NI Holdings, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion is intended to provide a more comprehensive review of our operating results and financial condition than can be obtained from reading the consolidated financial statements alone. Unless otherwise noted, the information in the following discussion is being presented for our continuing operations. The discussion should be read in conjunction with the consolidated financial statements and the notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data.” Some of the information contained in this discussion and analysis or set forth elsewhere in this 2024 Annual Report constitutes forward-looking information that involves risks and uncertainties. Please see “Forward-Looking Statements” and Part I, Item 1A, “Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described, or implied by, the forward-looking statements contained herein. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document discusses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023 as well as discussions of 2022 items and year-over-year comparisons between 2023 and 2022, which were included due to the impacts of discontinued operations for those prior periods. All dollar amounts, except per share amounts, are in thousands. Financial Highlights 2024 Consolidated Results of Continuing Operations ● Net income of $6,600, or $0.31 per share basic and diluted ● Net premiums earned of $310,110 ● Net investment income of $10,943 ● Net unfavorable prior year reserve development of $13,517 ● Underwriting loss of $2,321 ● Combined ratio of 100.7% ● Operating cash flows of $15,082 2024 Consolidated Financial Condition ● Total cash and investments of $385,094 ● Total assets of $526,545 ● Unpaid losses and loss adjustment expenses of $137,288 ● Total liabilities of $281,914 ● Shareholders’ equity of $244,631 28 Results of Continuing Operations Our consolidated financial statements are prepared in accordance with GAAP. Management evaluates our operations by monitoring key measures of growth and profitability, which may include the disclosure of certain non-GAAP financial measures. Our results of operations are influenced by numerous factors affecting the U.S. property and casualty insurance industry including competition, weather, catastrophic events, innovation and emerging technologies, changes in regulations, inflation, general economic conditions, judicial trends, fluctuations in interest rates, and other changes in the financial markets. Our premium levels and underwriting results have been, and will continue to be, influenced by market conditions. The property and casualty insurance industry has historically been characterized by soft markets (periods of relatively high levels of price competition, less restrictive underwriting practices, and generally low premium rates) followed by hard markets (periods of capital shortages resulting in a lack of insurance availability, relatively low levels of price competition, more selective underwriting of risks, and relatively high premium rates). During soft markets, we may lose business to other carriers offering competitive insurance at lower rates. We may also choose to reduce our premiums or limit premium increases leading to a reduction in profit margins and revenues. Our industry is also influenced by general economic conditions, which could reduce overall premium volume for us and our competitors. Additionally, the industry is impacted by changes in customer preferences, including customer demand for direct, point-of-sale, or other non-traditional distribution channels. We regularly monitor our performance and competitive position by line of business and geographic market to determine appropriate rate actions. Premiums in the multi-peril crop insurance business are primarily influenced by the types of crops planted, number of acres insured, and commodity prices because the rates are established by the RMA rather than individual insurance carriers. The expected experience of this business for the calendar year may also significantly affect the reported net earned premiums and losses due to the risk-sharing arrangement with the federal government. Multi-peril crop insurance premiums are generally written in the second quarter, and earned ratably over the period of risk, which generally extends into the fourth quarter. Premiums in the crop hail insurance business are also generally written in the second quarter and earned ratably until the end of the third quarter. Premiums in our other lines of business are written and earned throughout the year based on their coverage periods. Losses on this business are also incurred throughout the year but are usually more frequent and/or severe during periods of elevated weather-related activity. Property Claims Service (“PCS”), a division of the Insurance Services Office, maintains industry loss data related to catastrophe loss events. PCS defines a catastrophe as an event that causes damage of $25 million or more in insured property losses and affects a significant number of insureds. When reporting on our losses from catastrophe events, we may include losses from those events that were defined as a catastrophe by PCS or those events which may include losses that we believe are, or will be, material to our operations, either in amount or in number of claims made. The frequency and severity of catastrophic losses we experience in any year may significantly affect our results of operations and financial position. In analyzing the underwriting performance of our property and casualty insurance business, we evaluate performance both including and excluding catastrophe losses. Portions of our catastrophe losses may be recoverable under our catastrophe reinsurance agreements. For more information on the Company’s results of operations by segment, see Part II, Item 8, Note 21 “Segment Information.” 29 Years ended December 31, 2024, 2023, and 2022 The consolidated net income from continuing operations for the Company was $6,600 for the year ended December 31, 2024, compared to net income of $19,831 for the year ended December 31, 2023, and a net loss of $38,685 for the year ended December 31, 2022. The major components of our revenues and net income (loss) for the three periods are shown below: Year Ended December 31, 2024 2023 2022 Revenues: Net premiums earned $ 310,110 $ 292,117 $ 271,740 Fee and other income 1,938 1,940 1,381 Net investment income 10,943 8,034 6,636 Net investment gains (losses) 2,213 1,929 (11,975 ) Total revenues $ 325,204 $ 304,020 $ 267,782 Components of net income (loss): Net premiums earned $ 310,110 $ 292,117 $ 271,740 Losses and loss adjustment expenses 207,465 186,516 241,750 Amortization of deferred policy acquisition costs and other underwriting and general expenses 104,966 96,957 78,908 Underwriting gain (loss) (2,321 ) 8,644 (48,918 ) Fee and other income 1,938 1,940 1,381 Net investment income 10,943 8,034 6,636 Net investment gains (losses) 2,213 1,929 (11,975 ) Goodwill impairment charge (2,628 ) — — Income (loss) from continuing operations before income taxes 10,145 20,547 (52,876 ) Income tax expense (benefit) 3,545 716 (14,191 ) Net income (loss) from continuing operations $ 6,600 $ 19,831 $ (38,685 ) 30 Net Premiums Earned Year Ended December 31, 2024 2023 2022 Net premiums earned: Direct premium $ 341,885 $ 325,590 $ 299,607 Assumed premium 2,984 3,570 6,550 Ceded premium (34,759 ) (37,043 ) (34,417 ) Total net premiums earned $ 310,110 $ 292,117 $ 271,740 Net premiums earned for the year ended December 31, 2024 increased $17,993, or 6.2%, to $310,110, compared to $292,117 for the year ended December 31, 2023. Net premiums earned for the year ended December 31, 