NI Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of NI Holdings, Inc. Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of NI Holdings, Inc. and Subsidiaries (collectively, the “Company”) as of December 31, 2023, and 2022, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and the schedule listed in Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 47 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of Losses and Loss Adjustment Expenses Reserves Critical Audit Matter Description On December 31, 2023, the Company’s liability for unpaid losses and loss adjustment expenses was approximately $217 million. As described in Note 3 and 8, the Company’s property and casualty insurance loss and loss expenses reserves (referred to as “losses and loss expenses reserves”), are determined by the Company using actuarial methods, models, assumptions, and judgment to estimate the reserves required to pay for and settle all outstanding insured claims as of the financial statement date. There is significant uncertainty inherent in determining management’s best estimate of the losses and loss expenses reserves, requiring the use of informed actuarially based estimates and management’s judgment. The actuarial estimate of losses and loss expenses reserves is subject to review and adjustment by Company management. Losses and loss expenses are inherently uncertain as to timing and amount and the recorded losses and loss expense reserves may vary materially from the actual ultimate cost of claims. Given the subjectivity in estimating ultimate losses and loss expenses, due to uncertainties concerning the future emergence of losses and loss expenses, inflation trends, and the judicial environment, among other factors, auditing losses and loss expenses reserves involved an especially high degree of auditor judgment, including the need to involve an actuarial specialist. How the Critical Matter Was Addressed in the Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of certain internal controls over the Company’s reserving process for losses and loss adjustment expenses reserves. To test the Company’s estimate of losses and loss adjustment expenses reserves, our audit procedures included among others: ● With the assistance of the actuarial specialist, we used the Company’s claims data and other inputs, to develop a range of independent estimates for the losses and loss expenses reserves. We used these independent estimates to assess the reasonableness of the Company’s reserves by comparing our estimates to the Company’s recorded losses and loss expenses reserves. ● We tested the underlying data that served as the basis for the actuarial analysis, including historical claims data, to test the reasonableness of key inputs to the actuarial estimate. ● We compared the Company’s prior years estimates of expected incurred losses to actual experience during the current year to identify potential bias in the determination of losses and loss expenses reserves. /s/ Mazars USA LLP PCAOB ID 339 We have served as the Company’s auditor since 2016. Fort Washington, Pennsylvania March 15, 2024 48 NI Holdings, Inc. Consolidated Balance Sheets December 31, 2023 and 2022 (dollar amounts in thousands, except par value) 2023 2022 Assets: Cash and cash equivalents $ 56,693 $ 47,002 Fixed income securities, at fair value (net of allowance for expected credit losses of $ 0 at December 31, 2023 and 2022) 347,731 303,324 Equity securities, at fair value 27,767 52,393 Other investments 2,006 2,005 Total cash and investments 434,197 404,724 Premiums and agents' balances receivable (net of allowance for expected credit losses of $ 402 at December 31, 2023 and $ 425 at December 31, 2022) 74,058 62,173 Deferred policy acquisition costs 34,120 29,768 Reinsurance premiums receivable 4,061 1,647 Reinsurance recoverables on losses (net of allowance for expected credit losses of $ 0 at December 31, 2023 and 2022) 48,969 37,575 Income tax recoverable — 13,964 Accrued investment income 2,763 2,456 Property and equipment, net 9,897 9,843 Deferred income taxes 8,413 9,005 Receivable from Federal Crop Insurance Corporation 17,404 15,462 Goodwill and other intangibles 10,039 17,250 Other assets 10,965 10,365 Total assets $ 654,886 $ 614,232 Liabilities: Unpaid losses and loss adjustment expenses $ 217,119 $ 190,459 Unearned premiums 164,100 148,513 Income tax payable 88 — Accrued expenses and other liabilities 23,180 22,053 Total liabilities 404,487 361,025 Shareholders’ equity: Common stock, $ 0.01 par value, authorized 25,000,000 shares, issued: 23,000,000 shares; and outstanding: 2023 – 20,599,908 shares, 2022 – 21,076,255 shares 230 230 Additional paid-in capital 96,294 95,671 Unearned employee stock ownership plan shares ( 698 ) ( 941 ) Retained earnings 208,376 214,121 Accumulated other comprehensive income (loss), net of income taxes ( 21,384 ) ( 29,286 ) Treasury stock, at cost, 2023 – 2,330,297 shares, 2022 – 1,829,635 shares ( 35,177 ) ( 28,818 ) Non-controlling interest 2,758 2,230 Total shareholders’ equity 250,399 253,207 Total liabilities and shareholders’ equity $ 654,886 $ 614,232 The accompanying notes are an integral part of these consolidated financial statements. 49 NI Holdings, Inc. Consolidated Statements of Operations Years Ended December 31, 2023, 2022, and 2021 (dollar amounts in thousands, except per share data) 2023 2022 2021 Revenues: Net premiums earned $ 351,137 $ 328,290 $ 299,589 Fee and other income 1,978 1,453 1,775 Net investment income 10,456 7,820 7,131 Net investment gains (losses) 2,124 ( 13,126 ) 15,479 Total revenues 365,695 324,437 323,974 Expenses: Losses and loss adjustment expenses 244,412 294,432 216,379 Amortization of deferred policy acquisition costs 82,991 66,803 64,574 Other underwriting and general expenses 35,799 32,231 31,715 Goodwill impairment charge 6,756 — — Total expenses 369,958 393,466 312,668 Income (loss) before income taxes ( 4,263 ) ( 69,029 ) 11,306 Income tax expense (benefit) 963 ( 15,254 ) 2,974 Net income (loss) ( 5,226 ) ( 53,775 ) 8,332 Net income (loss) attributable to non-controlling interest 250 ( 679 ) ( 84 ) Net income (loss) attributable to NI Holdings, Inc. $ ( 5,476 ) $ ( 53,096 ) $ 8,416 Earnings (loss) per common share: Basic $ ( 0.26 ) $ ( 2.49 ) $ 0.39 Diluted $ ( 0.26 ) $ ( 2.49 ) $ 0.39 Share data: Weighted average common shares outstanding used in basic per common share calculations 21,159,073 21,333,389 21,424,060 Plus: Dilutive securities — — 232,366 Weighted average common shares used in diluted per common share calculations 21,159,073 21,333,389 21,656,426 The accompanying notes are an integral part of these consolidated financial statements. 50 NI Holdings, Inc. Consolidated Statements of Comprehensive Income (Loss) Years Ended December 31, 2023, 2022, and 2021 (dollar amounts in thousands) 2023 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income (loss) $ ( 5,476 ) $ 250 $ ( 5,226 ) Other comprehensive income (loss), before income taxes: Holding gains (losses) on investments 9,709 363 10,072 Reclassification adjustment for net realized losses (gains) included in net income (loss) 582 — 582 Other comprehensive income (loss), before income taxes 10,291 363 10,654 Income tax benefit (expense) related to items of other comprehensive income (loss) ( 2,389 ) ( 85 ) ( 2,474 ) Other comprehensive income (loss), net of income taxes 7,902 278 8,180 Comprehensive income (loss) $ 2,426 $ 528 $ 2,954 2022 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income (loss) $ ( 53,096 ) $ ( 679 ) $ ( 53,775 ) Other comprehensive income (loss), before income taxes: Holding gains (losses) on investments ( 44,810 ) ( 1,703 ) ( 46,513 ) Reclassification adjustment for net realized losses (gains) included in net income (loss) 131 20 151 Other comprehensive income (loss), before income taxes ( 44,679 ) ( 1,683 ) ( 46,362 ) Income tax benefit (expense) related to items of other comprehensive income (loss) 10,156 383 10,539 Other comprehensive income (loss), net of income taxes ( 34,523 ) ( 1,300 ) ( 35,823 ) Comprehensive income (loss) $ ( 87,619 ) $ ( 1,979 ) $ ( 89,598 ) 2021 Attributable to NI Holdings, Inc. Attributable to Non-Controlling Interest Total Net income (loss) $ 8,416 $ ( 84 ) $ 8,332 Other comprehensive income (loss), before income taxes: Holding gains (losses) on investments ( 8,827 ) ( 319 ) ( 9,146 ) Reclassification adjustment for net realized losses (gains) included in net income (loss) ( 648 ) ( 2 ) ( 650 ) Other comprehensive income (loss), before income taxes ( 9,475 ) ( 321 ) ( 9,796 ) Income tax benefit (expense) related to items of other comprehensive income (loss) 1,872 69 1,941 Other comprehensive income (loss), net of income taxes ( 7,603 ) ( 252 ) ( 7,855 ) Comprehensive income (loss) $ 813 $ ( 336 ) $ 477 The accompanying notes are an integral part of these consolidated financial statements. 51 NI Holdings, Inc. Consolidated Statements of Changes in Shareholders’ Equity Years Ended December 31, 2023, 2022, and 2021 (dollar amounts in thousands) 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, 2021 $ 230 $ 97,911 $ ( 1,427 ) $ 258,741 $ 12,840 ( 23,968 ) $ 4,545 $ 348,872 Net income (loss) — — — 8,416 — — ( 84 ) 8,332 Other comprehensive income (loss), net of income taxes — — — — ( 7,603 ) — ( 252 ) ( 7,855 ) Purchase of treasury stock — — — — — ( 4,316 ) — ( 4,316 ) Share-based compensation — 2,408 — — — — — 2,408 Issuance of vested award shares — ( 2,370 ) — 50 — 1,832 — ( 488 ) Distribution of employee stock ownership plan shares — 217 243 — — — — 460 Balance, December 31, 2021 230 98,166 ( 1,184 ) 267,207 5,237 ( 26,452 ) 4,209 347,413 Net income (loss) — — — ( 53,096 ) — — ( 679 ) ( 53,775 ) Other comprehensive income (loss), net of income taxes — — — — ( 34,523 ) — ( 1,300 ) ( 35,823 ) Purchase of treasury stock — — — — — ( 4,180 ) — ( 4,180 ) Share-based compensation — ( 40 ) — — — — — ( 40 ) Issuance of vested award shares — ( 2,592 ) — 10 — 1,814 — ( 768 ) Distribution of employee stock ownership plan shares — 137 243 — — — — 380 Balance, December 31, 2022 230 95,671 ( 941 ) 214,121 ( 29,286 ) ( 28,818 ) 2,230 253,207 Net income (loss) — — — ( 5,476 ) — — 250 ( 5,226 ) Other comprehensive income (loss), net of income taxes — — — — 7,902 — 278 8,180 Purchase of treasury stock — — — — ( 7,278 ) — ( 7,278 ) Share-based compensation — 1,366 — — — — — 1,366 Issuance of vested award shares — ( 822 ) — ( 269 ) — 919 — ( 172 ) Distribution of employee stock ownership plan shares — 79 243 — — — — 322 Balance, December 31, 2023 $ 230 $ 96,294 $ ( 698 ) $ 208,376 ( 21,384 ) ( 35,177 ) $ 2,758 $ 250,399 The accompanying notes are an integral part of these consolidated financial statements. 52 NI Holdings, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2023, 2022, and 2021 (dollar amounts in thousands) 2023 2022 2021 Cash flows from operating activities: Net income (loss) $ ( 5,226 ) $ ( 53,775 ) $ 8,332 Adjustments to reconcile net income (loss) to net cash flows from operating activities: Net investment losses (gains) ( 2,124 ) 13,126 ( 15,479 ) Deferred income tax expense (benefit) ( 1,882 ) ( 3,972 ) ( 1,310 ) Depreciation of property and equipment 826 708 694 Amortization of intangibles 455 472 472 Goodwill impairment charge 6,756 — — Distribution of employee stock ownership plan shares 322 380 460 Share-based compensation 1,366 ( 40 ) 2,408 Amortization of deferred policy acquisition costs 82,991 66,803 64,574 Deferral of policy acquisition costs ( 87,343 ) ( 71,624 ) ( 65,553 ) Net amortization of premiums and discounts on investments 984 1,590 2,080 Loss (gain) on sale of property and equipment ( 55 ) ( 186 ) 31 Changes in operating assets and liabilities: Premiums and agents’ balances receivable ( 11,885 ) ( 10,721 ) ( 2,929 ) Reinsurance premiums receivable / payable ( 2,414 ) ( 1,973 ) 419 Reinsurance recoverables on losses ( 11,394 ) ( 16,375 ) ( 12,490 ) Income tax recoverable / payable 14,052 ( 13,600 ) ( 1,118 ) Accrued investment income ( 307 ) 68 ( 383 ) Federal Crop Insurance Corporation receivable / payable ( 1,942 ) ( 20,424 ) 11,608 Other assets ( 600 ) 9 ( 3,669 ) Unpaid losses and loss adjustment expenses 26,660 50,797 33,912 Unearned premiums 15,587 20,724 8,426 Accrued expenses and other liabilities 1,143 7,625 ( 1,317 ) Net cash flows from operating activities 25,970 ( 30,388 ) 29,168 Cash flows from investing activities: Proceeds from maturities and sales of fixed income securities 37,904 77,965 73,015 Proceeds from sales of equity securities 39,939 26,204 44,600 Purchases of fixed income securities ( 73,222 ) ( 64,742 ) ( 128,480 ) Purchases of equity securities ( 12,607 ) ( 13,884 ) ( 37,491 ) Purchases of property and equipment ( 974 ) ( 1,162 ) ( 739 ) Proceeds from sales of property and equipment 147 667 43 Proceeds from sale of other investments and other — — 901 Net cash flows from investing activities ( 8,813 ) 25,048 ( 48,151 ) Cash flows from financing activities: Purchases of treasury stock ( 7,278 ) ( 4,180 ) ( 4,316 ) Installment payment on Westminster consideration payable — ( 13,333 ) ( 6,667 ) Principal repayments of finance leases ( 16 ) — — Issuance of vested award shares ( 172 ) ( 768 ) ( 488 ) Net cash flows from financing activities ( 7,466 ) ( 18,281 ) ( 11,471 ) Net increase (decrease) in cash and cash equivalents 9,691 ( 23,621 ) ( 30,454 ) Cash and cash equivalents at beginning of period 47,002 70,623 101,077 Cash and cash equivalents at end of period $ 56,693 $ 47,002 $ 70,623 Federal and state income taxes paid (net of refunds received) $ ( 11,102 ) $ 2,175 $ 4,452 The accompanying notes are an integral part of these consolidated financial statements. 