919 24 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 15. 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. 16. Common and Preferred Stock Changes in the number of common stock shares outstanding are as follows: Six Months Ended June 30, 2023 2022 Shares outstanding, beginning of period 21,076,255 21,219,808 Treasury shares repurchased through stock repurchase authorization ( 238,164 ) ( 111,244 ) Issuance of treasury shares for vesting of restricted stock units 47,887 101,292 Shares outstanding, end of period 20,885,978 21,209,856 The changes in the number of common shares outstanding excludes certain non-forfeitable stock award shares that are included in the weighted average common shares outstanding used in basic earnings per common share calculations. In addition, the net loss per diluted common share for the three- and six-month periods ended June 30, 2023, excluded the weighted average effects of 61,935 and 61,614 shares of stock awards, respectively, since the impacts of these potential shares of common stock were anti-dilutive. 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 year ended December 31, 2021, we completed the repurchase of 81,095 shares of our common stock for $ 1,554 under this authorization. During 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. Of these amounts, 111,244 shares were repurchased for $ 1,932 during the six months ended June 30, 2022. 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. During the six months ended June 30, 2023, we completed the repurchase of 238,164 shares of our common stock for $ 3,223 . At June 30, 2023, $ 6,043 remains available 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, subject to certain adjustments. The effective date of these provisions was January 1, 2023. The Company is not currently subject to the AMT based on our reported GAAP earnings for the past three years and does not expect the IRA to have a material impact on the Company’s financial position and results of operations. 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. 17. Share-Based Compensation The NI Holdings, Inc. 2020 Stock and Incentive Plan (the “Plan”) is designed to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors, advisors, and non-employee directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business, and to afford such persons an opportunity to acquire an ownership interest in the Company, thereby aligning the interests of such persons with the Company’s shareholders. The Plan provides for the grant of nonqualified stock options, incentive stock options, restricted stock units (“RSUs”), stock appreciation rights, dividend equivalents, and performance share units (“PSUs”) to employees, officers, consultants, advisors, non-employee directors, and independent contractors designated by the Compensation Committee of the Board of Directors (the “Compensation Committee”). Awards made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the Company. 25 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 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. No eligible participant may be granted any awards for more than 100,000 shares in the aggregate in any calendar year, subject to adjustment in accordance with the Plan. The aggregate amount payable pursuant to all performance awards denominated in cash to any eligible person in any calendar year is limited to $ 1,000 in value. Directors who are not also employees of the Company may not be granted awards denominated in shares that exceed $ 150 in any calendar year. Restricted Stock Units The Compensation Committee has awarded RSUs to non-employee directors and select executives. RSUs are promises to issue actual shares of common stock at the end of a vesting period. The RSUs granted to executives under the Plan were based on salary and vest 20 % per year over a five-year period, while RSUs granted to non-employee directors vest 100 % on the date of the next annual meeting of shareholders following the grant date. Dividend equivalents on RSUs are accrued during the vesting period and paid in cash at the end of the vesting period but are subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to RSUs. The Company recognizes stock-based compensation costs for RSUs based on the grant date fair value. The compensation costs are normally expensed over the vesting periods to each vesting date; however, the cost of RSUs granted to executives are expensed immediately if the executive has met certain retirement criteria and the RSUs become non-forfeitable. Estimated forfeitures are included in the determination of compensation costs. No forfeitures are currently estimated. A summary of the Company’s outstanding and unearned RSUs is presented below: RSUs Weighted-Average Grant-Date Fair Value Per Share Units outstanding and unearned at January 1, 2022 108,380 $ 16.86 RSUs granted during 2022 59,600 17.61 RSUs earned during 2022 ( 52,620 ) 17.39 Units outstanding and unearned at December 31, 2022 115,360 17.00 RSUs granted during 2023 85,000 13.76 RSUs earned during 2023 ( 53,780 ) 16.32 Units outstanding and unearned at June 30, 2023 146,580 15.37 The following table shows the impact of RSU activity to the Company’s financial results: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 RSU compensation expense $ 257 $ 225 $ 559 $ 498 Income tax benefit ( 58 ) ( 51 ) ( 127 ) ( 113 ) RSU compensation expense, net of income taxes $ 199 $ 174 $ 432 $ 385 At June 30, 2023, there was $ 1,427 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 1.84 years. 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 are met. The PSUs granted to employees under the Plan were based on salary and include a three-year adjusted 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. 