2023 increased $20,377, or 7.5%, to $292,117, compared to $271,740 for the year ended December 31, 2022. Year Ended December 31, 2024 2023 2022 Net premiums earned: Private passenger auto $ 90,314 $ 83,360 $ 77,605 Non-Standard auto 95,225 87,760 66,911 Home and farm 90,761 83,389 78,381 Crop 21,142 25,817 34,721 All other 12,668 11,791 14,122 Total net premiums earned $ 310,110 $ 292,117 $ 271,740 Below are comments regarding significant changes in net premiums earned by business segment: Private passenger auto – Net premiums earned for 2024 increased $6,954, or 8.3%, from 2023. Results were driven by new business growth in North Dakota as well as significant rate increases in North Dakota, South Dakota, and Nebraska, partially offset by lower new business and retention levels in South Dakota and Nebraska as a result of underwriting actions taken to improve profitability. Net premiums earned for 2023 increased $5,755, or 7.4%, from 2022. This increase was driven by significant rate increases in North Dakota, South Dakota, and Nebraska, partially offset by lower new business production as a result of underwriting actions taken to improve profitability. Non-Standard auto – Net premiums earned for 2024 increased $7,465, or 8.5%, from 2023. Results were driven by prior period new business growth in Illinois and Arizona as well as significant rate increases in the Chicago market where our non-standard auto business is concentrated, partially offset by lower retention compared to the prior year and the decision to exit Nevada. Net premiums earned for 2023 increased $20,849, or 31.2%, from 2022. This increase was driven by new business growth, improved retention, and significant rate increases in the Chicago market. Home and farm – Net premiums earned for 2024 increased $7,372, or 8.8%, from 2023. Results were driven by new business growth in North Dakota, rate increases, and increased insured property values, which were primarily the result of higher inflationary factors. These increases were partially offset by lower retention rates and new business levels in Nebraska and South Dakota as a result of underwriting actions taken to improve profitability. Net premiums earned for 2023 increased $5,008, or 6.4%, from 2022. This increase was driven by rate increases along with increased insured property values, which were primarily the result of higher inflationary factors. These premium increases were partially offset by lower levels of new business production as a result of underwriting actions taken to improve profitability Crop – Net premiums earned for 2024 decreased $4,675, or 18.1%, from 2023. This decrease was driven by a reduction in acres insured and lower commodity prices, which are a key determinant of premiums on a Federal multi-peril crop insurance policy, in the current year. Net premiums earned for 2023 decreased $8,904, or 25.6%, from 2022. This decrease was driven by lower commodity prices and lower muti-peril crop insurance rates in 2023, combined with fewer acres insured compared to the prior year. In addition, the strong multi-peril crop results for 2023 resulted in higher ceded premiums as required by the SRA. All other – Net premiums earned for 2024 increased $877, or 7.4%, from 2023. Results were driven by rate and insured value increases for the commercial and excess lines of business, partially offset by the continued run-off of our participation in an assumed domestic and international reinsurance pool of business. Net premiums earned for 2023 decreased $2,331, or 16.5%, from 2022. This 31 decrease was driven by the decision to non-renew our participation in an assumed domestic and international reinsurance pool of business as of January 1, 2022. Losses and Loss Adjustment Expenses Year Ended December 31, 2024 2023 2022 Net losses and loss adjustment expenses: Direct losses and loss adjustment expenses $ 220,991 $ 195,138 $ 255,187 Assumed losses and loss adjustment expenses 784 1,140 2,369 Ceded losses and loss adjustment expenses (14,310 ) (9,762 ) (15,806 ) Total net losses and loss adjustment expenses $ 207,465 $ 186,516 $ 241,750 The Company’s net losses and loss adjustment expenses for the year ended December 31, 2024 increased $20,949, or 11.2%, to $207,465, compared to $186,516 for the year ended December 31, 2023. The Company’s net losses and loss adjustment expenses for the year ended December 31, 2023 decreased $55,234, or 22.8%, to $186,516, compared to $241,750 for the year ended December 31, 2022. Year Ended December 31, 2024 2023 2022 Net losses and loss adjustment expenses: Private passenger auto $ 51,869 $ 60,204 $ 65,420 Non-Standard auto 76,130 63,041 39,400 Home and farm 64,561 50,935 107,823 Crop 9,071 10,793 19,418 All other 5,834 1,543 9,689 Total net losses and loss adjustment expenses $ 207,465 $ 186,516 $ 241,750 Year Ended December 31, 2024 2023 2022 Loss and loss adjustment expenses ratio: Private passenger auto 57.4% 72.2% 84.3% Non-Standard auto 79.9% 71.8% 58.9% Home and farm 71.1% 61.1% 137.6% Crop 42.9% 41.8% 55.9% All other 46.1% 13.1% 68.6% Total loss and loss adjustment expenses ratio 66.9% 63.8% 89.0% Below are comments regarding significant changes in net losses and loss adjustment expenses, and the net loss and loss adjustment expenses ratios by business segment: Private passenger auto – The net loss and loss adjustment expenses ratio decreased 14.8 percentage points in 2024 compared to 2023. This decrease was driven by lower levels of weather-related losses in the current year due to the mild winter in the Midwest compared to elevated winter weather-related losses in the prior year as well as favorable prior year loss reserve development. Both periods were positively affected by earned premium growth. The net loss and loss adjustment expenses ratio decreased 12.1 percentage points in 2023 compared to 2022. This decrease was the result of recent significant rate increases, lower loss frequency compared to the prior year, and favorable prior year loss reserve development, partially offset by elevated loss costs due to high levels of inflation. Non-Standard auto – The net loss and loss adjustment expenses ratio increased 8.1 percentage points in 2024 compared to 2023. This increase was driven by unfavorable prior year loss reserve development related to elevated bodily injury losses, partially offset by earned premium growth resulting from new business growth and significant rate increases. We continue to take significant underwriting actions as a result of these elevated losses and challenging market conditions. The net loss and loss adjustment expenses ratio increased 12.9 percentage points in 2023 compared to 2022. This increase was driven by elevated loss severity as a result of inflationary factors as well as unfavorable prior year loss reserve development, partially offset by significant rate increases. 