53 NI Holdings, Inc. Notes to Consolidated Financial Statements December 31, 2023, 2021, and 2020 (dollar amounts in thousands) 1. Organization NI Holdings is a North Dakota business corporation that is the stock holding company of Nodak Insurance and became such in connection with the conversion of Nodak Mutual from a mutual to stock form of organization and the creation of a mutual holding company. The conversion was 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 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 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 private passenger 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 for NI Holdings (“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 for NI Holdings (“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. 54 Nodak Insurance markets and distributes its policies through its captive agents, while all other companies utilize the independent agent distribution channel. Additionally, all of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by AM Best, a global credit rating agency specializing in the insurance industry. 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. Recent Accounting Pronouncements Prior to December 31, 2022, we were classified as an EGC and elected to use the extended transition period for complying with certain new or revised financial accounting standards from the Financial Accounting Standards Board (“FASB”) pursuant to Section 13(a) of the Exchange Act. However, beginning on December 31, 2022, we are no longer an EGC and are now unable to delay adoption of these new or revised accounting standards or take advantage of reduced corporate governance disclosures. Adopted Leases Effective for the year ended December 31, 2022, the Company adopted the updated guidance for leases and elected to utilize a cumulative-effect adjustment to the opening balance of retained earnings for the year of adoption, if necessary. Accordingly, the Company’s reporting for the comparative periods prior to adoption continue to be presented in the consolidated financial statements in accordance with previous lease accounting guidance. The Company also elected to apply all practical expedients applicable to the Company in the updated guidance for transition for leases in effect at adoption, including using hindsight to determine the lease term of existing leases, the option to not reassess whether an existing contract is a lease or contains a lease, and whether the lease is an operating or finance lease. The adoption of the updated guidance resulted in the Company recognizing a right-of-use asset of $ 1,637 as part of other assets, a lease liability of $ 1,837 as part of accrued expenses and other liabilities, and an elimination of the $ 200 deferred rent liability in the Consolidated Balance Sheet. The cumulative effect adjustment to the opening balance of retained earnings was zero . The adoption of the updated guidance did not affect the Company’s results of operations or cash flows. Measurement of Credit Losses on Financial Instruments In December 2022, the Company adopted amended guidance from the FASB that applies a new credit loss model (current expected credit losses or “CECL”) for determining credit-related impairments for financial instruments measured at amortized cost and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the Consolidated Balance Sheet at the amount expected to be collected. The updated guidance also amends the previous other-than-temporary impairment model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted the updated guidance for the year ended December 31, 2022. The adoption of this guidance resulted in an allowance for expected credit losses of $ 425 for premiums and agents' balances receivable. Based on the results of the receivable analyses and management’s review of our available-for-sale fixed income securities, it was determined that no allowance was required for reinsurance recoverables or available-for-sale fixed income securities at this time. Income Taxes – Simplifying the Accounting for Income Taxes In December 2022, the Company adopted amended guidance from the FASB relating to accounting for income taxes. The modifications primarily remove or amend several exceptions contained in existing guidance to simplify income tax matters. The adoption of this guidance did not materially impact the Company’s financial position, results of operations, or cash flows. 55 Not Yet Adopted Improvements to Reportable Segment Disclosures In November 2023, the FASB issued guidance related to improving disclosures for reportable segments primarily through enhanced disclosures about significant segment expenses that are provided to the chief operating decision maker (“CODM”). This guidance also requires disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources . The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact of the new standard on our consolidated financial statements, which is expected to result in enhanced disclosures. Improvements to Income Tax Disclosures In December 2023, the FASB issued guidance related to improving income tax disclosures. This guidance requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The guidance is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2024. We are currently evaluating the impact of the new standard on our consolidated financial statements, which is expected to result in enhanced disclosures. 3. Summary of Significant Accounting Policies Basis of Consolidation Our consolidated financial statements, which we have prepared in accordance with GAAP, include our accounts and those of our wholly-owned subsidiaries, as well as Battle Creek, an entity we control via a surplus note agreement. We have eliminated all significant intercompany accounts and transactions in consolidation. Use of Estimates In preparing our consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet, and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates. We make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our consolidated financial statements. The most significant estimates relate to our reserves for unpaid losses and loss adjustment expenses, earned premiums for crop insurance, valuation of investments, determination of credit impairments, valuation allowances for deferred income tax assets, deferred policy acquisition costs, as well as valuation and impairments of goodwill and other intangible assets. While we believe our estimates are appropriate, the ultimate amounts may differ from the estimates provided. We regularly review our methods for making these estimates as well as the continued appropriateness of the estimated amounts, and we reflect any adjustment we consider necessary in our current results of operations. Variable-Interest Entities Any company deemed to be a variable interest entity (“VIE”) is required to be consolidated by the primary beneficiary of the VIE. We assess our investments in other entities at inception to determine if any meet the qualifications of a VIE. We consider an investment in another company to be a VIE if: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb expected losses of the entity, or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or the rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events, we would reassess our initial determination of whether the investment is a VIE. We evaluate whether we are the primary beneficiary of each VIE and we consolidate the VIE if we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity. We consider the contractual agreements that define the ownership structure, distribution of profits and losses, risks, 56 responsibilities, indebtedness, voting rights, and board representation of the respective parties in determining whether we qualify as the primary beneficiary. Our assessment of whether we are the primary beneficiary of a VIE is performed at least annually. We control Battle Creek via a surplus note which provides us with the ability to appoint two-thirds of the Board of Directors of Battle Creek. Under the quota share reinsurance agreement that existed through December 31, 2019, Battle Creek’s operating results included only net investment income, bad debt expense, and income taxes. Effective January 1, 2020, the Company implemented an intercompany pooling reinsurance agreement, and Battle Creek’s operating results now include its participation in the underwriting results of the pool ( 2 % during 2023, 2022, and 2021). For more information, see Part II, Item 8, Note 11 “Royalties, Dividends, and Affiliations”. Because we have concluded that we control Battle Creek, we consolidate the financial statements of Battle Creek, and Battle Creek’s policyholders’ interest in Battle Creek is reflected as a non-controlling interest in shareholders’ equity in our Consolidated Balance Sheet and its net income or loss is excluded from net income or loss attributed to NI Holdings in our Consolidated Statement of Operations. Cash and Cash Equivalents Cash and cash equivalents include cash, money market accounts, and certain investments in highly liquid debt instruments. Cost approximates fair value for these short-term investments. Investments The Company’s fixed income securities and equity securities are classified as available-for-sale and carried at estimated fair value as determined by management based upon quoted market prices or a recognized independent pricing service at the reporting date for those or similar investments. Changes in unrealized investment gains or losses on the fixed income securities, net of applicable income taxes, are reflected directly in shareholders’ equity as a component of other comprehensive income (loss) and, accordingly, have no effect on net income (loss). Changes in unrealized investment gains or losses on equity securities are reported in net income (loss). Investment income from fixed income securities is recognized when earned, and realized investment gains (losses) are recognized when investments are sold, the fair value of equity securities change, or credit impairments are recognized. Fair values are based on quoted market prices or independent pricing services, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Amortization of premium and accretion of discount are computed using the effective interest method. Net investment income includes interest and dividend income together with amortization of purchase premiums and discounts, and is net of investment management and custody fees. Realized gains and losses on investments are determined using the specific identification method and are included in net investment gains (losses), along with the change in unrealized gains and losses on equity securities. Other invested assets that do not have observable inputs and little or no market activity are carried on a cost basis, which approximates fair value. The carrying value of these other invested assets was $ 2,006 at December 31, 2023 and $ 2,005 at December 31, 2022. Beginning on December 31, 2022, credit losses are recognized through an allowance account. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional information. We, along with our investment advisors, frequently review our investment portfolio for declines in fair value that could be indicative of credit losses. The available-for-sale impairment model requires an estimate of expected credit losses only when the fair value of the available-for-sale fixed income security is below its amortized cost basis. The Company considers a number of factors when determining if an allowance for credit losses is necessary including payment and default history, credit spreads, credit ratings and rating actions, and probability of default. The Company determines the credit loss component of fixed income securities by utilizing discounted cash flow modeling to determine the present value of the security and comparing the present value with the amortized cost of the security. If the amortized cost is greater than the present value of the expected cash flows, the difference is considered a credit loss and recognized as an impairment loss in net realized investment gains (losses). Credit impairments are recognized as an allowance on the Consolidated Balance Sheet with a corresponding adjustment to earnings. For fixed income securities that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component in net realized investment gains (losses). The impairment related to all other factors (non-credit factors) is reported in other comprehensive income. The allowance is adjusted for any additional credit losses and subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted. For fixed income securities the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in net investment gains (losses). The new cost basis of the investment is the previous amortized cost basis less the impairment recognized in net investment gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value. 57 The Company reports investment income accrued separately from fixed income investments, available for sale, and has elected not to measure an allowance for credit losses for investment income accrued. Investment income accrued is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default on payments. For more information on investment valuation measurements, see Part II, Item 8, Note 5 “Fair Value Measurements”. Revenue Recognition We record premiums written at policy inception and recognize them as revenue on a pro rata basis over the policy term or, in the case of crop insurance, over the period of risk. The portion of premiums that could be earned in the future is deferred and reported as unearned premiums. When policies lapse, the Company reverses the unearned portion of the written premium and removes the applicable unearned premium. Policy-related fee income is recognized when collected. The period of risk for our crop insurance program, which is comprised of primarily spring-planted crops, typically runs from April 1 (the approximate time when farmers can begin to work their fields) through December 15 (last date claims can be made for the most recent planting season). Premiums and Agents’ Balances Receivable Premiums and agents’ balances receivable include both direct and agent billed premiums as well as crop notes receivable related to the multi-peril crop and crop hail insurance. Accounts billed directly to the policyholder are provided grace payment and cancellation notice periods per state insurance regulations. Direct Auto also provides for agency billing for a portion of their agents. Accounts billed to agents are due within 60 days of the statement date. The agent is responsible for all past due balances. As part of its agent appointment, Direct Auto requires a personal guarantee for all balances due to Direct Auto from the principal of the contracted agency. Beginning on December 31, 2022, the premium and agents’ receivable balances are reported net of an allowance for expected credit losses. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional information. We recognized $ 425 of credit losses for these receivables at the time of adoption of CECL. Therefore, there was no beginning balance of credit losses as of January 1, 2022, and all 2022 activity was the result of adoption. As a result of the transition from the previous accounting treatment, we did not record a cumulative effect adjustment to retained earnings at the time of adoption. Given the nature of these receivables, the Company has elected to use a loss-rate method to determine the expected credit losses. The allowance is based upon the Company’s ongoing review of amounts outstanding and write-offs. Management may also evaluate current economic conditions and reasonable/supportable forecasts to adjust this calculation as deemed necessary. Policy Acquisition Costs We defer our policy acquisition costs, consisting primarily of commissions, premium taxes, and certain other underwriting costs, reduced by ceding commissions, which vary with and relate directly to the production of business. We amortize these deferred policy acquisition costs over the period in which we earn the premiums. The method we follow in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value, which gives effect to the premium to be earned, related investment income, losses and loss adjustment expenses, and certain other costs we expect to incur as we earn the premium. Property and Equipment We report property and equipment at cost less accumulated depreciation. Depreciation is typically computed using the straight-line method based upon estimated useful lives of the assets. Losses and Loss Adjustment Expenses Liabilities for unpaid losses and loss adjustment expenses are estimates at a given point in time of the amounts we expect to pay with respect to policyholder claims based on facts and circumstances then known. At the time of establishing our estimates, we recognize that our ultimate liability for losses and loss adjustment expenses may differ from these estimates. We base our estimates of liabilities for unpaid losses and loss adjustment expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability, and other factors. During the loss adjustment period, we may learn additional facts regarding certain claims, and, consequently, it often becomes necessary for us to refine and adjust our estimates of the liability. We reflect any adjustments to our liabilities for unpaid losses and loss adjustment expenses in our operating results in the period in which we determine the need for a 58 change in the estimates. We maintain liabilities for unpaid losses and loss adjustment expenses with respect to both reported and unreported claims. We establish these liabilities for the purpose of covering the ultimate costs of settling all losses incurred through the reporting date, including investigation and litigation costs. We base the amount of our liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim, and the insurance policy provisions relating to the type of loss our policyholder incurred. We determine the amount of our liability for unreported losses and loss adjustment expenses on the basis of historical information by line of insurance. Inflation is not explicitly selected in the loss reserve analysis. However, historical inflation is embedded in the estimated loss development factors. We closely monitor our liabilities and update them periodically using new information on reported claims and a variety of statistical techniques. We do not discount our liabilities for unpaid losses and loss adjustment expenses. Reserve estimates can change over time because of unexpected changes in assumptions related to our external environment and, to a lesser extent, assumptions as to our internal operations. Assumptions related to our external environment include the potential impact of significant changes in tort law and the legal environment which may impact liability exposure, the trends in judicial interpretations of insurance coverage and policy provisions, and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss data, consistency in the recording of claims, payment and case reserving methodologies, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business, and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent we determine that underlying factors impacting our assumptions have changed, we attempt to make appropriate adjustments for such changes in our reserves. Accordingly, our ultimate liability for unpaid losses and loss adjustment expenses will likely differ from the amount recorded. Income Taxes With the exception of Battle Creek, which files a stand-alone federal income tax return, we file a consolidated federal income tax return which includes NI Holdings and its wholly-owned subsidiaries. Insurance companies typically pay state premium taxes rather than state income taxes. However, Direct Auto is subject to state income taxes in the state of Illinois, in addition to state premium taxes. Additionally, NI Holdings, on a stand-alone basis, pays state income taxes to the state of North Dakota for income or losses generated as a separate financial entity. State premium taxes are included as a part of amortization of deferred policy acquisition costs. State income taxes are reported along with federal income taxes as income tax expense (benefit). The Company did not have any material uncertain tax positions as of December 31, 2023 and 2022. The Company’s policy is to recognize tax-related interest and penalties accrued related to unrecognized benefits as a component of income tax expense. The Company did not recognize any tax-related interest and penalties, nor did it have any tax-related interest or penalties accrued as of December 31, 2023 and 2022. We account for deferred income taxes using the asset and liability method. The objective of the asset and liability method is to establish deferred income tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of our assets and liabilities at enacted tax rates expected to be in effect when we realize or settle such amounts. We re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs and record an offset for the net amount of the change as a component of income tax expense from continuing operations in the period of enactment. We also record any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards as a component of income tax expense from continuing operations. The Company has elected to reclassify any tax effects stranded in accumulated other comprehensive income as a result of a change in income tax rates to retained earnings. Earnings Per Share Earnings per share are computed by dividing net income available to common shareholders for the period by the weighted average number of common shares outstanding for the same period. Unearned shares related to the Company’s ESOP are not considered outstanding until they are released and allocated to plan participants. Unearned shares related to the Company’s Restricted Stock Units (“RSUs”) and Performance Share Units (“PSUs”) are not considered outstanding until they are earned by award participants. See Part II, Item 8, Note 12 “Benefit Plans” and Note 18 “Share-Based Compensation”. 59 Credit Risk Our primary investment objective is to earn competitive returns by investing in a diversified portfolio of securities. Our portfolio of fixed income securities and, to a lesser extent, short-term investments, is subject to credit risk. We define this risk as the potential loss in fair value resulting from adverse changes in the borrower’s ability to repay the debt. We manage this risk by performing an analysis of prospective investments and through regular reviews of our portfolio by our management team and investment advisors. We also limit the amount of our total investment portfolio that we invest in any one security. Property and liability insurance coverages are marketed through captive agents in North Dakota and through independent insurance agencies located throughout all other operating areas. All business, except for the majority of Direct Auto’s business, is billed directly to the policyholders. We maintain cash balances primarily at one bank, which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250 . During the normal course of business, balances are maintained above the FDIC insurance limit. The Company maintains short-term investment balances in investment grade money market accounts that are insured by the Securities Investor Protection Corporation (“SIPC”) up to $ 500 . During the normal course of business, balances for these accounts are often maintained in excess of the SIPC insurance limit. Reinsurance The Company limits the maximum net loss that can arise from large risks or risks in concentrated areas of exposure by reinsuring (ceding) certain levels of risks to reinsurers, either on an automatic basis under general reinsurance contracts known as treaties or through facultative contracts placed on substantial individual risks. Ceded reinsurance is treated as the risk and liability of the assuming companies. The ceding of insurance does not legally discharge us from primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation. Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. Beginning on December 31, 2022, credit losses are recognized through an allowance account developed using the CECL model. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional information. The allowance is based upon the Company’s ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and other relevant factors. Management has concluded that it is not necessary to record an allowance for expected credit losses related to reinsurance recoverables. All of our significant reinsurance partners are rated “A-” (Excellent) or better by AM Best, and there is no history of write-offs. Goodwill and Other Intangibles Goodwill assets arise from business combinations and consist of the excess of the fair value of consideration paid over the tangible and intangible assets acquired and liabilities assumed. We evaluate goodwill and other intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that it is more likely than not that the carrying amount of goodwill and other intangible assets may exceed their fair value. When performing our goodwill impairment analyses, we typically first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In making our assessment, we evaluate a number of factors including operating results, key changes in the reporting unit, business plans, macroeconomic conditions, and industry considerations. Inherent uncertainties exist with respect to these factors and to our judgment in applying them when we make our assessment, and impairment of goodwill and other intangibles could result from changes in economic and operating conditions in future periods. We may also choose to bypass the qualitative assessment in any period for any reporting unit and proceed directly to performing the quantitative assessment. If our qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount or we choose to bypass the qualitative assessment, we will perform a quantitative assessment that compares the reporting unit’s carrying value with its estimated fair value. The determination of the fair value of our reporting units is based on a combination of a market approach that considers benchmark company market multiples, and an income approach that utilizes discounted cash flows. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. While we believe such assumptions and estimates are reasonable, the actual results may differ materially from the projected amounts. Should the carrying value exceed the estimated fair value, a goodwill impairment charge will be recognized in the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the total goodwill assigned to the reporting unit. 60 For the goodwill arising from the acquisition of Primero in 2014, we performed the annual qualitative assessment as of the beginning of the fourth quarter of 2023 and concluded there was no impairment of the goodwill. We also did not record any impairments of goodwill for this reporting unit during the years ended December 31, 2022 or 2021. For the goodwill arising from the acquisition of Westminster in 2020, we determined that it was appropriate to perform a quantitative assessment during the fourth quarter of 2023. Based on our quantitative assessment as described above, we concluded that the goodwill related to Westminster was fully impaired as of December 31, 2023, primarily due to Westminster’s actual and expected future performance being well below initial projections and expectations. We did not record any impairments of goodwill for this reporting unit during the years ended December 31, 2022 or 2021. Intangible assets arising from the acquisition of Direct Auto in 2018 represent the estimated fair values of certain intangible assets, including a favorable lease contract, a state insurance license, the value of the Direct Auto trade name, and the value of business acquired (“VOBA”). The state insurance license asset has an indefinite life, while the Direct Auto trade name was amortized over five years from the August 31, 2018 acquisition/valuation date. The favorable lease contract and VOBA assets have been fully amortized. We did not record any impairments of the intangible assets for this reporting unit during the years ended December 31, 2023, 2022 or 2021. Other intangible assets arising from the acquisition of Westminster represent the estimated fair values of certain intangible assets, including state insurance licenses, the value of Westminster’s distribution network, the value of the Westminster trade name, and the VOBA. The state insurance license asset has an indefinite life, while the distribution networks asset and Westminster trade name are being amortized over twenty years and ten years , respectively, from the January 1, 2020 acquisition/valuation date. The VOBA asset has been fully amortized. We did not record any impairments of the other intangible assets for this reporting unit during the years ended December 31, 2023, 2022 or 2021. 61 4. Investments The amortized cost and estimated fair value of fixed income securities as of December 31, 2023 and 2022, were as follows: December 31, 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 $ 10,998 $ — $ — $ ( 736 ) $ 10,262 Obligations of states and political subdivisions 55,769 — 408 ( 4,716 ) 51,461 Corporate securities 152,630 — 442 ( 10,856 ) 142,216 Residential mortgage-backed securities 66,362 — 180 ( 5,379 ) 61,163 Commercial mortgage-backed securities 33,532 — 148 ( 4,241 ) 29,439 Asset-backed securities 52,692 — 142 ( 3,805 ) 49,029 Redeemable preferred stocks 4,747 — — ( 586 ) 4,161 Total fixed income securities $ 376,730 $ — $ 1,320 $ ( 30,319 ) $ 347,731 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. December 31, 2023 Amortized Cost Fair Value Due to mature: One year or less $ 9,612 $ 9,436 After one year through five years 75,794 72,602 After five years through ten years 86,185 79,281 After ten years 47,806 42,620 Mortgage / asset-backed securities 152,586 139,631 Redeemable preferred stocks 4,747 4,161 Total fixed income securities $ 376,730 $ 347,731 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 62 Fixed income securities with a fair value of $ 6,403 at December 31, 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. December 31, 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 $ — $ — $ 9,018 $ ( 736 ) $ 9,018 $ ( 736 ) Obligations of states and political subdivisions 5,239 ( 359 ) 36,194 ( 4,357 ) 41,433 ( 4,716 ) Corporate securities 8,018 ( 93 ) 110,117 ( 10,763 ) 118,135 ( 10,856 ) Residential mortgage-backed securities 12,054 ( 104 ) 33,341 ( 5,275 ) 45,395 ( 5,379 ) Commercial mortgage-backed securities 2,678 ( 5 ) 23,713 ( 4,236 ) 26,391 ( 4,241 ) Asset-backed securities 4,463 ( 18 ) 30,200 ( 3,787 ) 34,663 ( 3,805 ) Redeemable preferred stocks — — 4,161 ( 586 ) 4,161 ( 586 ) Total fixed income securities $ 32,452 $ ( 579 ) $ 246,744 $ ( 29,740 ) $ 279,196 $ ( 30,319 ) 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 income securities by utilizing discounted cash flow modeling to determine the present value of the security and comparing the present value with the amortized cost of the security. 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 year ended December 31, 2023. Therefore, there was no beginning or ending balance of credit losses for the years ended December 31, 2022 and 2023. See Item II, Part 8, Note 3 “Summary of Significant Accounting Policies” for additional information. 63 Net investment income consisted of the following: Year Ended December 31, 2023 2022 2021 Fixed income securities $ 11,506 $ 9,226 $ 8,489 Equity securities 1,118 1,485 1,221 Real estate 622 595 625 Cash and cash equivalents 579 30 4 Total gross investment income 13,825 11,336 10,339 Investment expenses 3,369 3,516 3,208 Net investment income $ 10,456 $ 7,820 $ 7,131 Net investment gains (losses) consisted of the following: Year Ended December 31, 2023 2022 2021 Gross realized gains: Fixed income securities $ 1 $ 117 $ 677 Equity securities 13,974 7,078 17,453 Total gross realized gains 13,975 7,195 18,130 Gross realized losses, excluding credit impairment losses: Fixed income securities ( 583 ) ( 268 ) ( 27 ) Equity securities ( 1,341 ) ( 5,003 ) ( 335 ) Total gross realized losses, excluding credit impairment losses ( 1,924 ) ( 5,271 ) ( 362 ) Net realized gains 12,051 1,924 17,768 Change in net unrealized gain on equity securities ( 9,927 ) ( 15,050 ) ( 2,289 ) Net investment gains (losses) $ 2,124 $ ( 13,126 ) $ 15,479 5. 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 64 financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts which we could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective period-end and have not been re-evaluated or updated for purposes of our 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 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 first attempt to obtain a fair value estimate from our third-party investment advisors who utilize different independent pricing services. If unsuccessful, we would attempt to obtain a non-binding fair value estimate from a number of broker-dealers and would review this estimate in conjunction with a fair value estimate reported by an independent business news service or other sources. In instances where only one broker-dealer provides a fair value for a fixed income security, we would use that estimate. In instances where the Company would be able to obtain fair value estimates from more than one broker-dealer, we would review the range of estimates and select the most appropriate value based on the facts and circumstances. Should neither the independent pricing service nor a broker-dealer provide a fair value estimate, we would develop a fair value estimate based on cash flow analyses and other valuation techniques that utilize certain unobservable inputs. Accordingly, the Company classifies such a security as a Level 3 investment. The fair value estimates of our investments provided by the independent pricing service at each period-end were utilized, among other resources, in reaching a conclusion as to the fair value of its investments. Management reviews the reasonableness of the pricing provided by the independent pricing service by employing various analytical procedures. 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 years ended December 31, 2023, 2022, or 2021. The classification within the fair value hierarchy is then confirmed based on the final conclusions from the pricing review. The valuation of money market accounts and equity securities are generally based on Level 1 inputs, which use the market-approach valuation technique. The valuation of certain cash equivalents and 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 December 31, 2023 or 2022. 65 The following tables set forth our assets which are measured on a recurring basis by the level within the fair value hierarchy in which fair value measurements fall: December 31, 2023 Total Level 1 Level 2 Level 3 Fixed income securities: U.S. Government and agencies $ 10,262 $ — $ 10,262 $ — Obligations of states and political subdivisions 51,461 — 51,461 — Corporate securities 142,216 — 142,216 — Residential mortgage-backed securities 61,163 — 61,163 — Commercial mortgage-backed securities 29,439 — 29,439 — Asset-backed securities 49,029 — 49,029 — Redeemable preferred stock 4,161 — 4,161 — Total fixed income securities 347,731 — 347,731 — Equity securities: Common stock 25,890 25,890 — — Non-redeemable preferred stock 1,877 1,877 — — Total equity securities 27,767 27,767 — — Money market accounts and cash equivalents 25,596 19,412 6,184 — Total assets at fair value $ 401,094 $ 47,179 $ 353,915 $ — 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 stocks 3,719 — 3,719 — Total fixed income securities 303,324 — 303,324 — Equity securities: Common stock 50,699 50,699 — — Non-redeemable preferred stocks 1,694 1,694 — — Total equity securities 52,393 52,393 — — Money market accounts and 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 December 31, 2023 or 2022. 6. 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. 