26 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 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: PSUs Weighted-Average Grant-Date Fair Value Per Share Units outstanding at January 1, 2022 190,600 $ 16.06 PSUs granted during 2022 (at target) 61,800 18.10 PSUs earned during 2022 ( 86,684 ) 15.21 Performance adjustment (1) 31,200 15.21 Forfeitures ( 6,916 ) 15.21 Units outstanding at December 31, 2022 190,000 17.00 PSUs granted during 2023 (at target) 87,400 13.85 PSUs earned during 2023 — — Performance adjustment (1) ( 63,600 ) 14.26 Forfeitures — — Units outstanding at June 30, 2023 213,800 16.53 (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: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 PSU compensation expense $ 139 $ 262 $ 277 $ 523 Income tax benefit ( 32 ) ( 60 ) ( 63 ) ( 119 ) PSU compensation expense, net of income taxes $ 107 $ 202 $ 214 $ 404 The cost estimates for PSU grants represent initial target awards until we can reasonably forecast the financial performance of each PSU award grant. At the end of the performance period, we will reflect a performance adjustment, which may be either an increase or decrease from the initial target awards. 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 June 30, 2023, there was $ 1,316 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 2.44 years. 27 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 18. Allowance for Expected Credit Losses Premiums Receivable Beginning on December 31, 2022, credit losses are recognized through an allowance account developed using the new CECL model. This guidance was adopted in the fourth quarter of 2022, and accordingly, there was no allowance for expected credit losses as of June 30, 2022. See the Part II, Item 8, Note 2 “Recent Accounting Pronouncements” section of the 2022 Annual Report for additional information. The following table presents the balances of premiums and agents’ receivable balances, net of the allowance for expected credit losses as of June 30, 2023, and the changes in the allowance for expected credit losses for the three and six months ended June 30, 2023. As of and For the Three Months Ended June 30, 2023 Premiums Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Balance, beginning of period $ 64,502 $ 445 Current period charge for expected credit losses 189 Write-offs of uncollectible premiums receivable 200 Balance, end of period $ 106,946 $ 434 As of and For the Six Months Ended June 30, 2023 Premiums Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Balance, beginning of period $ 62,173 $ 425 Current period charge for expected credit losses 278 Write-offs of uncollectible premiums receivable 269 Balance, end of period $ 106,946 $ 434 28 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) 19. Segment Information 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 three- and six-month periods ended June 30, 2023 and 2022. For purposes of evaluating profitability of the non-standard auto segment, we combine 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 line items in our Unaudited Consolidated Statement of Operations or Unaudited Consolidated Balance Sheet to our operating segments. Those line items include investment income, net investment gains (losses), fee and other income excluding non-standard auto, and income tax expense (benefit) within the Unaudited Consolidated Statement of Operations. For the Unaudited Consolidated Balance Sheet, those items include cash and investments, property and equipment, other assets, accrued expenses, income taxes recoverable or payable, and shareholders’ equity. 29 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Three Months Ended June 30, 2023 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 21,508 $ 21,744 $ 22,995 $ 17,526 $ 21,076 $ 1,313 $ 106,162 Assumed premiums earned — — — 501 — 326 827 Ceded premiums earned ( 965 ) ( 99 ) ( 2,580 ) ( 4,691 ) ( 4,435 ) ( 73 ) ( 12,843 ) Net premiums earned 20,543 21,645 20,415 13,336 16,641 1,566 94,146 Direct losses and loss adjustment expenses 18,455 14,139 18,414 12,702 29,685 1,754 95,149 Assumed losses and loss adjustment expenses — — — — — 67 67 Ceded losses and loss adjustment expenses 411 — ( 499 ) ( 4,492 ) ( 11,556 ) ( 1,574 ) ( 17,710 ) Net losses and loss adjustment expenses 18,866 14,139 17,915 8,210 18,129 247 77,506 Gross margin 1,677 7,506 2,500 5,126 ( 1,488 ) 1,319 16,640 Underwriting and general expenses 5,754 8,684 6,150 2,648 6,249 389 29,874 Underwriting gain (loss) ( 4,077 ) ( 1,178 ) ( 3,650 ) 2,478 ( 7,737 ) 930 ( 13,234 ) Fee and other income 239 499 ( 939 ) Net investment income 2,505 Net investment gains (losses) ( 174 ) Loss before income taxes ( 10,404 ) Income tax benefit ( 2,169 ) Net loss ( 8,235 ) Net loss attributable to non-controlling interest ( 113 ) Net loss attributable to NI Holdings, Inc. $ ( 8,122 ) Operating Ratios: Loss and loss adjustment expense ratio 91.8 % 65.3 % 87.8 % 61.6 % 108.9 % 15.8 % 82.3 % Expense ratio 28.0 % 40.1 % 30.1 % 19.9 % 37.6 % 24.8 % 31.7 % Combined ratio 119.8 % 105.4 % 117.9 % 81.5 % 146.5 % 40.6 % 114.0 % Balances at June 30, 2023: Premiums and agents’ balances receivable $ 23,840 $ 10,322 $ 9,793 $ 44,951 $ 17,213 $ 827 $ 106,946 Deferred policy acquisition costs 5,785 8,871 7,974 2,832 8,198 464 34,124 Reinsurance recoverables on losses 727 — 4,691 3,114 42,635 2,341 53,508 Receivable from Federal Crop Insurance Corporation — — — 14,032 — — 14,032 Goodwill and other intangibles — 2,736 — — 14,278 — 17,014 Unpaid losses and loss adjustment expenses 31,935 52,866 30,503 11,603 96,390 8,741 232,038 Unearned premiums 35,317 28,067 48,690 27,193 43,066 3,017 185,350 30 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Three Months Ended June 30, 2022 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 19,824 $ 15,577 $ 21,703 $ 17,709 $ 18,161 $ 1,277 $ 94,251 Assumed premiums earned — — — 491 — 1,200 1,691 Ceded premiums earned ( 559 ) ( 65 ) ( 1,748 ) ( 5,905 ) ( 3,130 ) ( 39 ) ( 11,446 ) Net premiums earned 19,265 15,512 19,955 12,295 15,031 2,438 84,496 Direct losses and loss adjustment expenses 16,866 4,133 62,188 13,237 13,081 1,165 110,670 Assumed losses and loss adjustment expenses — — — 244 — 1,291 1,535 Ceded losses and loss adjustment expenses ( 12 ) — ( 357 ) ( 3,151 ) ( 90 ) — ( 3,610 ) Net losses and loss adjustment expenses 16,854 4,133 61,831 10,330 12,991 2,456 108,595 Gross margin 2,411 11,379 ( 41,876 ) 1,965 2,040 ( 18 ) ( 24,099 ) Underwriting and general expenses 5,553 6,867 6,056 1,609 5,576 585 26,246 Underwriting gain (loss) ( 3,142 ) 4,512 ( 47,932 ) 356 ( 3,536 ) ( 603 ) ( 50,345 ) Fee and other income 254 415 4,766 Net investment income 2,015 Net investment gains (losses) ( 11,136 ) Loss before income taxes ( 59,051 ) Income tax benefit ( 12,415 ) Net loss ( 46,636 ) Net loss attributable to non-controlling interest ( 726 ) Net loss attributable to NI Holdings, Inc. $ ( 45,910 ) Operating Ratios: Loss and loss adjustment expense ratio 87.5 % 26.6 % 309.9 % 84.0 % 86.4 % 100.7 % 128.5 % Expense ratio 28.8 % 44.3 % 30.3 % 13.1 % 37.1 % 24.0 % 31.1 % Combined ratio 116.3 % 70.9 % 340.2 % 97.1 % 123.5 % 124.7 % 159.6 % Balances at June 30, 2022: Premiums and agents’ balances receivable $ 21,287 $ 16,678 $ 10,468 $ 42,905 $ 16,175 $ 823 $ 108,336 Deferred policy acquisition costs 5,427 8,201 7,838 1,060 7,929 462 30,917 Reinsurance recoverables on losses 591 — 2,766 1,976 10,960 748 17,041 Goodwill and other intangibles — 2,786 — — 14,700 — 17,486 Unpaid losses and loss adjustment expenses 29,105 38,689 49,052 12,755 43,876 9,399 182,876 Unearned premiums 31,885 24,030 45,942 26,205 42,379 3,284 173,725 Payable to Federal Crop Insurance Corporation — — — 7,102 — — 7,102 31 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Six Months Ended June 30, 2023 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 42,050 $ 42,716 $ 45,426 $ 17,516 $ 41,306 $ 2,622 $ 191,636 Assumed premiums earned — — — 501 — 902 1,403 Ceded premiums earned ( 1,853 ) ( 192 ) ( 5,021 ) ( 5,405 ) ( 8,648 ) ( 147 ) ( 21,266 ) Net premiums earned 40,197 42,524 40,405 12,612 32,658 3,377 171,773 Direct losses and loss adjustment expenses 34,080 31,177 27,937 12,032 59,007 1,777 166,010 Assumed losses and loss adjustment expenses — — — — — 157 157 Ceded losses and loss adjustment expenses 412 — ( 1,303 ) ( 4,596 ) ( 22,764 ) ( 1,585 ) ( 29,836 ) Net losses and loss adjustment expenses 34,492 31,177 26,634 7,436 36,243 349 136,331 Gross margin 5,705 11,347 13,771 5,176 ( 3,585 ) 3,028 35,442 Underwriting and general expenses 12,172 17,677 12,355 2,680 12,336 898 58,118 Underwriting gain (loss) ( 6,467 ) ( 6,330 ) 1,416 2,496 ( 15,921 ) 2,130 ( 22,676 ) Fee and other income 471 773 ( 5,859 ) Net investment income 4,744 Net investment gains (losses) 1,242 Loss before income taxes ( 15,917 ) Income tax benefit ( 3,182 ) Net loss ( 12,735 ) Net loss attributable to non-controlling interest ( 403 ) Net loss attributable to NI Holdings, Inc. $ ( 12,332 ) Operating Ratios: Loss and loss adjustment expense ratio 85.8 % 73.3 % 65.9 % 59.0 % 111.0 % 10.3 % 79.4 % Expense ratio 30.3 % 41.6 % 30.6 % 21.2 % 37.8 % 26.6 % 33.8 % Combined ratio 116.1 % 114.9 % 96.5 % 80.2 % 148.8 % 36.9 % 113.2 % 32 Table of Contents NI Holdings, Inc. Notes to Consolidated Financial Statements (Unaudited) (dollar amounts in thousands, except per share amounts) Six Months Ended June 30, 2022 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 39,125 $ 30,019 $ 42,882 $ 17,692 $ 35,391 $ 2,541 $ 167,650 Assumed premiums earned — — — 491 — 3,061 3,552 Ceded premiums earned ( 1,118 ) ( 129 ) ( 3,715 ) ( 5,901 ) ( 6,172 ) ( 84 ) ( 17,119 ) Net premiums earned 38,007 29,890 39,167 12,282 29,219 5,518 154,083 Direct losses and loss adjustment expenses 31,392 12,624 69,380 13,134 28,144 1,491 156,165 Assumed losses and loss adjustment expenses — — — 244 — 1,301 1,545 Ceded losses and loss adjustment expenses 173 — ( 709 ) ( 3,214 ) ( 5,136 ) ( 100 ) ( 8,986 ) Net losses and loss adjustment expenses 31,565 12,624 68,671 10,164 23,008 2,692 148,724 Gross margin 6,442 17,266 ( 29,504 ) 2,118 6,211 2,826 5,359 Underwriting and general expenses 11,321 12,958 12,029 1,057 10,912 1,373 49,650 Underwriting gain (loss) ( 4,879 ) 4,308 ( 41,533 ) 1,061 ( 4,701 ) 1,453 ( 44,291 ) Fee and other income 642 843 4,950 Net investment income 3,668 Net investment gains (losses) ( 16,664 ) Loss before income taxes ( 56,444 ) Income tax benefit ( 11,847 ) Net loss ( 44,597 ) Net loss attributable to non-controlling interest ( 596 ) Net loss attributable to NI Holdings, Inc. $ ( 44,001 ) Operating Ratios: Loss and loss adjustment expense ratio 83.1 % 42.2 % 175.3 % 82.8 % 78.7 % 48.8 % 96.5 % Expense ratio 29.8 % 43.4 % 30.7 % 8.6 % 37.3 % 24.9 % 32.2 % Combined ratio 112.8 % 85.6 % 206.0 % 91.4 % 116.1 % 73.7 % 128.7 % 33 Table of Contents Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion is intended to provide a more comprehensive review of our operating results and financial condition than can be obtained from reading the unaudited consolidated financial statements alone. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial Statements.” Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q constitutes forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” included elsewhere in this Form 10-Q. Part I, Item 1A, “Risk Factors” included in our 2022 Annual Report should also be reviewed for a discussion of important factors that could cause actual results to differ materially from the results described, or implied by, the forward-looking statements contained herein. All dollar amounts included in Item 2 herein are in thousands. Results of Operations Our consolidated net loss was $8,235 for the three months ended June 30, 2023, compared to net loss of $46,636 for the three months ended June 30, 2022. Our consolidated net loss was $12,735 for the six months ended June 30, 2023, compared to net loss of $44,597 for the six months ended June 30, 2022. The major components of revenues and net loss are shown below: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Net premiums earned $ 94,146 $ 84,496 $ 171,773 $ 154,083 Fee and other income 499 415 773 843 Net investment income 2,505 2,015 4,744 3,668 Net investment gains (losses) (174 ) (11,136 ) 1,242 (16,664 ) Total revenues 96,976 75,790 178,532 141,930 Components of net income: Net premiums earned 94,146 84,496 171,773 154,083 Losses and loss adjustment expenses 77,506 108,595 136,331 148,724 Amortization of deferred policy acquisition costs and other underwriting and general expenses 29,874 26,246 58,118 49,650 Underwriting loss (13,234 ) (50,345 ) (22,676 ) (44,291 ) Fee and other income 499 415 773 843 Net investment income 2,505 2,015 4,744 3,668 Net investment gains (losses) (174 ) (11,136 ) 1,242 (16,664 ) Loss before income taxes (10,404 ) (59,051 ) (15,917 ) (56,444 ) Income tax benefit (2,169 ) (12,415 ) (3,182 ) (11,847 ) Net loss $ (8,235 ) $ (46,636 ) $ (12,735 ) $ (44,597 ) Net Premiums Earned Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net premiums earned: Direct premium $ 106,162 $ 94,251 $ 191,636 $ 167,650 Assumed premium 827 1,691 1,403 3,552 Ceded premium (12,843 ) (11,446 ) (21,266 ) (17,119 ) Total net premiums earned $ 94,146 $ 84,496 $ 171,773 $ 154,083 34 Table of Contents Our net premiums earned for the three months ended June 30, 2023, increased $9,650, or 11.4%, compared to the three months ended June 30, 2022. Net premiums earned for the six months ended June 30, 2023, increased $17,690, or 11.5%, compared to the six months ended June 30, 2022. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net premiums earned: Private passenger auto $ 20,543 $ 19,265 $ 40,197 $ 38,007 Non-standard auto 21,645 15,512 42,524 29,890 Home and farm 20,415 19,955 40,405 39,167 Crop 13,336 12,295 12,612 12,282 Commercial 16,641 15,031 32,658 29,219 All other 1,566 2,438 3,377 5,518 Total net premiums earned $ 94,146 $ 84,496 $ 171,773 $ 154,083 Below are comments regarding net premiums earned by business segment: Private passenger auto – Net premiums earned for the second quarter of 2023 increased $1,278, or 6.6%, from the second quarter of 2022. Net premiums earned for the first six months of 2023 increased $2,190, or 5.8% from the first six months of 2022. Results were driven by significant rate increases in North Dakota, South Dakota, and Nebraska, offset by lower new business production as a result of underwriting actions taken to improve profitability. Non-standard auto – Net premiums earned for the second quarter of 2023 increased $6,133, or 39.5%, from the second quarter of 2022. Net premiums earned for the first six months of 2023 increased $12,634, or 42.3% from the first six months of 2022. Results were driven by prior period new business growth, improved retention, and significant rate increases in the Chicago market where our non-standard auto business is concentrated. Home and farm – Net premiums earned for the second quarter of 2023 increased $460, or 2.3%, from the second quarter of 2022. Net premiums earned for the first six months of 2023 increased $1,238, or 3.2% from the first six months of 2022. Results were driven by rate increases along with increased insured property values, which were primarily the result of higher inflationary factors. These premium increases were partially offset by lower levels of new business production as a result of underwriting actions taken to improve profitability. Crop – Net premiums earned for the second quarter of 2023 increased $1,041, or 8.5%, from the second quarter of 2022. This increase was driven by fewer multi-peril crop insurance premiums being ceded in the current year quarter. Net premiums earned for the first six months of 2023 increased $330, or 2.7% from the first six months of 2022. These increases were driven by fewer multi-peril crop insurance premiums being ceded, which were partially offset by prior crop year premium adjustments that occurred during the first quarter of 2023. Commercial – Net premiums earned for the second quarter of 2023 increased $1,610, or 10.7%, from the second quarter of 2022. Net premiums earned for the first six months of 2023 increased $3,439, or 11.8% from the first six months of 2022. These increases were driven by prior period new business growth, increased insured values which were primarily the result of higher inflationary factors, and continued increases in rate, partially offset by higher levels of ceded premium. All other – Net premiums earned for the second quarter of 2023 decreased $872, or 35.8%, from the second quarter of 2022. Net premiums earned for the first six months of 2023 decreased $2,141, or 38.8%, from the first six months of 2022. These decreases were driven by the decision to non-renew our participation in an assumed domestic and international reinsurance pool of business as of January 1, 2022. 35 Table of Contents Losses and Loss Adjustment Expenses Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net losses and loss adjustment expenses: Direct losses and loss adjustment expenses $ 95,149 $ 110,670 $ 166,010 $ 156,165 Assumed losses and loss adjustment expenses 67 1,535 157 1,545 Ceded losses and loss adjustment expenses (17,710 ) (3,610 ) (29,836 ) (8,986 ) Total net losses and loss adjustment expenses $ 77,506 $ 108,595 $ 136,331 $ 148,724 Our net losses and loss adjustment expenses for the three months ended June 30, 2023, decreased $31,089, or 28.6%, compared to the three months ended June 30, 2022. Our net losses and loss adjustment expenses for the six months ended June 30, 2023, decreased $12,393, or 8.3%, compared to the six months ended June 30, 2022. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net losses and loss adjustment expenses: Private passenger auto $ 18,866 $ 16,854 $ 34,492 $ 31,565 Non-standard auto 14,139 4,133 31,177 12,624 Home and farm 17,915 61,831 26,634 68,671 Crop 8,210 10,330 7,436 10,164 Commercial 18,129 12,991 36,243 23,008 All other 247 2,456 349 2,692 Total net losses and loss adjustment expenses $ 77,506 $ 108,595 $ 136,331 $ 148,724 Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Loss and loss adjustment expenses ratio: Private passenger auto 91.8% 87.5% 85.8% 83.1% Non-standard auto 65.3% 26.6% 73.3% 42.2% Home and farm 87.8% 309.9% 65.9% 175.3% Crop 61.6% 84.0% 59.0% 82.8% Commercial 108.9% 86.4% 111.0% 78.7% All other 15.8% 100.7% 10.3% 48.8% Total loss and loss adjustment expenses ratio 82.3% 128.5% 79.4% 96.5% Below are comments regarding significant changes in the net losses and loss adjustment expenses, and the net loss and loss adjustment expense ratios, by business segment: Private passenger auto – The net loss and loss adjustment expense ratio increased 4.3 percentage points and 2.7 percentage points in the three- and six-month periods ended June 30, 2023, respectively, compared to the same periods in 2022. Both periods were affected by elevated loss costs due to continued high levels of inflation. Additionally, the first quarter of 2023 was impacted by elevated winter weather-related losses. Non-standard auto – The net loss and loss adjustment expense ratio increased 38.7 percentage points and 31.1 percentage points in the three- and six-month periods ended June 30, 2023, respectively, compared to the