32 Home and farm – The net loss and loss adjustment expenses ratio increased 10.0 percentage points in 2024 compared to 2023. This increase was driven by higher loss severity and higher non-catastrophe weather-related losses in North Dakota and Nebraska during 2024 compared to the prior year, partially offset by earned premium growth in the current year. The net loss and loss adjustment expenses ratio decreased 76.5 percentage points in 2023 compared to 2022. This decrease was driven by the much-improved loss experience as a result of having no catastrophe losses during 2023 compared to 2022, combined with improved non-catastrophe weather losses and the significant rate increases and underwriting actions we implemented to address the profitability on these lines of business. Catastrophe losses, net of reinsurance, for the Home and Farm segment accounted for 72.1 percentage points of the net loss and loss adjustment expense ratio for the year ended December 31, 2022. Crop – The net loss and loss adjustment expenses ratio increased 1.1 percentage points in 2024 compared to 2023. The strong results for 2024 were the result of favorable crop growing conditions, similar to the prior year. The net loss and loss adjustment expenses ratio decreased 14.1 percentage points in 2023 compared to 2022. This decrease was due to improved crop growing conditions in 2023 in comparison to 2022. All other – The net loss and loss adjustment expenses ratio increased 33.0 percentage points in 2024 compared to 2023. This increase was driven by elevated large loss experience compared to the prior year and an inter-segment reclassification of a large loss during 2023. The net loss and loss adjustment expenses ratio decreased 55.5 percentage points in 2023 compared to 2022. This decrease was driven by improved loss experience related to the commercial and excess liability lines of business. Underwriting and General Expenses and Expense Ratio Year Ended December 31, 2024 2023 2022 Underwriting and general expenses: Amortization of deferred policy acquisition costs $ 71,257 $ 67,631 $ 53,605 Other underwriting and general expenses 33,709 29,326 25,303 Total underwriting and general expenses $ 104,966 $ 96,957 $ 78,908 Expense ratio 33.8% 33.2% 29.0% The expense ratio is calculated by dividing other underwriting and general expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company’s operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio increased 0.6 percentage points in the year ended December 31, 2024, compared to the same period in 2023. The increase in the amortization of deferred policy acquisition costs is due to higher deferrable costs resulting from significant earned premium growth compared to the prior year, including significant growth in the Non-Standard Auto segment which generally pays higher agent commissions than our other segments. The increase in the other underwriting and general expenses is due to the costs incurred in the current year associated with the execution of separation agreements with our former Chief Executive Officer and former Senior Vice President of Operations. The overall expense ratio increased 4.2 percentage points in the year ended December 31, 2023, compared to the same period in 2022. The increase in amortization of deferred policy acquisition costs was driven by higher deferrable costs resulting from overall premium growth compared to the prior year, including significant growth in the non-standard auto segment which generally pays higher agent commissions than our other segments. The increase in other underwriting and general expenses was due to the impact of continued high levels of inflation and 2022 expenses being favorably impacted by multi-peril crop insurance final settlements. 33 Underwriting Gain (Loss) and Combined Ratio Year Ended December 31, 2024 2023 2022 Underwriting gain (loss): Private passenger auto $ 10,407 $ (1,536 ) $ (9,548 ) Non-Standard auto (17,637 ) (12,860 ) 508 Home and farm (2,373 ) 7,557 (52,644 ) Crop 7,189 8,702 12,236 All other 93 6,781 530 Total underwriting gain (loss) $ (2,321 ) $ 8,644 $ (48,918 ) Year Ended December 31, 2024 2023 2022 Combined ratio: Private passenger auto 88.4% 101.8% 112.3% Non-Standard auto 118.5% 114.6% 99.3% Home and farm 102.6% 91.0% 167.2% Crop 66.0% 66.3% 64.7% All other 99.3% 42.5% 96.2% Total combined ratio 100.7% 97.0% 118.0% Underwriting gain (loss) measures the pre-tax profitability of our insurance operations. It is derived by subtracting losses and loss adjustment expenses, amortization of deferred policy acquisition costs, and other underwriting and general expenses from net premiums earned. The combined ratio represents the sum of these losses and expenses as a percentage of net premiums earned and measures our overall underwriting profit. The total underwriting gain (loss) decreased $10,965, or 126.9%, for the year ended December 31, 2024, compared to the same period in 2023. The total underwriting gain (loss) increased $57,562, or 117.7%, for the year ended December 31, 2023, compared to the same period in 2022. These results were driven by the factors discussed in the Losses and Loss Adjustment Expenses and the Underwriting and General Expenses and Expense Ratio sections above. The overall combined ratio increased 3.7 percentage points in the year ended December 31, 2024, compared to the same period in 2023. The overall combined ratio decreased 21.0 percentage points in the year ended December 31, 2023, compared to the same period in 2022. These results were driven by the factors discussed in the Losses and Loss Adjustment Expenses and the Underwriting and General Expenses and Expense Ratio sections above. Fee and Other Income We had fee and other income of $1,938 for the year ended December 31, 2024, compared to $1,940 for the year ended December 31, 2023, and $1,381 for the year ended December 31, 2022. Fee income is largely attributable to the Non-Standard Auto segment and is a key component in measuring its profitability. Fee and other income on this business decreased to $1,219 for the year ended December 31, 2024, from $1,293 for the year ended December 31, 2023, due to elevated other income in the prior year. Fee and other income for non-standard auto increased to $1,293 for the year ended December 31, 2023, from $831 for the year ended December 31, 2022, due to an increase in policies that generate fee income. Goodwill Impairment Charge We had a goodwill impairment charge of $2,628 for the year ended December 31, 2024, compared to $6,756 for the years ended December 31, 2023, and $0 for the year ended December 31, 2022. See Part II, Item 8, Note 10 “Goodwill and Other Intangibles” for additional information. 34 Net Investment Income The following table shows our average cash and invested assets, net investment income, and return on average cash and invested assets for the reported periods for continuing operations: Year Ended December 31, 2024 2023 2022 Average cash and invested assets $ 371,110 $ 335,821 $ 391,584 Net investment income $ 10,943 $ 8,034 $ 6,636 Gross return on average cash and invested assets 3.9% 3.5% 2.5% Net return on average cash and invested assets 3.0% 2.6% 1.7% Net investment income increased $2,909 for the year ended December 31, 2024, compared to the year ended December 31, 2023. This increase was primarily driven by the higher interest rate environment which resulted in higher reinvestment rates in our fixed income portfolio as well as higher yields on our cash and cash equivalents, partially offset by higher investment expenses. Net investment income increased $1,398 for the year ended December 31, 2023, compared to the year ended December 31, 2022. This increase was primarily driven by higher reinvestment rates as well as a strategic increased allocation to fixed income securities in our investment portfolio. Gross and net return on average cash and invested assets increased year-over-year from 2023 to 2024, primarily driven by the favorable interest rate environment that resulted in significantly higher net investment income on an increased average balance of fixed income securities as well as cash and cash equivalents (measured at fair value). In addition, the increase in investments in high dividend yield equities resulted in relatively consistent year-over-year dividend income despite a reduction in the average equities balance (measured at fair value). The increase in average cash and invested assets was driven by additional investments in fixed income securities as a result of positive operating cash flows during 