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Item 7. Management’s Discussion and Analysis

2026-03-06 compared with 2025-03-07 · 411 added, 402 removed, 448 unchanged (64% of the section changed)

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

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.

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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.

Our Management’s Discussion and Analysis of

Financial Condition and Results of Operations included in this document discusses 2025 and 2024 items and year-over-year comparisons between

2025 and 2024 as well as discussions of 2023 items and year-over-year comparisons between 2024 and 2023, 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

2025 Consolidated Results of Operations

· Net loss of $10,413, or ($0.50) per share basic and diluted

· Net premiums earned of $270,655

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Results of Continuing Operations

Our consolidated financial statements are prepared in accordance

Management evaluates our operations by monitoring key measures of growth and profitability, which may include the disclosure

of certain non-GAAP financial measures.

Our consolidated financial statements are prepared in accordance with

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.

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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,

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).

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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.

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

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Years ended December 31, 2025, 2024, and 2023

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

The consolidated net loss from continuing operations for the Company

was $10,413 for the year ended December 31, 2025, compared to net income of $6,600 for the year ended December 31, 2024, and net income

of $19,831 for the year ended December 31, 2023.

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Net investment income

Net investment gains (losses)

Net investment gains

Total revenues

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Net investment income

Net investment gains (losses)

Net investment gains

Goodwill impairment charge

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Total net premiums earned

Net premiums earned for the year ended December 31, 2024 increased

Net premiums earned for the year ended December 31, 2025 decreased

$39,455, or 12.7%, to $270,655, compared to $310,110 for the year ended December 31, 2024.

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Total net premiums earned

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.

Below are comments regarding significant changes in net premiums earned

by business segment:

Private passenger auto – Net premiums earned for

2025 increased $713, or 0.8%, from 2024.

This increase was driven by new business growth in North Dakota, significant rate increases in

South Dakota and Nebraska, and improved retention in North Dakota and Nebraska, partially offset by lower new business and retention levels

in South Dakota.

Net premiums earned for 2024 increased $6,954, or 8.3%, from 2023.

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.

This increase was 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.

Non-Standard auto – Net premiums earned for 2025

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

decreased $45,225, or 47.5%, from 2024.

This decrease was driven by strategic decisions to exit Nevada during 2024 and significantly reduce

written premium in the Chicago market for 2025 as well as the decision during the third quarter of 2025 to ultimately stop writing non-standard

auto business in Illinois, Arizona, and South Dakota, with existing policies being non-renewed.

We anticipate further reductions in net

earned premiums over the next twelve months as a result of the decisions to run off these non-standard auto operations.

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 was concentrated, partially offset by lower retention

compared to the prior year and the decision to exit Nevada.

Home and farm – Net premiums earned for 2025 increased

$3,159, or 3.5%, from 2024.

Results were driven by new business growth, rate increases, and increased insured property values in North

Dakota, South Dakota, and Nebraska, partially offset by lower retention rates in South Dakota.

In addition, net premiums earned for 2025

were impacted by the recognition of higher ceded premiums earned as a result of reinstatement premium for a significant catastrophe event

in North Dakota during the second quarter of 2025.

Net premiums earned for 2024 increased $7,372, or 8.8%, from 2023.

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.

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

This increase was

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.

Crop – Net premiums earned for 2025 increased $523,

or 2.5%, from 2024.

This decrease was driven by a reduction in acres insured and lower commodity prices, which are a key determinant

The year-over-year increase was driven by the recognition of more favorable premium adjustments, related to the settlement

of prior crop year claims, in the first quarter of 2025 compared to the first quarter of 2024.

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%,

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

All other – Net premiums earned for 2025 increased

$1,375, or 10.9%, from 2024.

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.

earned for 2023 decreased $2,331, or 16.5%, from 2022.

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.

This increase was driven by rate and insured value increases for the commercial and excess lines of business.

Net premiums earned for 2024 increased $877, or 7.4%, from 2023.

This increase was 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.

Losses and Loss Adjustment Expenses

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Total net losses and loss adjustment expenses

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.

The Company’s net losses and loss adjustment expenses for the

year ended December 31, 2025 decreased $6,677, or 3.2%, to $200,788, compared to $207,465 for the year ended December 31, 2024.

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.

Year Ended December 31,

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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.

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.

adjustment expenses ratio increased 3.3 percentage points in 2025 compared to 2024.

This increase was driven by higher severity on bodily

injury liability losses.

The net loss and loss adjustment expenses ratio decreased 14.8 percentage points in 2024 compared to 2023.

decrease was the result of lower levels of weather-related losses in 2024 due to the mild winter in the Midwest compared to elevated winter

weather-related losses in 2023 as well as favorable prior year loss reserve development.

Both periods were positively affected by earned

premium growth.

Non-Standard auto – The net loss and loss adjustment

expenses ratio increased 55.8 percentage points in 2025 compared to 2024.

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 higher unfavorable prior year development

on liability loss reserves, primarily related to bodily injury coverage.

The net loss and loss adjustment expenses ratio increased 8.1

percentage points in 2024 compared to 2023.