same periods in 2022. These increases were driven by elevated loss severity as a result of inflationary factors as well as unfavorable prior year development on loss reserves. We continue to take significant rate and underwriting actions as a result of these elevated losses and challenging market conditions. Home and farm – The net loss and loss adjustment expense ratio decreased 222.1 percentage points and 109.4 percentage points in the three- and six-month periods ended June 30, 2023, respectively, compared to the same periods in 2022. These decreases were driven by significant catastrophe losses in Nebraska and South Dakota during the second quarter of 2022, in comparison to no catastrophe losses and moderate non-catastrophe weather-related losses during the first six months of 2023. Catastrophe losses for the Home and Farm segment in the second quarter of 2022 accounted for 211.6 percentage points of the net loss and loss adjustment expense ratio. Crop – The net loss and loss adjustment expense ratio decreased 22.4 percentage points and 23.8 percentage points in the three- and six-month periods ended June 30, 2023, respectively, compared to the same periods in 2022. These decreases were driven by improved crop growing conditions compared to the prior year. 36 Table of Contents Commercial – The net loss and loss adjustment expense ratio increased 22.5 percentage points and 32.3 percentage points in the three- and six-month periods ended June 30, 2023, respectively, compared to the same periods in 2022. These higher loss ratios were driven by unfavorable prior year reserve development attributable to freeze claims from Winter Storm Elliott as well as increased severity of liability losses. We are taking significant rate increases and underwriting actions and continue to evaluate additional measures to improve the segment’s profitability. All other – The net loss and loss adjustment expense ratio decreased 84.9 percentage points and 38.5 percentage points in the three-and six-month periods ended June 30, 2023, respectively, compared to the same period for 2022. These decreases were driven by our share of a significant catastrophe loss occurrence in the prior year within a reciprocal catastrophe pool that we participate in. Underwriting and General Expenses and Expense Ratio Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Underwriting and general expenses: Amortization of deferred policy acquisition costs $ 20,579 $ 16,244 $ 39,167 $ 31,867 Other underwriting and general expenses 9,295 10,002 18,951 17,783 Total underwriting and general expenses 29,874 26,246 58,118 49,650 Expense Ratio 31.7% 31.1% 33.8% 32.2% The expense ratio is calculated by dividing other underwriting and general expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company’s operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio increased 0.6 percentage points and 1.6 percentage points in the three-and six-month periods ended June 30, 2023, respectively, compared to the same periods in 2022. The increase in the amortization of deferred policy acquisition costs is due to higher deferrable costs resulting from significant premium growth in the non-standard auto and commercial segments, which generally pay higher agent commissions than our other segments, compared to the prior year. The increase in year-to-date other underwriting and general expenses was due to the impact of continued high levels of inflation. The decrease in quarter-to-date other underwriting and general expenses was related to changes in the timing of expense recognition between periods. Underwriting Gain (Loss) and Combined Ratio Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Underwriting gain (loss): Private passenger auto $ (4,077 ) $ (3,142 ) $ (6,467 ) $ (4,879 ) Non-standard auto (1,178 ) 4,512 (6,330 ) 4,308 Home and farm (3,650 ) (47,932 ) 1,416 (41,533 ) Crop 2,478 356 2,496 1,061 Commercial (7,737 ) (3,536 ) (15,921 ) (4,701 ) All other 930 (603 ) 2,130 1,453 Total underwriting loss $ (13,234 ) $ (50,345 ) $ (22,676 ) $ (44,291 ) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Combined ratio: Private passenger auto 119.8% 116.3% 116.1% 112.8% Non-standard auto 105.4% 70.9% 114.9% 85.6% Home and farm 117.9% 340.2% 96.5% 206.0% Crop 81.5% 97.1% 80.2% 91.4% Commercial 146.5% 123.5% 148.8% 116.1% All other 40.6% 124.7% 36.9% 73.7% Combined ratio 114.0% 159.6% 113.2% 128.7% Underwriting gain (loss) measures the pre-tax profitability of our insurance operations. It is derived by subtracting losses and loss adjustment expenses, amortization of deferred policy acquisition costs, and other underwriting and general expenses from net premiums earned. The combined ratio represents the sum of these losses and expenses as a percentage of net premiums earned, and measures our overall underwriting profit. 37 Table of Contents The total underwriting loss decreased $37,111, or 73.7%, for the three-month period ended June 30, 2023, compared to the same period in 2022. The total underwriting loss decreased $21,615, or 48.8%, for the six-month period ended June 30, 2023, compared to the same period in 2022. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses section above. The overall combined ratio decreased 45.6 percentage points in the three-month period ended June 30, 2023, compared to the same periods in 2022. The overall combined ratio decreased 15.5 percentage points in the six-month period ended June 30, 2023, compared to the same periods in 2022. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses section above. As we discussed above, we are taking significant rate increases and underwriting actions and continue to evaluate additional measures to improve underwriting profitability. Fee and Other Income We had fee and other income of $499 and $773 for the three and six months ended June 30, 2023, respectively, compared to $415 and $843 for the three and six months ended June 30, 2022, respectively. Fee income is largely attributable to the non-standard auto segment and is a key component in measuring its profitability. The decrease in fee and other income for the six-month period ended June 30, 2023, was driven by a shifting mix of business in the Chicago market as well as miscellaneous income from the sale of property in the first quarter of the prior year. Net Investment Income The following table shows our average cash and invested assets, net investment income, and return on average cash and invested assets for the reported periods: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Average cash and invested assets $ 409,388 $ 474,133 $ 407,833 $ 487,745 Net investment income $ 2,505 $ 2,015 $ 4,744 $ 3,668 Gross return on average cash and invested assets 3.2% 2.4% 3.2% 2.3% Net return on average cash and invested assets 2.5% 1.7% 2.3% 1.5% Net investment income increased $490 for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. Net investment income increased $1,076 for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. This increase was primarily driven by the rising interest rate environment which resulted in higher reinvestment rates for the fixed income portfolio. Gross and net return on average cash and invested assets increased year-over-year, driven by the higher net investment income and a higher proportion of the equity portfolio being invested in high dividend yield equities in 2023, along with a decrease in average cash and invested assets (measured at fair value). This decrease in average cash and invested assets was driven by lower fixed income fair values caused by an increasing interest rate environment and challenging equity market conditions particularly during the middle and later stages of 2022, combined with investment sales as a result of an unusually high number of weather-related losses in 2022. Net Investment Gains (Losses) Net investment gains (losses) consisted of the following: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Gross realized gains $ 357 $ 1,201 $ 13,088 $ 2,320 Gross realized losses, excluding credit impairment losses (476 ) (174 ) (1,621 ) (355 ) Net realized gains (losses) (119 ) 1,027 11,467 1,965 Change in net unrealized gains on equity securities (55 ) (12,163 ) (10,225 ) (18,629 ) Net investment gains (losses) $ (174 ) $ (11,136 ) $ 1,242 $ (16,664 ) 38 Table of Contents We had net unrealized losses of $119 and net unrealized gains of $11,467 for the three and six months ended June 30, 2023, respectively, compared to gains of $1,027 and $1,965 for the three and six months ended June 30, 2022, respectively. The year-to-date increase in net realized gains was the result of a strategic liquidation of a portfolio of equity securities in the first quarter of 2023. The gross realized gains from the sale of these securities were largely offset by the elimination of the unrealized gain position of these securities. No credit impairment losses were reported during any of the periods presented. We experienced a decrease in net unrealized gains on equity securities of $55 and $10,225 during the three and six months ended June 30, 2023, respectively, and a decrease in net unrealized gains on equity securities of $12,163 and $18,629 during the three and six months ended June 30, 2022, respectively. The current period year-to-date change in net unrealized gains on equity securities was driven by the equity portfolio liquidation noted above and additional sales of equity securities during the current quarter offset by the impact of changes in fair value attributable to favorable equity markets. The prior year decreases were driven by the impact of changes in fair value attributable to unfavorable equity markets. Our fixed income securities are classified as available for sale because we will, from time to time, make sales of securities that are not impaired, consistent with our investment goals and policies. The fixed income portion of the portfolio experienced net unrealized losses of $2,907 and net unrealized gains of $3,116 during the three and six months ended June 30, 2023, respectively, compared to net unrealized losses of $16,283 and $37,220 during the three and six months ended June 30, 2022, respectively. The changes were primarily the result of changes in U.S. interest rates. The change in the fair value of fixed income securities is not reflected in net income; rather it is reflected as a separate component (net of income taxes) of other comprehensive income. Income (Loss) before Income Taxes For the three months ended June 30, 2023, we had a pre-tax loss of $10,404 compared to a pre-tax loss of $59,051 for the three months ended June 30, 2022. For the six months ended June 30, 2023, we had a pre-tax loss of $15,917 compared to pre-tax loss of $56,444 for the six months ended June 30, 2022. These year-over-year decreases in pre-tax loss were largely attributable to the significant catastrophe losses during the second quarter of 2022 and significantly higher investment losses during the first and second quarters of 2022, partially offset by year-to-date unfavorable prior year reserve development during 2023 combined with year-to-date favorable prior year reserve development during 2022. Income Tax Expense (Benefit) We recorded an income tax benefit of $2,169 for the three months ended June 30, 2023, compared to an income tax benefit of $12,415 for the three months ended June 30, 2022. Our effective tax rate for the second quarter of 2023 was 20.8% compared to an effective tax rate of 21.0% for the second quarter of 2022. We recorded an income tax benefit of $3,182 for the six months ended June 30, 2023, compared to income tax benefit of $11,847 for the six months ended June 30, 2022. Our effective tax rate for the first six months of 2023 was 20.0% compared to an effective tax rate of 21.0% for the first six months of 2022. Net Income (Loss) For the three months ended June 30, 2023, we had a net loss before non-controlling interest of $8,235 compared to a net loss of $46,636 for the three months ended June 30, 2022. For the six months ended June 30, 2023, we had a net loss before non-controlling interest of $12,735 compared to net loss of $44,597 for the six months ended June 30, 2022. These year-over-year decreases in pre-tax loss were largely attributable to the significant catastrophe losses during the second quarter of 2022 and significantly higher investment losses during the first and second quarters of 2022, partially offset by year-to-date unfavorable prior year reserve development during 2023 combined with year-to-date favorable prior year reserve development during 2022. Return on Average Equity For the three months ended June 30, 2023, we had annualized return on average equity, after non-controlling interest, of (13.3)% compared to annualized return on average equity, after non-controlling interest, of (61.4)% for the three months ended June 30, 2022. For the six months ended June 30, 2023, we had annualized return on average equity, after non-controlling interest, of (10.1)% compared to annualized return on average equity, after non-controlling interest, of (28.7)% for the six months ended June 30, 2022. Average equity is calculated as the average between beginning and ending equity, excluding non-controlling interest, for the period. 