2024. Gross and net return on average cash and invested assets increased year-over-year from 2022 to 2023, driven by the higher net investment income and a higher proportion of the equity portfolio being invested in high dividend yield equities in 2023, along with a decrease in average cash and invested assets (measured at fair value). This decrease in average cash and invested assets was driven by challenging equity market conditions, particularly during the middle and later stages of 2022, combined with investment sales as a result of an unusually high number of weather-related losses in 2022. Net Investment Gains (Losses) Net investment gains (losses) consisted of the following: Year Ended December 31, 2024 2023 2022 Gross realized gains $ 1,341 $ 13,841 $ 7,083 Gross realized losses, excluding credit impairment losses (790 ) (1,745 ) (5,099 ) Net realized gains 551 12,096 1,984 Change in net unrealized gain on equity securities 1,662 (10,167 ) (13,959 ) Net investment gains (losses) $ 2,213 $ 1,929 $ (11,975 ) We had net realized gains of $551 for the year ended December 31, 2024, compared to $12,096 for the year ended December 31, 2023, and $1,984 for the year ended December 31, 2022. The elevated net realized gains for the year ended December 31, 2023, were the result of a strategic liquidation of a portfolio of equity securities. The gross realized gains from the sale of these securities were largely offset by the elimination of the unrealized gain position of these securities. No credit impairment losses were reported during any of the periods presented. We experienced an increase in net unrealized gains on equity securities of $1,662 during the year ended December 31, 2024, attributable to overall favorable equity markets during the current year. The change in net unrealized gains on equity securities for 2023 was driven by the equity portfolio liquidation noted above and the impact of changes in fair value attributable to equity market volatility. The 2022 decreases were driven by the impact of changes in fair value attributable to unfavorable equity markets. We had net realized gains on the sale of equity securities of $750, $12,619, and $2,051 during the years ended December 31, 2024, 2023, and 2022, respectively. 35 Our fixed income securities are classified as available for sale because we will, from time to time, execute sales of securities that are not impaired, consistent with our investment goals and policies. The fixed income portion of the portfolio experienced net unrealized losses of $191 during the year ended December 31, 2024, compared to net unrealized gains of $9,168 during the year ended December 31, 2023. The changes were primarily the result of changes in U.S. interest rates. The change in the fair value of fixed income securities is not reflected in net income; rather it is reflected as a separate component (net of income taxes) of other comprehensive income. The fixed income portfolio experienced net unrealized losses of $39,971 during the year ended December 31, 2022. Income (Loss) before Income Taxes We had pre-tax income of $10,145 for the year ended December 31, 2024, a pre-tax income of $20,547 for the year ended December 31, 2023, and pre-tax loss of $52,876 for the year ended December 31, 2022. The year-over-year decrease in 2024 compared to 2023 was largely attributable to higher loss severity and non-catastrophe weather-related losses for Home and Farm in the states of North Dakota and Nebraska, unfavorable prior year loss reserve development for Non-Standard Auto, a goodwill impairment charge for Non-Standard Auto, and expenses incurred related to the separation agreements with our former Chief Executive Officer and former Senior Vice President of Operations, partially offset by net earned premium growth, improved loss experience for Private Passenger Auto, and higher net investment income. The year-over-year improvement in 2023 compared to 2022 was largely attributable to the significant catastrophe losses and significantly higher investment losses during 2022. Income Tax Expense (Benefit) We recorded income tax expense of $3,545 for the year ended December 31, 2024, income tax expense of $716 for the year ended December 31, 2023, and an income tax benefit of $14,191 for the year ended December 31, 2022. Including the impacts of discontinued operations and the loss on sale of discontinued operations, we recorded an income tax benefit of $3,192 for the year ended December 31, 2024, income tax expense of $963 for the year ended December 31, 2023, and an income tax benefit of $15,254 for the year ended December 31, 2022. Including the impacts of discontinued operations and the loss on sale of discontinued operations, our effective tax rate for 2024 was 35.2% compared to an effective tax rate of (22.6)% and 22.1% for 2023 and 2022, respectively. Our 2024 effective tax rate was impacted by several factors, but the loss on sale of discontinued operations, non-taxable compensation-related expenses, and non-taxable goodwill impairment charge were the most significant drivers of the variance from the statutory rate. Our 2023 effective tax rate was impacted by several factors, but the 2023 non-taxable goodwill impairment charge was the most significant driver of the variance from the statutory rate. Our 2022 effective tax rate was impacted by several factors, but the change in valuation allowance and non-taxable executive compensation were the most significant drivers of the variance from the statutory rate. The valuation allowance against certain deferred income tax assets was $2,506 as of December 31, 2024, $505 as of December 31, 2023, and $694 as of December 31, 2022. Net Income (Loss) We had net income before non-controlling interest of $6,600 for the year ended December 31, 2024, net income of $19,831 for the year ended December 31, 2023, and a net loss of $38,685 for the year ended December 31, 2022. The year-over-year decrease in 2024 compared to 2023 was largely attributable to higher loss severity and non-catastrophe weather-related losses for Home and Farm in the states of North Dakota and Nebraska, unfavorable prior year loss reserve development for Non-Standard Auto, a goodwill impairment charge for Non-Standard Auto, and expenses incurred related to the separation agreements with our former Chief Executive Officer and former Senior Vice President of Operations, partially offset by net earned premium growth, improved loss experience for Private Passenger Auto, and higher net investment income. The year-over-year improvement in 2023 compared to 2022 was largely attributable to the significant catastrophe losses and significantly higher investment losses during 2022. Return on Average Equity For the year ended December 31, 2024, we had annualized return on average equity, after non-controlling interest, of 2.8%, compared to annualized return on average equity, after non-controlling interest, of 7.9% and (13.6)% for the years ended December 31, 2023 and 2022, respectively. Average equity is calculated as the average between beginning and ending equity, excluding non-controlling interest, for the period. 