66 During the year ended December 31, 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 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. During the year ended December 31, 2021, the Company maintained property catastrophe reinsurance protection covering $ 117,000 in excess of a $ 10,000 retention. Additionally, per risk excess of loss treaties provided coverage of $ 4,300 in excess of $ 700 for property risks and $ 11,300 in excess of $ 700 for casualty risks, with facultative contracts in place to provide coverage up to $ 20,000 in excess of $ 5,000 per property. Aggregate stop loss reinsurance agreements were placed for both crop hail and multi-peril crop coverage. The crop hail aggregate attached at a 100 % net loss ratio providing 50 points of cover. The multi-peril crop aggregate attached at a 105 % net loss ratio providing 45 points of cover. In addition to the aggregate covers, underlying multi-peril crop reinsurance was provided through the FCIC. The Company experienced multiple catastrophe events during 2022 which resulted in reinsurance recoveries of $ 5,362 as of December 31, 2023. The Company experienced one catastrophe event during 2021 which resulted in a reinsurance recovery of $ 5,764 as of December 31, 2023. For 2024, the Company’s catastrophe retention and retention limit will remain consistent with the prior year, and there were no changes made to limits, retentions, or attachment points in our other reinsurance contracts. The Company actively monitors and evaluates the financial condition of the reinsurers and develops estimates of the uncollectible amounts due from reinsurers. Beginning on December 31, 2022, credit losses are recognized through an allowance account developed using the CECL model. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional information. Credit loss estimates are made based on periodic evaluation of balances due from reinsurers, changes in reinsurer credit standing, judgments regarding reinsurers’ solvency, known disputes, reporting characteristics of the underlying reinsured business, historical experience, current economic conditions, and the state of reinsurer relations in general. Collection risk is mitigated by entering into reinsurance arrangements only with reinsurers that have strong financial strength ratings. At December 31, 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. A reconciliation of direct to net premiums on both a written and an earned basis is as follows: Year Ended December 31, 2023 2022 2021 Premiums Written Premiums Earned Premiums Written Premiums Earned Premiums Written Premiums Earned Direct premium $ 418,399 $ 401,945 $ 389,706 $ 368,886 $ 342,215 $ 333,254 Assumed premium 3,098 3,570 6,299 6,550 8,183 8,035 Ceded premium ( 54,848 ) ( 54,378 ) ( 46,993 ) ( 47,146 ) ( 42,629 ) ( 41,700 ) Net premiums $ 366,649 $ 351,137 $ 349,012 $ 328,290 $ 307,769 $ 299,589 67 A reconciliation of direct to net losses and loss adjustment expenses is as follows: Year Ended December 31, 2023 2022 2021 Direct losses and loss adjustment expenses $ 293,978 $ 333,397 $ 280,998 Assumed losses and loss adjustment expenses 1,140 2,369 6,899 Ceded losses and loss adjustment expenses ( 50,706 ) ( 41,334 ) ( 71,518 ) Net losses and loss adjustment expenses $ 244,412 $ 294,432 $ 216,379 If 100 % of our ceded reinsurance was cancelled as of December 31, 2023, 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. This agreement was finalized, approved, and implemented during the fourth quarter of 2020, retroactive to the January 1 effective date. Nodak Insurance is the lead company of the pool, and assumes the net premiums, net losses, and underwriting expenses from each of the other five companies. Nodak Insurance then retrocedes balances back to each company, while retaining its own share of the pool’s net underwriting results, based on individual pool percentages established in the respective pooling agreement. This arrangement allows each insurance company to rely upon the capacity of the pool’s total statutory capital and surplus. As a result, they are evaluated by AM Best on a group basis and hold a single combined financial strength rating, long-term issuer credit rating, and financial size category. For the years ended December 31, 2023, 2022, and 2021, 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 % 7. 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: Year Ended December 31, 2023 2022 2021 Balance, beginning of year $ 29,768 $ 24,947 $ 23,968 Deferral of policy acquisition costs 87,343 71,624 65,553 Amortization of deferred policy acquisition costs ( 82,991 ) ( 66,803 ) ( 64,574 ) Balance, end of year $ 34,120 $ 29,768 $ 24,947 68 8. Unpaid Losses and Loss Adjustment Expenses Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows: Year Ended December 31, 2023 2022 2021 Balance, beginning of year: Liability for unpaid losses and loss adjustment expenses $ 190,459 $ 139,662 $ 105,750 Reinsurance recoverables on losses 37,575 21,200 8,710 Net balance, beginning of year 152,884 118,462 97,040 Incurred related to: Current year 223,960 293,283 220,517 Prior years 20,452 1,149 ( 4,138 ) Total incurred 244,412 294,432 216,379 Paid related to: Current year 138,598 197,250 150,278 Prior years 90,548 62,760 44,679 Total paid 229,146 260,010 194,957 Balance, end of year: Liability for unpaid losses and loss adjustment expenses 217,119 190,459 139,662 Reinsurance recoverables on losses 48,969 37,575 21,200 Net balance, end of year $ 168,150 $ 152,884 $ 118,462 During the year ended December 31, 2023, the Company’s incurred reported losses and loss adjustment expenses included $ 20,452 of net unfavorable development on prior accident years, primarily attributable to unfavorable development for the Westminster commercial and Direct Auto non-standard auto businesses partially offset by favorable development for Battle Creek, American West, and Nodak Insurance. During the year ended December 31, 2022, the Company’s incurred reported losses and loss adjustment expenses included $ 1,149 of net unfavorable development on prior accident years, primarily attributable to unfavorable development for the Westminster commercial business partially offset by favorable development for Battle Creek and Nodak Insurance. During the year ended December 31, 2021, incurred reported losses and loss adjustment expenses included $ 4,138 of net favorable development on prior accident years, primarily attributable to the Direct Auto non-standard auto business. Changes in unpaid losses and loss adjustment expense reserves are generally the result of ongoing analysis of recent loss development trends. As additional information becomes known regarding individual claims, original estimates are increased or decreased accordingly. The tables on the following pages present information, organized by our primary operating segments, about incurred and paid claims development as of December 31, 2023, net of reinsurance, as well as cumulative claim frequency and the total of IBNR reserves plus expected development on reported claims. The cumulative number of reported claims represents open claims, claims closed with payment, and claims closed without payment. It does not include an estimated amount for unreported claims. The number of claims is measured by claim event (such as a car accident or storm damage) and an individual claim event may result in more than one reported claim (such as a car accident with both property and liability damages). The Company considers a claim that does not result in a liability as a claim closed without payment. The segment information presented in the tables is prior to the effects of the intercompany reinsurance pooling arrangement. The tables include unaudited information about incurred and paid claims development for the years ended December 31, 2014 (a) through 2015 for the Private Passenger Auto, Primero Non-Standard Auto, Home and Farm, and Crop segments, (b) through 2017 for the Direct Auto Non-Standard Auto information, and (c) through 2019 for the Westminster Commercial information, which we present as supplementary information. 69 Private Passenger Auto Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2023 Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2014 $ 32,548 $ 31,349 $ 30,427 $ 29,099 $ 29,144 $ 29,298 $ 29,479 $ 29,423 $ 29,409 $ 29,415 $ ( 1 ) 11,745 2015 — 32,438 31,532 30,461 30,503 30,679 30,455 30,379 30,370 30,351 ( 5 ) 11,688 2016 — — 40,227 39,260 39,057 39,314 38,535 38,416 38,601 38,566 24 14,325 2017 — — — 40,779 40,199 40,120 40,427 40,488 40,520 40,471 44 13,753 2018 — — — — 44,925 43,428 43,641 43,575 43,807 43,733 206 14,675 2019 — — — — — 53,769 53,328 53,364 52,802 52,749 329 16,540 2020 — — — — — — 46,247 48,519 47,403 47,174 680 13,541 2021 — — — — — — — 57,316 57,176 57,431 660 15,321 2022 — — — — — — — — 66,711 65,132 1,379 16,146 2023 — — — — — — — — — 62,357 3,753 12,671 Total $ 467,379 (1) Prior years unaudited Private Passenger Auto Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 2014 $ 22,744 $ 25,727 $ 27,076 $ 27,443 $ 28,281 $ 28,765 $ 29,239 $ 29,407 $ 29,409 $ 29,416 2015 — 23,401 27,171 28,933 29,598 29,795 30,120 30,355 30,355 30,355 2016 — — 29,009 35,845 37,307 38,108 37,833 38,173 38,303 38,539 2017 — — — 31,033 37,050 38,331 39,738 40,111 40,294 40,315 2018 — — — — 34,358 40,213 41,479 42,820 43,074 43,225 2019 — — — — — 42,414 48,414 50,370 51,556 52,060 2020 — — — — — — 35,495 42,585 45,670 46,211 2021 — — — — — — — 42,326 52,256 54,243 2022 — — — — — — — — 49,911 59,556 2023 — — — — — — — — — 45,452 Total $ 439,372 All outstanding liabilities prior to 2014, net of reinsurance 17 Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 28,022 (1) Prior years unaudited 70 Non- Standard Auto (Primero) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2023 Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2014 $ 7,297 $ 7,619 $ 7,591 $ 7,577 $ 7,612 $ 7,625 $ 7,606 $ 7,606 $ 7,606 $ 7,606 $ — 1,838 2015 — 9,727 9,806 9,655 9,691 9,641 9,622 9,623 9,623 9,623 — 1,795 2016 — — 9,967 10,048 10,054 10,033 10,008 9,976 9,974 9,974 — 1,741 2017 — — — 8,722 8,654 8,556 8,541 8,543 8,659 8,659 — 1,470 2018 — — — — 10,445 11,804 11,763 11,766 11,776 11,780 — 1,801 2019 — — — — — 12,264 11,391 11,236 11,221 11,227 4 1,506 2020 — — — — — — 9,018 8,824 8,936 9,041 21 968 2021 — — — — — — — 10,073 10,016 10,083 62 1,015 2022 — — — — — — — — 5,905 5,780 171 586 2023 — — — — — — — — — 6,283 610 611 Total $ 90,056 (1) Prior years unaudited Non-Standard Auto (Primero) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 2014 $ 3,733 $ 6,707 $ 7,423 $ 7,521 $ 7,579 $ 7,605 $ 7,606 $ 7,606 $ 7,606 $ 7,606 2015 — 5,335 8,685 9,479 9,557 9,620 9,622 9,623 9,623 9,623 2016 — — 5,409 8,882 9,790 9,912 9,974 9,976 9,974 9,974 2017 — — — 4,348 7,660 8,204 8,460 8,506 8,659 8,659 2018 — — — — 5,492 10,536 11,616 11,730 11,766 11,772 2019 — — — — — 6,300 10,007 10,971 11,175 11,224 2020 — — — — — — 4,112 7,645 8,657 8,882 2021 — — — — — — — 4,844 8,946 9,885 2022 — — — — — — — — 3,203 5,178 2023 — — — — — — — — — 3,636 Total $ 86,439 All outstanding liabilities prior to 2014, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 3,617 (1) Prior years unaudited 71 Non- Standard Auto (Direct Auto) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2023 Accident Year 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 2019 2020 2021 2022 2023 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2014 $ 14,010 $ 9,068 $ 6,224 $ 8,381 $ 6,745 $ 6,476 $ 6,672 $ 6,524 $ 6,440 $ 6,476 $ — 4,776 2015 — 17,917 14,498 13,043 10,538 10,704 10,945 10,576 10,416 10,718 ( 1 ) 9,057 2016 — — 20,547 14,660 13,552 13,956 12,876 12,291 11,973 12,121 ( 31 ) 11,137 2017 — — — 23,376 18,621 15,858 14,648 13,678 13,244 13,565 ( 8 ) 11,720 2018 — — — — 25,791 22,662 21,980 20,541 20,262 20,961 60 14,917 2019 — — — — — 24,932 25,473 24,574 24,879 25,432 649 10,918 2020 — — — — — — 24,036 22,919 23,571 25,616 1,059 13,348 2021 — — — — — — — 30,579 30,596 35,254 1,748 14,758 2022 — — — — — — — — 33,609 37,592 1,721 12,564 2023 — — — — — — — — — 44,132 15,675 11,389 Total $ 231,867 (1) Prior years unaudited Non-Standard Auto (Direct Auto) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 2019 2020 2021 2022 2023 2014 $ 2,201 $ 3,573 $ 4,452 $ 5,369 $ 5,781 $ 6,151 $ 6,327 $ 6,364 $ 6,421 $ 6,447 2015 — 2,967 5,202 7,057 8,327 9,560 10,057 10,176 10,365 10,669 2016 — — 3,526 6,272 8,559 10,603 11,058 11,519 11,820 12,010 2017 — — — 4,385 6,981 10,034 11,366 12,098 12,869 13,404 2018 — — — — 6,034 12,285 15,204 16,759 18,723 20,430 2019 — — — — — 10,203 16,214 18,982 21,195 23,691 2020 — — — — — — 9,965 15,401 18,503 21,537 2021 — — — — — — — 13,767 21,209 27,005 2022 — — — — — — — — 11,766 24,355 2023 — — — — — — — — — 14,664 Total $ 174,212 All outstanding liabilities prior to 2014, net of reinsurance 0 Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 57,655 (1) Prior years unaudited 72 Home and Farm Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2023 Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2014 $ 36,620 $ 35,981 $ 35,769 $ 35,591 $ 35,685 $ 35,534 $ 35,497 $ 35,503 $ 35,507 $ 35,765 $ 10 5,247 2015 — 32,740 31,804 31,300 31,577 31,446 31,612 31,600 31,601 31,599 — 3,924 2016 — — 45,713 44,513 44,945 44,597 44,728 44,745 44,809 44,788 2 6,354 2017 — — — 42,112 41,593 41,882 41,779 41,804 41,640 41,590 4 4,955 2018 — — — — 42,486 43,840 43,747 43,682 43,712 43,731 42 4,596 2019 — — — — — 45,334 45,828 45,471 45,352 45,106 43 5,521 2020 — — — — — — 36,264 35,668 34,656 34,761 73 4,114 2021 — — — — — — — 53,079 50,322 50,759 324 5,378 2022 — — — — — — — — 112,049 105,409 1,204 8,304 2023 — — — — — — — — — 57,205 3,253 3,920 Total $ 490,713 (1) Prior years unaudited Home and Farm Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 2014 $ 32,208 $ 35,199 $ 35,218 $ 35,371 $ 35,482 $ 35,482 $ 35,485 $ 35,503 $ 35,502 $ 35,505 2015 — 27,204 30,165 30,350 30,573 31,383 31,597 31,597 31,599 31,599 2016 — — 37,655 44,942 44,270 44,529 44,583 44,650 44,690 44,736 2017 — — — 34,657 38,928 40,441 40,941 41,414 41,504 41,506 2018 — — — — 37,880 42,814 43,178 43,549 43,634 43,688 2019 — — — — — 38,718 43,253 44,119 44,847 45,053 2020 — — — — — — 29,273 33,988 34,243 34,688 2021 — — — — — — — 41,096 48,890 50,117 2022 — — — — — — — — 92,482 101,957 2023 — — — — — — — — — 46,607 Total $ 475,456 All outstanding liabilities prior to 2014, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 15,256 (1) Prior years unaudited 73 Crop Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2023 Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2014 $ 22,688 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ — 2,268 2015 — 13,813 13,849 13,849 13,849 13,849 13,849 13,849 13,849 13,849 — 2,427 2016 — — 20,209 19,582 19,487 19,487 19,487 19,487 19,487 19,487 — 2,806 2017 — — — 33,734 34,181 34,181 34,181 34,181 34,181 34,181 — 2,968 2018 — — — — 12,506 11,730 11,730 11,730 11,730 11,730 — 2,147 2019 — — — — — 33,913 37,629 37,629 37,629 37,630 1 3,101 2020 — — — — — — 28,688 28,759 28,759 28,760 1 2,442 2021 — — — — — — — 28,574 28,144 28,146 3 2,726 2022 — — — — — — — — 21,834 20,745 11 2,021 2023 — — — — — — — — — 12,728 23 1,516 Total $ 227,589 (1) Prior years unaudited Crop Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 2014 $ 17,789 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 $ 20,333 2015 — 12,866 13,849 13,849 13,849 13,849 13,849 13,849 13,849 13,849 2016 — — 16,444 19,487 19,487 19,487 19,487 19,487 19,487 19,487 2017 — — — 32,768 34,181 34,181 34,181 34,181 34,181 34,181 2018 — — — — 10,737 11,730 11,730 11,730 11,730 11,730 2019 — — — — — 26,208 37,629 37,629 37,629 37,629 2020 — — — — — — 27,952 28,759 28,759 28,759 2021 — — — — — — — 29,424 28,143 28,143 2022 — — — — — — — — 20,279 20,735 2023 — — — — — — — — — 10,202 Total $ 225,048 All outstanding liabilities prior to 2014, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 2,541 (1) Prior years unaudited 74 Commercial (Westminster) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2023 Accident Year 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 (1) 2019 (1) 2020 2021 2022 2023 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2014 $ 4,385 $ 4,274 $ 4,286 $ 4,428 $ 4,450 $ 4,443 $ 4,445 $ 4,443 $ 4,443 $ 4,443 $ — 272 2015 — 3,082 3,258 4,019 4,218 4,293 4,238 4,294 4,290 4,317 — 278 2016 — — 4,661 5,719 6,200 6,091 6,248 6,354 6,353 6,396 — 264 2017 — — — 5,552 6,249 6,838 7,347 7,905 7,855 7,900 38 320 2018 — — — — 10,358 11,177 12,414 12,769 13,100 12,893 57 480 2019 — — — — — 11,658 13,051 14,564 15,370 15,764 981 423 2020 — — — — — — 14,774 14,063 15,404 16,327 1,181 490 2021 — — — — — — — 30,911 35,525 39,720 6,836 626 2022 — — — — — — — — 45,647 58,372 5,773 586 2023 — — — — — — — — — 39,751 12,423 309 Total $ 205,883 (1) Prior years unaudited Commercial (Westminster) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2014 (1) 2015 (1) 2016 (1) 2017 (1) 2018 (1) 2019 (1) 2020 2021 2022 2023 2014 $ 3,330 $ 3,921 $ 4,151 $ 4,269 $ 4,395 $ 4,403 $ 4,410 $ 4,443 $ 4,443 $ 4,443 2015 — 2,126 2,794 3,332 3,950 4,206 4,231 4,287 4,290 4,317 2016 — — 3,172 5,289 5,630 5,693 6,112 6,338 6,346 6,396 2017 — — — 3,573 4,927 5,865 6,576 7,206 7,512 7,612 2018 — — — — 6,494 9,472 10,591 11,911 12,136 12,607 2019 — — — — — 6,294 9,925 11,056 12,993 14,627 2020 — — — — — — 8,146 10,853 12,171 14,136 2021 — — — — — — — 16,269 25,105 28,660 2022 — — — — — — — — 15,817 40,527 2023 — — — — — — — — — 17,134 Total $ 150,459 All outstanding liabilities prior to 2014, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 55,425 (1) Prior years unaudited 75 Commercial (non- Westminster) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, At December 31, 2023 Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims (in thousands, except claim counts) 2014 $ 2,180 $ 1,732 $ 1,694 $ 1,675 $ 1,650 $ 1,650 $ 1,650 $ 1,650 $ 1,650 $ 1,650 $ — 163 2015 — 1,695 1,643 1,637 1,582 1,580 1,580 1,580 1,580 1,580 — 135 2016 — — 2,683 2,526 2,515 2,516 2,512 2,512 2,511 2,511 — 288 2017 — — — 2,530 2,513 2,510 2,497 2,494 2,494 2,494 — 167 2018 — — — — 1,652 1,576 1,609 1,555 1,554 1,554 — 147 2019 — — — — — 2,607 2,782 2,777 2,793 2,793 — 191 2020 — — — — — — 2,293 2,054 2,371 2,382 — 132 2021 — — — — — — — 2,726 2,507 2,611 13 203 2022 — — — — — — — — 4,536 3,904 62 225 2023 — — — — — — — — — 1,418 298 148 Total $ 22,897 (1) Prior years unaudited Commercial (non- Westminster) Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2014 (1) 2015 (1) 2016 2017 2018 2019 2020 2021 2022 2023 2014 $ 1,782 $ 1,925 $ 1,563 $ 1,640 $ 1,650 $ 1,650 $ 1,650 $ 1,650 $ 1,650 $ 1,650 2015 — 1,274 1,796 1,818 1,580 1,580 1,580 1,580 1,580 1,580 2016 — — 1,822 2,806 2,498 2,512 2,512 2,512 2,511 2,511 2017 — — — 1,530 2,465 2,497 2,497 2,494 2,494 2,494 2018 — — — — 1,049 1,213 1,240 1,554 1,554 1,554 2019 — — — — — 1,917 2,712 2,717 2,793 2,793 2020 — — — — — — 1,542 1,892 2,362 2,382 2021 — — — — — — — 1,687 2,345 2,372 2022 — — — — — — — — 2,846 3,843 2023 — — — — — — — — — 954 Total $ 22,133 All outstanding liabilities prior to 2014, net of reinsurance — Liabilities for Unpaid Losses and Loss Adjustment Expenses, net of reinsurance $ 764 (1) Prior years unaudited 76 The following table presents a reconciliation of the net incurred and paid claims development tables to the liability for unpaid losses and loss adjustment expenses in our Consolidated Balance Sheet: December 31, 2023 Liabilities for unpaid losses and loss adjustment expenses: Private passenger auto $ 28,037 Non-standard auto (Primero) 3,617 Non-standard auto (Direct Auto) 57,655 Home and farm 18,205 Crop 3,884 Commercial (Westminster) 97,934 Commercial (non-Westminster) 764 All other 7,023 Total liabilities for unpaid losses and loss adjustment expenses 217,119 Reinsurance recoverables on losses: Private passenger auto 15 Non-standard auto (Primero) — Non-standard auto (Direct Auto) — Home and farm 2,949 Crop 1,343 Commercial (Westminster) 42,509 Commercial (non-Westminster) — All other 2,153 Total reinsurance recoverables on losses 48,969 Net liability for unpaid losses and loss adjustment expenses $ 168,150 The following table presents required supplementary information about average historical claims duration as of December 31, 2023: Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Years 1 2 3 4 5 6 7 8 9 10 Private Passenger Auto 50.8 % 21.4 % 11.7 % 6.7 % 4.3 % 2.8 % 1.3 % 0.8 % 0.2 % — Non-Standard Auto (Primero) 75.7 % 17.5 % 4.4 % 1.5 % 0.6 % 0.2 % 0.1 % — — — Non-Standard Auto (Direct Auto) 43.0 % 25.0 % 12.7 % 5.4 % 5.2 % 4.4 % 2.6 % 1.6 % 0.1 % — Home and Farm 67.4 % 14.6 % 9.0 % 4.6 % 1.3 % 0.6 % 0.5 % 0.1 % 0.6 % 1.3 % Crop 100.0 % — — — — — — — — — Commercial (Westminster) 41.7 % 22.1 % 17.6 % 10.2 % 4.8 % 1.6 % 1.5 % 0.5 % — — Commercial (non-Westminster) 78.9 % 14.7 % 3.7 % 2.0 % 0.7 % — — — — — 77 9. Property and Equipment Property and equipment consisted of the following: December 31, 2023 2022 Estimated Useful Life Cost: Land $ 1,403 $ 1,403 indefinite Building and improvements 14,538 14,271 10 – 43 years Electronic data processing equipment 1,441 1,310 5 – 7 years Furniture and fixtures 2,953 2,919 5 – 7 years Automobiles 1,319 1,310 2 – 3 years Gross cost 21,654 21,213 Accumulated depreciation ( 11,757 ) ( 11,370 ) Total property and equipment, net $ 9,897 $ 9,843 Depreciation expense was $ 826 , $ 708 , and $ 694 during the years ended December 31, 2023, 2022, and 2021, respectively. 10. Goodwill and Other Intangibles The following table presents the carrying amount of the Company’s goodwill and related impairment by segment: Year Ended December 31, 2023 2022 Non-standard Auto Commercial Total Non-standard Auto Commercial Total Goodwill, beginning of year $ 2,628 $ 6,756 $ 9,384 $ 2,628 $ 6,756 $ 9,384 Impairment recognized during the period — ( 6,756 ) ( 6,756 ) — — — Goodwill, end of year $ 2,628 $ — $ 2,628 $ 2,628 $ 6,756 $ 9,384 Based on the qualitative analysis performed for the goodwill related to our non-standard auto segment as of the beginning of the fourth quarter of 2023, we concluded that goodwill was not impaired. We performed a quantitative assessment of the goodwill related to the Westminster acquisition during the fourth quarter of 2023, which is allocated to our commercial segment, and concluded that the goodwill was fully impaired as of December 31, 2023, resulting in a non-cash impairment charge of $ 6,756 in the current year. The determination of the fair value of the reporting unit was based on a combination of a market approach that considered benchmark company market multiples, and an income approach that utilized discounted cash flows. Under the income approach, we determined fair value based on the present value of the most recent cash flow projections for the reporting unit as of the date of the analysis and calculated a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections, new product introductions, customer behavior, competitor pricing, operating expenses, the discount rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. We determined during our reviews that there were no impairments of goodwill for any reporting units during the years ended December 31, 2022 and 2021. 78 Other Intangible Assets The following table presents the carrying amount of the Company’s other intangible assets: December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Subject to amortization: Trade names $ 748 $ 448 $ 300 Distribution network 6,700 1,489 5,211 Total subject to amortization 7,448 1,937 5,511 Not subject to amortization – state insurance licenses 1,900 — 1,900 Total $ 9,348 $ 1,937 $ 7,411 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 licenses 1,900 — 1,900 Total $ 9,348 $ 1,482 $ 7,866 We determined during our reviews that there were no impairments of other indefinite-lived intangible assets or finite-lived intangible assets during the years ended December 31, 2023, 2022, and 2021. Amortization expense was $ 455 , $ 472 , and $ 472 during the years ended December 31, 2023, 2022, and 2021, respectively. Other intangible assets that have finite lives, including trade names and distribution networks, are amortized over their useful lives. As of December 31, 2023, the estimated amortization of other intangible assets with finite lives for the next five years in the period ending December 31, 2028, and thereafter is as follows: Year ending December 31, 2024 $ 422 2025 422 2026 422 2027 422 2028 422 Thereafter 3,401 Total other intangible assets with finite lives $ 5,511 11. Royalties, Dividends, and Affiliations North Dakota Farm Bureau Nodak Insurance was organized by the NDFB to provide insurance protection for its members. We have a royalty agreement with the NDFB that recognizes the use of their trademark and provides royalties to the NDFB based on the premiums written on Nodak Insurance’s policies. Royalties paid to the NDFB were $ 1,603 , $ 1,453 , and $ 1,369 during the years ended December 31, 2023, 2022, and 2021, respectively. Royalty amounts payable of $ 131 and $ 119 were accrued as a liability to the NDFB at December 31, 2023 and 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 79 December 31, 2023, exceeded the amount of statutory capital and surplus necessary to satisfy risk-based capital requirements by a significant margin. There is no amount available for payment of dividends from Nodak Insurance to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department. 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. The Nodak Insurance Board of Directors declared and paid dividends of $ 3,000 to NI Holdings during the year ended December 31, 2022. No dividends were declared or paid by Nodak Insurance during the years ended December 31, 2023 and 2021. Direct Auto re-domesticated from Illinois to North Dakota during 2021 and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Direct Auto to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $ 90 as of December 31, 2023. No dividends were declared or paid by Direct Auto during the years ended December 31, 2023, 2022, or 2021. Westminster re-domesticated from Maryland to North Dakota during 2021 and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Westminster to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $ 1,200 as of December 31, 2023. No dividends were declared or paid by Westminster during the years ended December 31, 2023, 2022 or 2021. 