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.

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.

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

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.

expenses ratio decreased 5.7 percentage points in 2025 compared to 2024.

The 2025 net loss and loss adjustment expense ratio was impacted

by losses from a significant catastrophe event in North Dakota during the second quarter of 2025 that exceeded the Company’s $20,000

retention as well as the related ceded premiums earned.

Although there were no catastrophes during 2024, the net loss and loss adjustment

expense ratio for 2024 was impacted by elevated non-catastrophe weather losses in North Dakota and Nebraska.

Catastrophe losses, net

of reinsurance, for the Home and Farm segment accounted for 21.2 percentage points of the net loss and loss adjustment expense ratio

for the year ended December 31, 2025.

The net loss and loss adjustment expenses ratio increased 10.0 percentage points in 2024 compared

This increase was driven by higher loss severity and higher non-catastrophe weather-related losses in North Dakota and Nebraska

during 2024 compared 2023.

Crop – The net loss and loss adjustment expenses

ratio increased 8.5 percentage points in 2025 compared to 2024.

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

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.

This increase was driven by higher crop hail losses in the current year

compared to the prior year.

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 2023.

All other – The net loss and loss adjustment expenses

ratio decreased 9.7 percentage points in 2025 compared to 2024.

This decrease was driven by lower severity on commercial property losses

as well as the effects of earned premium growth.

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 2023 and an inter-segment reclassification of

a large loss during 2023.

Underwriting and General Expenses and Expense Ratio

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points in the year ended December 31, 2025, compared to the same period in 2024.

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.

The decrease in the amortization of deferred policy acquisition

costs is due to lower deferrable costs resulting from the strategic reduction in premium for 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 strategic

investments in human capital and technology during the current year.

The overall other underwriting and general expenses for the years

ended December 31, 2025 and 2024, were elevated due to costs associated with separation agreements.

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.

increase in the other underwriting and general expenses is due to the costs incurred in 2024 associated with the execution of separation

agreements with our former Chief Executive Officer and former Senior Vice President of Operations.

Underwriting Gain (Loss) and Combined Ratio

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as a percentage of net premiums earned and measures our overall underwriting profit.

The total underwriting gain (loss) decreased $24,403, or 1,051%, for

the year ended December 31, 2025, compared to the same period in 2024.

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.

The overall combined ratio increased 9.2 percentage points in the year

ended December 31, 2025, compared to the same period in 2024.

The overall combined ratio increased 3.7 percentage points in the year ended

December 31, 2024, compared to the same period in 2023.

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.

We had fee and other income of $997, $1,938, and $1,940 for the years

ended December 31, 2025, 2024, and 2023, respectively.

The decrease in the current year was driven by write-offs of uncollectable premiums

receivable as well as strategic reductions in non-standard auto premiums that typically generate the majority of the fee income.

other income for 2024 was generally consistent with 2023 due to elevated other income in 2023.

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.

Item 8, Note 10 “Goodwill and Other Intangibles” for additional information.

We did not have a goodwill impairment charge for the year ended December

31, 2025, compared to $2,628 for the year ended December 31, 2024, and $6,756 for the year ended December 31, 2023.

See Part II, Item

8, Note 10 “Goodwill and Other Intangibles” for additional information.

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:

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,

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2025, compared to the year ended December 31, 2024.

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.

This increase was primarily driven by the favorable interest rate environment that

resulted in higher net investment income on an increased average fixed income securities balance (measured at fair value), partially offset

by lower interest rates in the current year for cash and cash equivalents.

The increase in average cash and invested assets was driven

by changes in the fair value of fixed income securities due to the interest rate environment as well as positive operating cash flows

during the first six months of 2025.

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 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.

This increase was primarily driven by the favorable 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.

Gross and net return on average cash and invested assets remained consistent

year-over-year from 2024 to 2025, primarily driven by the favorable interest rate environment that resulted in slightly higher yields

for fixed income securities, offset by lower interest rates in the current year periods for cash and cash equivalents.

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.

year-over-year from 2023 to 2024, 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).

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.

Net Investment Gains (Losses)

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2025, compared to $551 for the year ended December 31, 2024, and $12,096 for the year ended December 31, 2023.

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.

realized gains from the sale of these securities were largely offset by the elimination of the unrealized gain position of these securities.

The net realized gains

for the year ended December 31, 2025, were driven by sales of equity securities that were executed as part of the strategic management

of our investment portfolio.

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.

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.

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.

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.

of $390 and $1,662 during the years ended December 31, 2025 and 2024, respectively.

These results were driven by the impact of changes

in fair value attributable to overall favorable equity markets during those periods.

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

We had net realized gains on the sale of equity securities of $1,646, $750, and $12,619 during the years ended December 31,

2025, 2024, and 2023, respectively.

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.

fixed income portion of the portfolio experienced net unrealized gains of $10,180 during the year ended December 31, 2025, compared to

net unrealized losses of $191 during the year ended December 31, 2024.

The fixed income portfolio experienced net unrealized losses of

$9,168 during the year ended December 31, 2023.