36 Principal Revenue Items Revenue is primarily derived from net premiums earned, net investment income, and net investment gains (losses). Gross and Net Premiums Written Gross premiums written is equal to direct premiums written and assumed premiums before the effect of ceded reinsurance. Gross premiums written are recognized upon sale of new insurance contracts or renewal of existing contracts. Net premiums written is equal to gross premiums written less premiums ceded to reinsurers. Premiums Earned Premiums earned is the earned portion of net premiums written. Insurance premiums on property and casualty policies are recognized in proportion to the underlying risk insured and are earned ratably over the duration of the policies or, in the case of crop insurance, over the period of risk to the Company. At the end of each accounting period, the portion of the premiums that is not yet earned is included in unearned premiums and is realized as revenue in subsequent periods over the remaining term of the policy or period of risk. Our property and casualty policies, other than some of our auto lines and the non-standard auto policies, typically have a term of twelve months. Due to the nature of the crop planting and harvesting cycle and the deadlines for filing and processing claims under the federal crop insurance program, insurance premiums for multi-peril crop insurance are recognized and earned during the period of risk, which usually begins in spring and ends with harvest in the fall. Under the federal crop insurance program, farmers must purchase crop insurance with respect to spring planted crops by March 15. By July 15, the farmer must report the number of acres planted in each crop. On September 1, the insurer bills the farmer for the insurance premium, which is due and payable by the farmer by October 1. If the farmer does not pay the premium by such date, the insurer will charge interest at a rate of 15% because the insurer is required to pay the farmer’s portion of the premium to the FCIC by November 15, regardless of whether the farmer pays the premium to the insurer. Except for claims occurring in the spring (primarily for prevented planting and required replanting claims), claims are required to be filed with the FCIC by December 15. A different cycle exists for crops planted in the fall, such as winter wheat, but the vast majority of crop insurance we write covers crops planted in the spring. Net Investment Income and Net Investment Gains (Losses) We invest our excess cash in fixed income and equity securities. Investment income includes interest and dividends earned on invested assets and is reported net of investment-related expenses. Net investment gains (losses) are reported separately from net investment income. We recognize realized gains when investments are sold for an amount greater than their cost or amortized cost (in the case of fixed income securities) and realized losses when investments are sold for an amount less than their cost or amortized cost or when credit impairments are recorded, as applicable. We recognize changes in unrealized gains and losses of equity securities in net income as part of net investment gains (losses). These gains and losses may be significant given the fair market value of the equity portfolio and the inherent volatility in equity markets. The changes in unrealized gains and losses on fixed income securities are recorded in other comprehensive income (loss), net of income taxes. Therefore, these changes have no impact on net income but do impact shareholders’ equity. The portfolio of investments for NI Holdings and its insurance subsidiaries is managed by Conning, Inc., which has discretion to buy and sell securities in accordance with the investment policy approved by our Board of Directors. Principal Expense Items Our expenses consist primarily of losses and loss adjustment expenses, amortization of deferred policy acquisition costs, other underwriting and general expenses, and income taxes. Losses and Loss Adjustment Expenses Losses and loss adjustment expenses represent the largest expense item and include (1) claim payments made, (2) estimates for future claim payments and changes in those estimates from prior periods, and (3) costs associated with investigating, defending, and adjusting claims, including legal fees. Amortization of Deferred Policy Acquisition Costs and Other Underwriting and General Expenses Expenses incurred to underwrite risks are referred to as policy acquisition costs. Policy acquisition costs consist of commission expenses, state premium taxes, and certain other underwriting expenses that vary with and are primarily related to the writing and 37 acquisition of new and renewal business. These policy acquisition costs are deferred and amortized over the effective period of the related insurance policies. Other underwriting and general expenses consist of salaries, professional fees, office supplies, depreciation, and all other operating expenses not otherwise classified separately. Income Taxes Current income taxes represent amounts paid or owed to the federal government and certain states whose payment is based upon net income (subject to regulatory adjustments) generated by the Company. The generation of net losses may result in income tax benefits. As noted above, it does not include state premium taxes that are based purely on the collection of policyholder premiums. We use the asset and liability method of accounting for deferred income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the income tax bases of its assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion of the deferred income tax asset will not be realized. The effect of a change in tax rates is recognized in the period of the enactment date. Total income taxes reflect both current income taxes and the change in the net deferred income tax asset or liability, excluding amounts attributed to accumulated other comprehensive income. Critical Accounting Policies General The preparation of financial statements in accordance with GAAP requires both the use of estimates and judgment relative to the application of appropriate accounting policies. We are required to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related footnotes. We evaluate these estimates and assumptions on an ongoing basis based on historical developments, market conditions, industry trends, and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to these estimates and assumptions and that reported results of operations would not be materially adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. We believe the following policies are the most sensitive to estimates and judgments. Unpaid Losses and Loss Adjustment Expenses How reserves are established With respect to our traditional property and casualty insurance products, we maintain reserves for the payment of claims (indemnity losses) and expenses related to adjusting those claims (loss adjustment expenses). Our liability for unpaid losses and loss adjustment expenses consists of (1) case reserves, which are reserves for claims that have been reported to us, and (2) IBNR, which represents reserves for claims that have been incurred but have not yet been reported and for the future development of reported claims. As some claims may not be reported for several years, the liability for unpaid losses and loss adjustment expenses may include significant estimates for IBNR based on the time necessary to settle the claim. Loss adjustment expenses consist of two components – allocated loss adjustment expenses and unallocated loss adjustment expenses. Allocated loss adjustment expenses are the expenses for defense and cost containment, including legal fees, court costs, and investigation fees, which are linked to the settlement of specific individual claims or losses. Unallocated loss adjustment expenses are expenses that generally cannot be associated with a specific claim, including internal costs such as salaries and other overhead costs. Estimates of future costs to administer reported and unreported claims for both allocated and unallocated expenses are included in IBNR. When a claim is reported to one of the insurance companies, its claims personnel establish a case reserve for the estimated amount of