39 Table of Contents Critical Accounting Policies The preparation of financial statements in accordance with GAAP requires both the use of estimates and judgment relative to the application of appropriate accounting policies. We are required to make estimates and assumptions in certain circumstances that affect amounts reported in the unaudited consolidated financial statements and related footnotes. We evaluate these estimates and assumptions on an ongoing basis based on historical developments, market conditions, industry trends, and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to these estimates and assumptions or that reported results of operations will not be materially and adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. Our critical accounting policies are more fully described in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” presented in our 2022 Annual Report. There have been no changes in our critical accounting policies from December 31, 2022. Liquidity and Capital Resources We expect to generate sufficient funds from our operations and maintain a high degree of liquidity in our investment portfolio to meet the demands of claim settlements and operating expenses for the foreseeable future. Our primary sources of funds are premium collections, investment earnings, and fixed income maturities. The change in cash and cash equivalents for the six months ended June 30, 2023 and 2022, were as follows: Six Months Ended June 30, 2023 2022 Net cash flows from operating activities $ 7,916 $ 13,647 Net cash flows from investing activities 1,115 (12,075 ) Net cash flows from financing activities (3,397 ) (9,163 ) Net increase (decrease) in cash and cash equivalents $ 5,634 $ (7,591 ) For the six months ended June 30, 2023, net cash provided by operating activities totaled $7,916 compared to $13,647 a year ago. This decrease was primarily driven by higher claim payments during the current period partially offset by higher levels of cash received for premiums. For the six months ended June 30, 2023, net cash provided by investing activities totaled $1,115 compared to net cash used of $12,075 a year ago. This change was attributable to an increase in sales of equity securities and a decrease in purchases of equity securities partially offset by a decrease in maturities and sales of fixed income securities and an increase in purchases of fixed income securities in the current year compared to the prior year. For the six months ended June 30, 2023, net cash used by financing activities totaled $3,397 compared to $9,163 a year ago. This decrease in cash used was attributable to an installment payment of $6,667 on the Westminster consideration payable during the first quarter of 2022, partially offset by an increase in share repurchases during the first six months of 2023 compared to the first six months of 2022. As a holding company, a principal source of long-term liquidity will be dividend payments from our directly-owned subsidiaries. 40 Table of Contents Nodak Insurance is restricted by the insurance laws of North Dakota as to the amount of dividends or other distributions it may pay to NI Holdings. North Dakota law sets the maximum amount of dividends that may be paid by Nodak Insurance during any twelve-month period after notice to, but without prior approval of, the North Dakota Insurance Department. This amount cannot exceed the lesser of (i) 10% of surplus as regards policyholders as of the preceding December 31, or (ii) the statutory net income for the preceding calendar year (excluding realized capital gains), less any prior dividends paid during such twelve-month period. In addition, any insurance company other than a life insurance company may carry forward net income from the preceding two calendar years, not including realized investment gains, less any dividends actually paid during those two calendar years. Dividends in excess of this amount are considered “extraordinary” and are subject to the approval of the North Dakota Insurance Department. There is no amount available for payment of dividends from Nodak Insurance to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss of Nodak Insurance during 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. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Nodak Insurance during the six months ended June 30, 2023. The Nodak Insurance Board of Directors declared and Nodak Insurance paid dividends of $3,000 to NI Holdings during the year ended December 31, 2022. 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 during the year ended December 31, 2022. No dividends were declared or paid by Direct Auto during the six months ended June 30, 2023, or the year ended December 31, 2022. 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 during the year ended December 31, 2022. No dividends were declared or paid by Westminster during the six months ended June 30, 2023, or the year ended December 31, 2022. 41 Table of Contents Item 3. - Quantitative and Qualitative Disclosures about Market Risk The Company’s assessment of market risk as of June 30, 2023, indicates there have been no material changes in the quantitative and qualitative disclosures from those in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our 2022 Annual Report. Item 4. - Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”), and that such material information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosures. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Changes in Internal Controls over Financial Reporting In the ordinary course of business, we periodically review our system of internal control over financial reporting to identify opportunities to improve our controls and increase efficiency, while ensuring that we maintain an effective internal control environment. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 42 Table of Contents Part II. - OTHER INFORMATION Item 1. - Legal Proceedings We are party to litigation in the normal course of business. Based upon information presently available to us, we do not consider any litigation to be material. However, given the uncertainties attendant to litigation, we cannot assure you that our results of operations and financial condition will not be materially adversely affected by any litigation. Item 1A. - Risk Factors There have been no material changes in our assessment of our risk factors from those set forth in Part I, Item 1A, “Risk Factors” in our 2022 Annual Report. 43 Table of Contents Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds All dollar amounts included in Item 2 herein, except per share data, are in thousands. The Company has not sold any unregistered securities within the past three years. On January 17, 2017, our registration statement on Form S-1 registering our common stock was declared effective by the SEC. On March 13, 2017, the Company completed the IPO of 10,350,000 shares of common stock at a price of $10.00 per share. The Company received net proceeds of $93,145 from the offering, after deducting underwriting discounts and offering expenses. Direct Auto was acquired on August 31, 2018, with $17,000 of the net proceeds from the IPO. On January 1, 2020, we acquired Westminster for $40,000. We paid $20,000 at the time of closing. The terms of the acquisition agreement included payment of the remaining $20,000, subject to certain adjustments, in three equal installments on each of the first and second anniversaries of the closing, and on the first business day of the month preceding the third anniversary of the closing. 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 Company used net proceeds from the IPO to satisfy these obligations. From time to time, the Company may also repurchase its own stock. To date, the Company has used the net proceeds from the IPO to fund these share repurchases. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on January 17, 2017. 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 year ended December 31, 2021, we completed the repurchase of 81,095 shares of our common stock for $1,554 under this authorization. During 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. During the six months ended June 30, 2023, we repurchased an additional 238,164 shares of our common stock for $3,223. At June 30, 2023, $6,043 remains available under this authorization. Share repurchase activity during the three months ended June 30, 2023, is presented below: Period in 2023 Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2) (in thousands) April 1-30, 2023 34,954 $ 13.37 34,954 $ 8,178 May 1-31, 2023 119,871 13.32 119,871 6,581 June 1-30, 2023 37,240 14.46 37,240 6,043 Total 192,065 $ 13.55 192,065 $ 6,043 (1) Shares purchased pursuant to the May 9, 2022, publicly announced share repurchase authorization of up to approximately $10,000 of the Company’s outstanding common stock. (2) Maximum dollar value of shares that may yet be purchased consist of up to approximately $6,043 under the May 9, 2022, publicly announced share repurchase authorization. 44 Table of Contents Item 3. - Defaults upon Senior Securities Not Applicable Item 4. - Mine Safety Disclosures Not Applicable Item 5. - Other Information 10b5-1 Trading Plans During the second quarter of 2023, none of our directors or executive officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408(a) of Regulation S-K). Amended and Restated Employment Agreement On August 8, 2023, we entered into an Amended and Restated Employment Agreement (the “Amended Employment Agreement”) with Seth Daggett, our Chief Financial Officer, to (i) provide that the employment period under the Amended Employment Agreement will be two years, which will be automatically extended on a daily basis such that the employment period shall always be two years, unless terminated in accordance with its terms, and (ii) increase Mr. Daggett’s annual base salary from $285,000 to $375,000. The increase in the employment period will also increase the amounts payable to Mr. Daggett following an involuntary termination by the Company without Cause (as defined in the Amended Employment Agreement) or a voluntary termination by Mr. Daggett for Good Reason (as defined in the Amended Employment Agreement) since in both cases Mr. Daggett is entitled to receive an amount equal to (a) his annual base salary plus (b) the average annual bonus for the preceding three calendar years, which annual amount shall be multiplied by the number of full calendar months remaining in the employment period divided by twelve. In addition, the Amended Employment Agreement clarifies that all compensation payable to Mr. Daggett shall be subject to any clawback policy we adopt to comply with Section 10D of the Securities Exchange Act of 1934, as amended, and related rules and listing standards of The Nasdaq Stock Market. The foregoing summary of the Amended Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended Employment Agreement filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference. Item 6. - Exhibits Exhibit Number Description 3.1 Articles of Incorporation, as amended by Articles of Amendment dated May 24, 2023. 3.2 Amended and Restated Bylaws, dated May 24, 2023. 10.1 Amended and Restated Employment Agreement dated August 8, 2023 between the Company and Seth C. Daggett. 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 45 Table of Contents 101.INS XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Linkbase Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 46 Table of Contents Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 8, 2023. NI HOLDINGS, INC. /s/ Michael J. Alexander Michael J. Alexander President and Chief Executive Officer (Principal Executive Officer) /s/ Seth C. Daggett Seth C. Daggett Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 47