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 Consolidated Statements of Operations: December 31, 2023 2022 Assets: Cash and cash equivalents $ 2,621 $ 5,008 Investments 15,394 13,350 Premiums and agents’ balances receivable 5,953 5,422 Deferred policy acquisition costs 682 595 Reinsurance recoverables on losses (2) 6,918 12,597 Accrued investment income 85 59 Income tax recoverable 225 225 Deferred income taxes 706 780 Property and equipment 306 319 Other assets 97 52 Total assets $ 32,987 $ 38,407 Liabilities: Unpaid losses and loss adjustment expenses $ 4,276 $ 6,453 Unearned premiums 3,269 2,959 Notes payable (1) 3,000 3,000 Pooling payable (1) 5,932 8,337 Reinsurance losses payable (2) 13,275 13,125 Accrued expenses and other liabilities 477 2,303 Total liabilities 30,229 36,177 Equity: Non-controlling interest 2,758 2,230 Total equity 2,758 2,230 Total liabilities and equity $ 32,987 $ 38,407 (1) Amount fully eliminated in consolidation. (2) Amount partly eliminated in consolidation. 80 Year Ended December 31, 2023 2022 2021 Revenues: Net premiums earned $ 7,023 $ 6,566 $ 5,992 Fee and other income (expense) 37 ( 30 ) ( 11 ) Net investment income 320 113 49 Net investment gains (losses) 1 ( 20 ) 2 Total revenues 7,381 6,629 6,032 Expenses: Losses and loss adjustment expenses 4,888 5,889 4,328 Amortization of deferred policy acquisition costs 1,660 1,336 1,291 Other underwriting and general expenses 588 564 470 Total expenses 7,136 7,789 6,089 Income (loss) before income taxes 245 ( 1,160 ) ( 57 ) Income tax expense (benefit) ( 5 ) ( 481 ) 27 Net income (loss) $ 250 $ ( 679 ) $ ( 84 ) 12. 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. Nodak Insurance also contributes an additional elective amount of employee compensation as a profit-sharing contribution for eligible employees. Westminster also sponsors a separate 401(k) plan. American West and Battle Creek have no employees. The Company reported expenses related to these plans totaling $ 806 , $ 693 , and $ 1,365 during the years ended December 31, 2023, 2022, and 2021, 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 $ 368 , $ 325 , and $ 914 during the years ended December 31, 2023, 2022, and 2021, respectively. In connection with our IPO in March 2017, the Company established its ESOP, which 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. 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 81 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 $ 322 , $ 380 , and $ 460 during the years ended December 31, 2023, 2022, and 2021, respectively. Through December 31, 2023, the Company had released and allocated 170,205 ESOP shares to participants, with a remainder of 69,795 ESOP shares in suspense at December 31, 2023. Using the Company’s year-end market price of $ 12.99 per share, the fair value of the unearned ESOP shares was $ 907 at December 31, 2023. 13. Line of Credit NI Holdings has a $ 3,000 line of credit with Wells Fargo Bank, N.A. The terms of the line of credit include a floating interest rate of 2.50 % above the daily simple secured overnight financing rate. There were no outstanding amounts during the years ended December 31, 2023, 2022, or 2021. This line of credit is scheduled to expire on December 13, 2024 . 14. Income Taxes The components of our provision for income tax expense (benefit) were as follows: Year Ended December 31, 2023 2022 2021 Current income tax expense (benefit) Federal $ 2,567 $ ( 11,280 ) $ 3,930 State 278 ( 2 ) 354 Total current 2,845 ( 11,282 ) 4,284 Deferred income tax expense (benefit) ( 1,882 ) ( 3,972 ) ( 1,310 ) Total income tax expense (benefit) $ 963 $ ( 15,254 ) $ 2,974 The provision for income tax expense (benefit) differs from the amount that would be computed by applying the statutory federal rate to income (loss) before income taxes as a result of the following: Year Ended December 31, 2023 2022 2021 Income (loss) before income taxes $ ( 4,263 ) $ ( 69,029 ) $ 11,306 Expected provision for federal income taxes at 21% $ ( 895 ) $ ( 14,496 ) $ 2,374 State income taxes, net of federal impact 90 ( 2 ) 474 Tax-exempt interest ( 204 ) ( 187 ) ( 197 ) Dividends received deduction ( 118 ) ( 147 ) ( 122 ) Section 832(b)(5)(B) proration amount 77 78 72 Compensation-related expenses 27 213 326 Goodwill impairment 1,419 — — Research and development credit ( 59 ) ( 70 ) ( 30 ) Change in valuation allowance ( 189 ) ( 314 ) 77 Other 815 ( 329 ) — Total income tax expense (benefit) $ 963 $ ( 15,254 ) $ 2,974 82 We re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs and record an offset for the net amount of the change as a component of income tax expense (benefit) from continuing operations in the period of enactment. We record any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards as a component of income tax expense (benefit) from continuing operations. The valuation allowance against certain deferred income tax assets was $ 505 , $ 694 , and $ 1,008 at December 31, 2023, 2022, and 2021, respectively. The income tax effects of temporary differences that give rise to significant portions of our deferred income tax assets and deferred income tax liabilities at December 31, 2023 and 2022, were as follows: December 31, 2023 2022 Deferred income tax assets: Unearned premium $ 7,371 $ 6,725 Unpaid losses and loss adjustment expenses 1,681 1,430 Net unrealized losses on investments 6,421 6,586 Net operating loss carryovers 851 1,194 Deferred compensation 579 500 Other 1,269 1,465 Total deferred income tax assets 18,172 17,900 Deferred income tax liabilities: Deferred policy acquisition costs 7,693 6,766 Intangibles 1,243 1,356 Other 318 79 Total deferred income tax liabilities 9,254 8,201 Net deferred income tax asset 8,918 9,699 Valuation allowance ( 505 ) ( 694 ) Deferred income tax asset, net $ 8,413 $ 9,005 At December 31, 2023 and 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 years ended December 31, 2023, 2022, or 2021. At December 31, 2023 and 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 federal income tax returns on a stand-alone basis, had net operating loss carryforwards of $ 3,756 and $ 3,963 at December 31, 2023 and 2022, respectively. The net operating loss carryforwards expire through 2032. Westminster, which became part of the Company’s consolidated federal income tax return beginning in 2020, had $ 1,270 of net operating loss carryforward at December 31, 2022. This net operating loss carryforward expired in 2023. 83 15. 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. In addition, Nodak Insurance leases server equipment under a non-cancellable finance lease expiring in 2026. Effective for the year ended December 31, 2022, the Company adopted the updated guidance for leases. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” for additional information. 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. 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. Lease liabilities are included in accrued expenses and other liabilities and right-of-use assets are included in other assets in the Consolidated Balance Sheet. There were expenses of $ 407 , $ 391 , and $ 250 related to these leases during the years ended December 31, 2023, 2022, and 2021, respectively. Additional information regarding the Company’s leases are as follows: As of and For the Year Ended December 31, 2023 2022 Operating lease cost $ 389 $ 391 Finance lease cost: Amortization of right-of-use assets 14 — Interest on lease liabilities 4 — Finance lease cost 18 — Total lease cost $ 407 $ 391 Other information on leases: Cash payments included in operating cash flows from operating leases $ 408 $ 340 Cash payments included in operating cash flows from finance leases 4 — Cash payments included in financing cash flows from finance leases 16 — Right-of-use assets obtained in exchange for new operating lease liabilities 247 — Right-of-use assets obtained in exchange for new finance lease liabilities 319 — Weighted average discount rate – operating leases 3.94 % 3.25 % Weighted average discount rate – finance leases 8.50 % — Weighted average remaining lease term in years – operating leases 5.3 years 6.3 years Weighted average remaining lease term in years – finance leases 2.8 years — The following table presents the contractual maturities of the Company’s lease liabilities for each of the five years in the period ending December 31, 2028, and thereafter, reconciled to our lease liability at December 31, 2023: Year ending December 31, Operating Leases Finance Leases Total 2024 $ 381 $ 120 $ 501 2025 346 120 466 2026 351 100 451 2027 356 — 356 2028 331 — 331 Thereafter 178 — 178 Total undiscounted lease payments 1,943 340 2,283 Less: present value adjustment 184 36 220 Lease liability at December 31, 2023 $ 1,759 $ 304 $ 2,063 84 16. 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. 17. Common and Preferred Stock Common Stock Changes in the number of common stock shares outstanding were as follows: Year Ended December 31, 2023 2022 2021 Shares outstanding, beginning 21,076,255 21,219,808 21,318,638 Treasury shares repurchased through stock repurchase authorization ( 548,549 ) ( 269,160 ) ( 225,205 ) Issuance of treasury shares for vesting of stock awards 47,887 101,292 102,060 Issuance of shares related to employee stock ownership plan 24,315 24,315 24,315 Shares outstanding, ending 20,599,908 21,076,255 21,219,808 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. The net loss per diluted common share for the year ended December 31, 2023, excluded the weighted average effects of 76,532 shares of stock awards since the impacts of these potential shares of common stock were anti-dilutive. The net loss per diluted common share for the year ended December 31, 2022, excluded the weighted average effects of 155,463 shares of stock awards since the impacts of these potential shares of common stock were anti-dilutive. On May 4, 2020, our Board of Directors approved an authorization for the repurchase of up to approximately $ 10,000 of the Company’s outstanding common stock. During the year ended December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $ 7,238 under this authorization. During the nine months ended September 30, 2021, we repurchased an additional 144,110 shares of our common stock for $ 2,762 to close out this authorization. On August 11, 2021, our Board of Directors approved an authorization for the repurchase of up to approximately $ 5,000 of the Company’s outstanding common stock. During the 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 year ended December 31, 2023, we completed the repurchase of 548,549 shares of our common stock for $ 7,278 , including the applicable excise tax discussed below. At December 31, 2023, $ 2,052 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. For periods subsequent to the effective date of the IRA, the cost of treasury stock acquired will include any 1 % excise tax imposed by the IRA. The Company 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. 85 18. 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. 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, 2021 115,780 $ 15.27 RSUs granted during 2021 58,700 18.76 RSUs earned during 2021 ( 66,100 ) 15.77 Units outstanding and unearned at December 31, 2021 108,380 16.86 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 December 31, 2023 146,580 $ 15.37 86 The following table shows the impact of RSU activity to the Company’s financial results: Year Ended December 31, 2023 2022 2021 RSU compensation expense $ 1,095 $ 952 $ 1,065 Income tax benefit ( 249 ) ( 216 ) ( 242 ) RSU compensation expense, net of income taxes $ 846 $ 736 $ 823 Total grant-date fair value of vested RSUs at end of period $ 872 $ 915 $ 1,042 At December 31, 2023, there was $ 891 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 1.63 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. 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, 2021 174,600 $ 15.15 PSUs granted during 2021 (at target) 64,600 18.64 PSUs earned during 2021 ( 70,363 ) 16.25 Performance adjustment (1) 24,300 16.25 Forfeitures ( 2,537 ) 16.25 Units outstanding at December 31, 2021 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 December 31, 2023 213,800 $ 16.53 (1) Represents the change in PSUs issued based upon the attainment of performance goals established by the Company. 