the ultimate payment to the extent it can be determined or estimated, in many cases a default reserve is utilized until the claims personnel can determine a more claim specific amount. The amount of the loss reserve for the reported claim is based primarily upon an evaluation of coverage, liability, damages suffered, and any other information considered pertinent to estimating the exposure presented by the claim. Each claim is contested or settled individually based upon its merits, and some property and casualty claims may take years to resolve, especially in situations where legal action may be involved. Case reserves are reviewed on a regular basis and are updated as new information becomes available. When a catastrophe occurs, which in our case usually involves the weather perils of wind and hail, we utilize mapping technology, through geographic coding of our property risks, to overlay the path of the storm. This enables us to establish estimated damage amounts based on the wind speed and size of the hail for case or per claim loss amounts. This process allows us to determine within a 38 reasonable time (5-7 days) an estimated number of claims and estimated losses from the storm. We have also begun reviewing the results of the predicted cost of the claim generated by the catastrophe models as a reasonability check on the anticipated cost of the storm. If we estimate the damages to be in excess of half of the retained catastrophe amount, reinsurers are notified immediately of a potential loss so that we can quickly recover reinsurance payments once the retention is exceeded. We estimate multi-peril crop insurance losses on a quarterly basis based upon historical loss patterns, current crop conditions, current weather patterns, and input from crop loss adjusters. These estimates have proven to be reasonably accurate indicators of our anticipated losses for this line of business. Our actuaries assist with the estimation of the liability for unpaid losses and loss adjustment expenses. The actuaries prepare estimates by first deriving an actuarially based estimate of the ultimate cost of total losses and loss adjustment expenses incurred as of the financial statement date based on established actuarial methods as described below. We then reduce the estimated ultimate loss and loss adjustment expenses by loss and loss adjustment expenses payments and case reserves carried as of the financial statement date. The actuarially determined estimate is based upon indications from various actuarial methodologies including paid chain-ladder, incurred chain-ladder, Bornhuetter-Ferguson, weighted averages of the methods, and judgment. The specific method used to estimate the ultimate losses varies depending on the judgment of the actuaries as to what is the most appropriate for the line of business. Management reviews these estimates and supplements the actuarial analysis with information not fully incorporated into the actuarially based estimate, such as changes in the external business environment and internal company processes. Management may adjust the actuarial estimates based on this supplemental information in order to arrive at the amount recorded in the consolidated financial statements. A further discussion of the actuarial methodologies used follows: Bornhuetter-Ferguson Method - The Bornhuetter-Ferguson Method is a blended method that explicitly considers both actual loss development to date and expected future loss emergence. This method is applied on both a paid loss basis and an incurred loss basis. This method uses selected loss development patterns to calculate the expected percentage of losses unpaid (or unreported). The expected future loss component of the method is calculated by multiplying earned premium for the given exposure period by a selected a priori (i.e. deductive) loss ratio. The resulting dollars are then multiplied by the expected percentage of unpaid (or unreported) losses described above. This provides an estimate of future paid (or reported) losses that is then added to actual paid (or incurred) loss data to produce the estimated ultimate loss. Paid and Case Incurred Loss Development (Chain-Ladder) Method - The Paid and Case Incurred Loss Development Method utilizes ratios of cumulative paid losses, case incurred losses, or paid loss adjustment expenses at each age of development as a percent of the preceding development age. Selected ratios are then multiplied together to produce a set of loss development factors which when applied to the most current data value, by accident period, develop the estimated ultimate losses or loss adjustment expenses. Ultimate losses or loss adjustment expenses are then selected for each accident year from the various methods employed. Ratio of Paid Allocated Loss Adjustment Expenses to Paid Loss Method - The Ratio of Paid Allocated Loss Adjustment Expenses to Paid Loss Method utilizes the ratio of paid allocated loss adjustment expenses to paid losses and is similar to the Paid and Case Incurred Loss Development (Chain-Ladder) Method described above, except that the data projected are the ratios of paid allocated loss adjustment expenses to paid losses. The projected ultimate ratio is then multiplied by the selected ultimate losses, by accident year, to yield the ultimate allocated loss adjustment expenses. Allocated loss adjustment expenses reserves are calculated by subtracting paid losses from ultimate allocated loss adjustment expenses. The process of estimating loss reserves involves a high degree of judgment and is subject to a number of variables. These variables can be affected by both internal and external events, such as changes in claims handling procedures/staffing, inflation, weather, legal trends, and regulatory and legislative changes. The impact of many of these items on ultimate costs for losses and loss adjustment expenses is difficult to estimate. Loss reserve estimation is also affected by the volume of claims, the potential severity of individual claims, the determination of occurrence date for a claim, and reporting lags (the time between the occurrence of the policyholder event and when it is actually reported to the insurer). Informed judgment is applied throughout the process, including the application of various individual experiences and expertise to multiple sets of data and analyses. We continually refine our estimates of unpaid losses and loss adjustment expenses in a regular ongoing process as historical loss experience develops and additional claims are reported and settled. We consider all significant facts and circumstances known at the time the liabilities for unpaid losses and loss adjustment expenses are established. There is an inherent amount of uncertainty in the establishment of liabilities for unpaid losses and loss adjustment expenses. This uncertainty is greatest in the current and most recent accident years due to the more recent nature of the claims being reported and relatively small percentage of these claims that have been reported, investigated, and adjusted by our claims staff. Therefore, the reserves carried in these more recent accident years are generally more conservative than those carried for older accident years. As we have the opportunity to investigate and adjust the reported claims, both the case and IBNR reserves are adjusted to more closely reflect the ultimate expected loss. 39 Other factors that may have an impact on our case and IBNR reserves include, but are not limited to, those described below. Changes in liability law and public attitudes regarding damage awards Laws governing liability claims and judicial interpretations thereof can change over time, which can expand the scope of