87 The following table shows the impact of PSU activity to the Company’s financial results: Year Ended December 31, 2023 2022 2021 PSU compensation expense (benefit) $ 206 $ ( 1,022 ) $ 1,344 Income tax expense (benefit) ( 47 ) 232 ( 305 ) PSU compensation expense (benefit), net of income taxes $ 159 $ ( 790 ) $ 1,039 Total grant-date fair value of vested PSUs at end of period $ — $ 1,319 $ 1,143 The cost estimates for PSU grants represent initial target awards until we can reasonably forecast the financial performance of each PSU award grant. As of December 31, 2023, the previously recognized compensation expense related to the PSU awards granted during 2022 was eliminated due to the Company's expectation that the threshold performance goal will not be met. The compensation expense related to the PSU awards granted during 2021 was previously eliminated. The actual number of shares to be issued at the end of each performance period will range from 0 % to 150 % of the initial target awards. At December 31, 2023, there was $ 828 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 2.16 years. 19. 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. The adoption of this guidance resulted in an allowance for expected credit losses of $ 425 for premiums and agents' balances receivable as of December 31, 2022. See Part II, Item 8, Note 2 “Recent Accounting Pronouncements” 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 December 31, 2023, and the changes in the allowance for expected credit losses for the year ended December 31, 2023. Year Ended December 31, 2023 Premiums and Agents’ Balances 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 335 Write-offs of uncollectible premiums receivable 358 Balance, end of period $ 74,058 $ 402 88 20. 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 years ended December 31, 2023, 2022, and 2021. 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 Consolidated Statement of Operations or 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 Consolidated Statement of Operations. For the Consolidated Balance Sheet, those items include cash and investments, property and equipment, other assets, accrued expenses and other liabilities, income taxes recoverable or payable, and shareholders’ equit y. 89 Year Ended December 31, 2023 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 87,431 $ 88,170 $ 93,130 $ 45,272 $ 82,590 $ 5,352 $ 401,945 Assumed premiums earned — — — 2,262 — 1,308 3,570 Ceded premiums earned ( 4,071 ) ( 410 ) ( 9,741 ) ( 21,717 ) ( 18,114 ) ( 325 ) ( 54,378 ) Net premiums earned 83,360 87,760 83,389 25,817 64,476 6,335 351,137 Direct losses and loss adjustment expenses 59,385 63,041 52,455 17,669 99,677 1,751 293,978 Assumed losses and loss adjustment expenses — — — 787 — 353 1,140 Ceded losses and loss adjustment expenses 819 — ( 1,520 ) ( 7,663 ) ( 40,932 ) ( 1,410 ) ( 50,706 ) Net losses and loss adjustment expenses 60,204 63,041 50,935 10,793 58,745 694 244,412 Gross margin 23,156 24,719 32,454 15,024 5,731 5,641 106,725 Underwriting and general expenses 24,497 37,373 24,702 6,262 24,307 1,649 118,790 Underwriting gain (loss) ( 1,341 ) ( 12,654 ) 7,752 8,762 ( 18,576 ) 3,992 ( 12,065 ) Fee and other income 1,293 1,978 ( 11,361 ) Goodwill impairment charge — — — — ( 6,756 ) — ( 6,756 ) Net investment income 10,456 Net investment gains (losses) 2,124 Income (loss) before income taxes ( 4,263 ) Income tax expense (benefit) 963 Net income (loss) ( 5,226 ) Net income (loss) attributable to non-controlling interest 250 Net income (loss) attributable to NI Holdings, Inc. $ ( 5,476 ) Operating Ratios: Loss and loss adjustment expenses ratio 72.2 % 71.8 % 61.1 % 41.8 % 91.1 % 11.0 % 69.6 % Expense ratio 29.4 % 42.6 % 29.6 % 24.3 % 37.7 % 26.0 % 33.8 % Combined ratio 101.6 % 114.4 % 90.7 % 66.1 % 128.8 % 37.0 % 103.4 % Balances at December 31, 2023: Premiums and agents’ balances receivable $ 24,152 $ 19,853 $ 9,755 $ 89 $ 19,487 $ 722 $ 74,058 Deferred policy acquisition costs 5,834 11,966 8,005 — 7,871 444 34,120 Reinsurance recoverables on losses 15 — 2,949 1,343 42,509 2,153 48,969 Receivable from Federal Crop Insurance Corporation — — — 17,404 — — 17,404 Goodwill and other intangibles — 2,728 — — 7,311 — 10,039 Unpaid losses and loss adjustment expenses 28,037 61,272 18,205 3,884 98,698 7,023 217,119 Unearned premiums 35,367 36,426 48,210 — 41,374 2,723 164,100 90 Year Ended December 31, 2022 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 80,410 $ 67,178 $ 88,143 $ 53,214 $ 74,764 $ 5,177 $ 368,886 Assumed premiums earned — — — 2,254 — 4,296 6,550 Ceded premiums earned ( 2,805 ) ( 267 ) ( 9,762 ) ( 20,747 ) ( 13,333 ) ( 232 ) ( 47,146 ) Net premiums earned 77,605 66,911 78,381 34,721 61,431 9,241 328,290 Direct losses and loss adjustment expenses 66,250 39,400 114,195 27,146 82,817 3,589 333,397 Assumed losses and loss adjustment expenses — — — 634 — 1,735 2,369 Ceded losses and loss adjustment expenses ( 830 ) — ( 6,372 ) ( 8,362 ) ( 25,601 ) ( 169 ) ( 41,334 ) Net losses and loss adjustment expenses 65,420 39,400 107,823 19,418 57,216 5,155 294,432 Gross margin 12,185 27,511 ( 29,442 ) 15,303 4,215 4,086 33,858 Underwriting and general expenses 21,601 26,889 23,070 3,009 22,173 2,292 99,034 Underwriting gain (loss) ( 9,416 ) 622 ( 52,512 ) 12,294 ( 17,958 ) 1,794 ( 65,176 ) Fee and other income 831 1,453 1,453 Net investment income 7,820 Net investment gains (losses) ( 13,126 ) Income (loss) before income taxes ( 69,029 ) Income tax expense (benefit) ( 15,254 ) Net income (loss) ( 53,775 ) Net income (loss) attributable to non-controlling interest ( 679 ) Net income (loss) attributable to NI Holdings, Inc. $ ( 53,096 ) Operating Ratios: Loss and loss adjustment expenses ratio 84.3 % 58.9 % 137.6 % 55.9 % 93.1 % 55.8 % 89.7 % Expense ratio 27.8 % 40.2 % 29.4 % 8.7 % 36.1 % 24.8 % 30.2 % Combined ratio 112.1 % 99.1 % 167.0 % 64.6 % 129.2 % 80.6 % 119.9 % Balances at December 31, 2022: Premiums and agents’ balances receivable $ 20,669 $ 14,884 $ 9,388 $ 381 $ 16,138 $ 713 $ 62,173 Deferred policy acquisition costs 5,040 9,378 7,376 — 7,561 413 29,768 Reinsurance recoverables on losses 1,440 — 5,732 589 29,018 796 37,575 Receivable from Federal Crop Insurance Corporation — — — 15,462 — — 15,462 Goodwill and other intangibles — 2,761 — — 14,489 — 17,250 Unpaid losses and loss adjustment expenses 27,439 46,231 27,989 2,145 78,053 8,602 190,459 Unearned premiums 30,721 29,301 44,957 — 40,506 3,028 148,513 91 Year Ended December 31, 2021 Private Passenger Auto Non-Standard Auto Home and Farm Crop Commercial All Other Total Direct premiums earned $ 76,749 $ 58,842 $ 84,102 $ 43,541 $ 65,104 $ 4,916 $ 333,254 Assumed premiums earned — — — 2,106 — 5,929 8,035 Ceded premiums earned ( 4,216 ) ( 257 ) ( 10,310 ) ( 18,799 ) ( 7,819 ) ( 299 ) ( 41,700 ) Net premiums earned 72,533 58,585 73,792 26,848 57,285 10,546 299,589 Direct losses and loss adjustment expenses 61,358 34,453 59,380 79,177 45,621 1,009 280,998 Assumed losses and loss adjustment expenses — — — 617 — 6,282 6,899 Ceded losses and loss adjustment expenses ( 1,637 ) — ( 7,235 ) ( 51,963 ) ( 10,842 ) 159 ( 71,518 ) Net losses and loss adjustment expenses 59,721 34,453 52,145 27,831 34,779 7,450 216,379 Gross margin 12,812 24,132 21,647 ( 983 ) 22,506 3,096 83,210 Underwriting and general expenses 20,516 22,770 22,122 8,212 20,000 2,669 96,289 Underwriting gain (loss) ( 7,704 ) 1,362 ( 475 ) ( 9,195 ) 2,506 427 ( 13,079 ) Fee and other income 1,280 1,775 2,642 Net investment income 7,131 Net investment gains (losses) 15,479 Income (loss) before income taxes 11,306 Income tax expense (benefit) 2,974 Net income (loss) 8,332 Net income (loss) attributable to non-controlling interest ( 84 ) Net income (loss) attributable to NI Holdings, Inc. $ 8,416 Operating Ratios: Loss and loss adjustment expenses ratio 82.3 % 58.8 % 70.7 % 103.7 % 60.7 % 70.6 % 72.2 % Expense ratio 28.3 % 38.9 % 30.0 % 30.6 % 34.9 % 25.3 % 32.1 % Combined ratio 110.6 % 97.7 % 100.7 % 134.3 % 95.6 % 95.9 % 104.3 % Balances at December 31, 2021: Premiums and agents’ balances receivable $ 19,039 $ 8,143 $ 8,914 $ — $ 14,687 $ 669 $ 51,452 Deferred policy acquisition costs 4,949 5,978 7,271 — 6,328 421 24,947 Reinsurance recoverables on losses 1,001 — 3,467 6,953 8,722 1,057 21,200 Goodwill and other intangibles — 2,810 — — 14,912 — 17,722 Unpaid losses and loss adjustment expenses 26,390 43,515 19,161 6,002 32,924 11,670 139,662 Unearned premiums 28,820 18,679 42,399 — 34,672 3,219 127,789 Payable to Federal Crop Insurance Corporation — — — 4,962 — — 4,962 92 21. Statutory Net Income (Loss), Capital and Surplus, and Dividend Restrictions The following table presents selected information, as filed with insurance regulatory authorities, for our insurance subsidiaries as determined in accordance with accounting practices prescribed or permitted by such insurance regulatory authorities as of and for the years ended December 31, 2023, 2022, and 2021: 2023 2022 2021 Nodak Insurance: Statutory capital and surplus $ 176,783 $ 175,673 $ 221,761 Statutory unassigned surplus 171,783 170,673 216,761 Statutory net income (loss) 7,839 ( 29,978 ) 5,311 American West: Statutory capital and surplus 15,423 14,957 18,400 Statutory unassigned surplus 9,422 8,956 12,399 Statutory net income (loss) ( 38 ) ( 3,228 ) ( 54 ) Primero: Statutory capital and surplus 8,585 8,677 10,138 Statutory unassigned surplus ( 675 ) ( 582 ) 879 Statutory net income (loss) ( 136 ) ( 1,211 ) 127 Battle Creek: Statutory capital and surplus 6,047 5,660 6,821 Statutory unassigned surplus 3,047 2,660 3,821 Statutory net income (loss) 146 ( 1,189 ) ( 77 ) Direct Auto: Statutory capital and surplus 32,843 32,054 37,960 Statutory unassigned surplus 29,843 29,054 34,960 Statutory net income (loss) 90 ( 6,074 ) 6,451 Westminster: Statutory capital and surplus 21,328 20,090 24,706 Statutory unassigned surplus 16,328 15,090 19,706 Statutory net income (loss) 1,200 ( 3,861 ) 1,723 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, 2023 and 2022 exceeded the amount of statutory capital and surplus necessary to satisfy risk-based capital requirements by a significant margin. Amounts available for distribution in 2024 to Nodak Insurance as dividends from its insurance subsidiaries without prior approval of insurance regulatory authorities are $ 134 from American West and Primero. No dividends were paid to Nodak Insurance from either entity during the years ended December 31, 2023, 2022, or 2021. There is no amount available for payment of dividends from Nodak Insurance to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department. 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 years ended December 31, 2023 and 2021. The Nodak Insurance Board of Directors declared and paid dividends of $ 3,000 to NI Holdings during the year ended December 31, 2022. 93 Direct Auto re-domesticated from Illinois to North Dakota during 2021 and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Direct Auto to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $ 90 as of December 31, 2023. No dividends were declared or paid by Direct Auto during the years ended December 31, 2023, 2022, or 2021. Westminster re-domesticated from Maryland to North Dakota during 2021 and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Westminster to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $ 1,200 as of December 31, 2023. No dividends were declared or paid by Westminster during the years ended December 31, 2023, 2022 or 2021. 22. Subsequent Event As of January 2, 2024, the North Dakota Secretary of State approved the conversion of Battle Creek Mutual Insurance Company from a mutual insurance company to a stock insurance company. In accordance with the approved plan of conversion, the name of Battle Creek Mutual Insurance Company has become Battle Creek Insurance Company. As of the conversion date, the outstanding principal of the surplus note due from Battle Creek Mutual Insurance Company to Nodak Insurance Company was $ 3,000,000 . There was no accrued interest as of the conversion date. Battle Creek Insurance Company has issued 300,000 shares of its common stock to Nodak Insurance Company at a $ 10.00 per share par value and has become a 100 % wholly-owned subsidiary of Nodak Insurance Company. The surplus note is considered paid in full as of the conversion date. We are currently in the process of finalizing the accounting for this transaction, which will be reflected in the consolidated financial statements for the three months ended March 31, 2024, to be included in the first quarter 2024 Form 10-Q. 94 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes or disagreements with accountants on accounting and financial disclosure.