coverage anticipated by insurers when initially establishing reserves for claims. In addition, public attitudes regarding damage awards can result in judges and juries granting higher recoveries for damages than expected by claims personnel when reserves are established. In addition, these changes can result in both increased claim frequency and severity as both plaintiffs and their legal counsel perceive the opportunity for higher damage awards. Reserves established for claims that occurred in prior years would not have anticipated these legal changes and, therefore, could prove to be inadequate for the ultimate losses paid by the Company, causing us to experience adverse development and higher loss payments in future years. Change in claims handling and/or setting case reserves Changes in Company personnel and/or the approach to how claims are reported, adjusted, and reserved may affect the reserves we establish. As discussed above, the setting of IBNR reserves is not an exact science and involves the expert judgment of an actuary. One actuary’s reserve opinion may differ slightly from another actuary’s opinion. This is the primary reason why the IBNR reserve estimate is customarily reported as a range by a company’s actuary, which provides a company with an acceptable range to use in establishing its best estimate for IBNR reserves. Economic inflation A sudden and extreme increase in the economic inflation rate could have a significant impact on our case and IBNR reserves. When establishing case reserves, claims personnel generally establish an amount that in their opinion will provide a conservative amount to settle the loss. If the time to settle the claim extends over a period of years, which is possible but unlikely as we usually settle claims in less than a year on average, the initial reserve may not anticipate an economic inflation rate that is significantly higher than the current inflation rate. This can also apply to IBNR reserves. Should the economic inflation rate increase significantly, we may not anticipate the need to adjust the IBNR reserves accordingly, which could lead to deficient IBNR reserves. Increases or decreases in claim severity for reasons other than inflation Factors exist that can drive the cost to settle claims for reasons other than standard inflation. For example, demand surge caused by a significant catastrophe, such as a derecho, has an impact on not only the availability and cost of building materials such as roofing and other materials, but also the availability and cost of labor. Numerous other factors could also cause claim severity to increase beyond what our historic reserves would reflect. In addition, unexpected increases in labor, healthcare, or building material costs and other factors may cause fluctuations in the ultimate development of the case reserves. Actual settlement experience different from historical data trends When establishing IBNR reserves, our actuaries consider many of the factors discussed above. One of the more important factors that is considered when setting reserves is the past or historical claim settlement experience. Our actuaries consider factors such as the number of files entering litigation, payment patterns, length of time it takes our claims personnel to settle the claims, and average payment amounts when estimating reserve amounts. Should future settlement patterns change due to the legal environment, our claims handling philosophy, or personnel, it may have an impact on the future claims payments, which could cause existing reserves to either be redundant (excessive) or deficient (below) compared to the actual loss amount. Change in Reporting Lag As discussed above, we utilize historical patterns to provide an accurate estimate of what will take place in the future. Should we experience an unexpected delay in reporting time (claims are slower to be reported than in the past), we may underestimate the anticipated number of future claims, which could cause the ultimate loss we may experience to be underestimated. A lag in reporting may be caused by changes in how claims are reported, the types or lines of business we write, our distribution system, and the geographic area where we choose to insure risk. Due to the inherent uncertainty underlying loss reserve estimates, final resolution of the estimated liability for unpaid losses and loss adjustment expenses may be higher or lower than the related loss reserves at the reporting date. Therefore, actual paid losses, as claims are settled in the future, may be materially higher or lower in amount than current loss reserves. We reflect adjustments to the liability for unpaid losses and loss adjustment expenses in the results of operations during the period in which the estimates are changed. 40 Investments Our 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. For additional information on our investments, see Part II, Item 8, Note 4 “Investments” and Note 5 “Fair Value Measurements.” Deferred Policy Acquisition Costs Certain direct policy acquisition costs consisting of commissions, state premium taxes, and other direct underwriting expenses that vary with and are primarily related to the production of business are deferred and amortized over the effective period of the related insurance policies as the underlying policy premiums are earned. At December 31, 2024 and 2023, deferred policy acquisition costs (“DAC”) and the related liability for unearned premiums were as follows: December 31, 2024 2023 Deferred policy acquisition costs $ 26,300 $ 26,790 Liability for unearned premiums 126,498 126,100 The method followed in computing DAC limits the amount of 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 expected to be incurred as the premium is earned. Future changes in estimates, the most significant of which is expected losses and loss adjustment expenses, may require adjustments to DAC. If the estimation of net realizable value indicates that DAC are not recoverable, they would be written off or a premium deficiency reserve would be established. Income Taxes Current income taxes represent amounts paid or owed to the federal government and certain states whose payment is based upon net income (subject to regulatory adjustments) generated by the Company. The generation of net losses may result in income tax benefits, a portion of which may be in the form of refunds of prior income taxes paid to taxing authorities. We use the asset and liability method of accounting for deferred income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the income tax bases of our assets and liabilities. A valuation allowance is established when it is more likely than not that some portion of the deferred income tax asset will not be realized. Total income taxes reflect both current income taxes and the change in the net deferred income tax asset or liability, excluding amounts attributed to accumulated other comprehensive income. We had gross deferred income tax assets of $15,946 at December 31, 2024, and $18,172 at December 31, 2023, arising primarily from unearned premiums, loss reserve discounting, net unrealized investment losses, and net operating loss carryforwards. A valuation allowance is required to be established for any portion of the deferred income tax asset for which we believe it is more likely than not that it will not be realized. A valuation allowance of $2,506 and $505 was maintained at December 31, 2024, and December 31, 2023, respectively. We had gross deferred income tax liabilities of $6,116 at December 31, 2024, and $9,254 at December 31, 2023, arising primarily from deferred policy acquisition costs and other intangible assets. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred income tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred income tax assets. As of December 31, 2024, we had no material unrecognized income tax benefits or accrued interest and penalties. Federal income tax returns for the years 2020 through 2023 remain subject to examination. 41 Changing Climate Conditions Longer-term natural catastrophe trends may be changing, and new types of catastrophe losses may be developing due to climate change, a phenomenon that has been associated with extreme weather events linked to rising temperatures, and includes effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, hail, and snow. The frequency, number, and severity of these losses are unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Our ability to effectively manage catastrophe risk is dependent, in part, on our reliance on various catastrophe models, which may produce unreliable output as a result of inaccurate or incomplete data, along with the inherent uncertainty of future frequency and severity of losses. The impact of changing climate conditions on the overall insurance industry may also materially affect the availability and cost of reinsurance to us. In addition, these changes could impact the creditworthiness of issuers of securities in which we invest, subjecting our investment portfolio to increased credit and interest rate risk, with the potential for reduced investment returns and/or material realized or unrealized losses. Liquidity and Capital Resources We expect to generate sufficient funds from our operations and maintain a high degree of liquidity in our investment portfolio to meet the demands of claim settlements and operating expenses for the foreseeable future. Our primary sources of funds are premium collections, investment earnings, and fixed income maturities. We also have 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, 2024, 2023, or 2022. This line of credit is scheduled to expire on December 13, 2025. The changes in cash and cash equivalents for continuing and discontinued operations for the years ended December 31, 2024, 2023, and 2022 were as follows: Year Ended December 31, 2024 2023 2022 Net cash flows from operating activities $ 38,506 $ 51,028 $ (15,294 ) Net cash flows from investing activities (4,541 ) (8,813 ) 25,048 Net cash flows from financing activities (3,643 ) (7,466 ) (18,281 ) Net increase (decrease) in cash and cash equivalents $ 30,322 $ 34,749 $ (8,527 ) For the year ended December 31, 2024, net cash provided by operating activities totaled $38,506 compared to $51,028 net cash provided by operating activities a year ago. This change was primarily driven by the severance payments to our former Chief Executive Officer and former Senior Vice President of Operations in the current year as well as the receipt of a significant income tax refund during 2023. For the year ended December 31, 2024, net cash used by investing activities totaled $4,541 compared to $8,813 net cash used by investing activities a year ago. This change was primarily attributable to the proceeds from the sale of Westminster as well as a decrease in the net cash outflows for fixed income securities in the current year, partially offset by a decrease in the cash inflows from equity securities in the current year. For the year ended December 31, 2024, net cash used by financing activities totaled $3,643 compared to $7,466 a year ago. This decrease in cash used was attributable to a reduction in share repurchases in the current year partially offset by the final pooling settlement between Nodak Insurance and Westminster. For the year ended December 31, 2023, net cash provided by operating activities totaled $51,028 compared to $15,294 net cash used by operating activities during 2022. This change was primarily driven by lower claim payments and the receipt of a significant income tax refund during 2023. For the year ended December 31, 2023, net cash used by investing activities totaled $8,813 compared to $25,048 net cash provided by investing activities during 2022. This change was primarily attributable to a decrease in maturities and sales of fixed income securities and an increase in purchases of fixed income securities during 2023 compared to 2022, partially offset by an increase in sales of equity securities and a decrease in purchases of equity securities. 42 For the year ended December 31, 2023, net cash used by financing activities totaled $7,466 compared to $18,281 during 2022. This decrease in cash used was attributable to installment payments on the Westminster consideration payable during 2022, partially offset by an increase in share repurchases during 2023 compared to 2022. As a holding company, a principal source of long-term liquidity will be dividend payments from our directly-owned subsidiaries. Nodak Insurance is restricted by the insurance laws of North Dakota as to the amount of dividends or other distributions it may pay to NI Holdings. North Dakota law sets the maximum amount of dividends that may be paid by Nodak Insurance during any twelve-month period after notice to, but without prior approval of, the North Dakota Insurance Department. This amount cannot exceed the lesser of (i) 10% of the Company’s surplus as regards policyholders as of the preceding December 31, or (ii) the Company’s statutory net income for the preceding calendar year (excluding realized investment gains), less any prior dividends paid during such twelve-month period. In addition, any insurance company other than a life insurance company may carry forward net income from the preceding two calendar years, not including realized investment gains, less any dividends actually paid during those two calendar years. Dividends in excess of this amount are considered “extraordinary” and are subject to the approval of the North Dakota Insurance Department. The amount available for payment of dividends from Nodak Insurance to NI Holdings during 2025 without the prior approval of the North Dakota Insurance Department is approximately $8,273 as of December 31, 2024. No dividends were declared or paid by Nodak Insurance during the years ended December 31, 2024 and 2023. The Nodak Insurance Board of Directors declared and paid dividends of $3,000 to NI Holdings during the year ended December 31, 2022. The amount available for payment of dividends from Direct Auto to NI Holdings during 2025 without the prior approval of the North Dakota Insurance Department is approximately $3,146 as of December 31, 2024. No dividends were declared or paid by Direct Auto during the years ended December 31, 2024, 2023, or 2022. Prior to its payment of any dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if an insurance company is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. Westminster was sold on June 30, 2024, and therefore no dividends are available to be paid to NI Holdings subsequent to that date. No dividends were declared or paid by Westminster during the years ended December 31, 2024, 2023 or 2022. See Part II, Item 8, Note 20 “Discontinued Operations” for additional information. Contractual Obligations The primary contractual obligations of the Company include gross loss and loss adjustment expenses payments as well as operating and finance lease obligations. The Company’s unpaid losses and loss adjustment expenses were $137,288 as of December 31, 2024. Historical payment experience indicates that approximately 46% of this amount will be paid during 2025 and another 37% will be paid over the subsequent two years. The actual timing and amounts of these payments in the future may vary. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Part II, Item 8, Note 2 “Recent Accounting Pronouncements.” 43