These changes were primarily the result of changes in U.S.

interest rates.

in the fair value of fixed income securities is not reflected in net income;

rather it is reflected as a separate component (net of income

taxes) of other comprehensive income.

Income (Loss) before Income Taxes

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.

We had pre-tax loss of ($12,329) for the year ended December 31, 2025,

a pre-tax income of $10,145 for the year ended December 31, 2024, and pre-tax income of $20,547 for the year ended December 31, 2023.

The year-over-year decrease in 2025 compared to 2024 was largely attributable to higher unfavorable prior year loss reserve development

for Non-Standard Auto and higher expenses associated with investments in human capital and technology, partially offset by higher net

investment income and lower goodwill impairment charges.

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.

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

We recorded income tax benefit of ($1,916) for the year ended December

31, 2025, income tax expense of $3,545 for the year ended December 31, 2024, and an income tax expense of $716 for the year ended December

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

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

benefit of $3,192 for the year ended December 31, 2024, and an income tax expense of $963 for the year ended December 31, 2023.

the impacts of discontinued operations and the loss on sale of discontinued operations, our effective tax rate for 2025 was 15.5% compared

to an effective tax rate of 35.2% and (22.6)% for 2024 and 2023, respectively.

Our 2025 effective tax rate was impacted by several factors,

but non-taxable compensation-related expenses and prior-year true-ups on the loss on sale of discontinued operations were the most significant

drivers of the variance from the statutory rate.

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.

The valuation allowance against certain

deferred income tax assets was $2,345 as of December 31, 2025, $2,506 as of December 31, 2024, and $505 as of December 31, 2023.

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.

We had net loss of ($10,413) for the year ended December 31, 2025,

net income of $6,600 for the year ended December 31, 2024, and a net income of $19,831 for the year ended December 31, 2023.

The year-over-year

decrease in 2025 compared to 2024 was largely attributable to higher unfavorable prior year loss reserve development for Non-Standard

Auto and higher expenses associated with investments in human capital and technology, partially offset by higher net investment income

and lower goodwill impairment charges.

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.

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.

For the year ended December 31, 2025, we had annualized return on average

equity of (4.3%), compared to annualized return on average equity, after non-controlling interest, of 2.8% and 7.9% for the years ended

December 31, 2024 and 2023, respectively.

Average equity is calculated as the average between beginning and ending

equity, excluding non-controlling interest, for the period.

Principal Revenue Items

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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

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.

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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.

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

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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

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

Amortization of Deferred Policy Acquisition Costs and Other Underwriting

and General Expenses

Expenses incurred to underwrite risks are referred to as policy acquisition

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

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.

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.

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.

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

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.

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

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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

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.

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

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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.

When a claim is reported to one of the insurance companies, its claims

personnel or assigned external parties 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

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

This enables us to establish estimated damage amounts based on the wind speed and size of the hail for case or per claim loss

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

reasonable time (5-7 days) an estimated number of claims and estimated losses from

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.

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.

are notified 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.

based upon historical loss patterns, current crop conditions, current weather patterns, input from crop loss adjusters, and other factors.

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

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

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 or other appropriate methods.

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 to determine the appropriate IBNR amount.

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:

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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

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.

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

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include, but are not limited to, those described below.

Changes in liability law and public attitudes regarding damage

Changes in liability law and public attitudes regarding damage awards

Laws governing liability claims and judicial interpretations thereof

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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.

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

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.

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,

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of operations during the period in which the estimates are changed.

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.”

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

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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:

At December 31, 2025 and 2024, deferred policy acquisition

costs (“DAC”) and the related liability for unearned premiums were as follows:

Deferred policy acquisition costs

Liability for unearned premiums

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.

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.

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.

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

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.

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 $12,680

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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.

A valuation allowance of $2,345 and $2,506

was maintained at December 31, 2025, and December 31, 2024, respectively.

We had gross deferred income tax liabilities of $4,190 at December

31, 2025, and $6,116 at December 31, 2024, 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.

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,

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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.

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.

to effectively manage catastrophe risk is dependent, in part, on our reliance on various catastrophe models, which may produce unreliable

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.

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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.

We also have a $3,000 line of credit with Wells Fargo

The terms of the line of credit include a floating interest rate of 2.25% above the daily simple secured overnight financing

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Net increase (decrease) in cash and cash equivalents

For the year ended December 31, 2025, net cash used by operating activities

totaled $15,272 compared to $38,506 net cash provided by operating activities a year ago.

This change was primarily driven by reductions

in cash received due to strategic decisions to stop writing non-standard auto in the current year and greater cash received in the prior

year from Westminster’s operations prior to the sale.

For the year ended December 31, 2025, net cash provided by investing

activities totaled $18,839 compared to $4,541 net cash used by investing activities a year ago.

This change was primarily attributable

to the decrease in the net cash outflows for fixed income securities in the current year, partially offset by proceeds from the sale of

Westminster in the prior year.

For the year ended December 31, 2025, net cash used by financing activities

totaled $2,782 compared to $3,643 a year ago.

This decrease in cash used was attributable to the final pooling settlement between Nodak

Insurance and Westminster in the prior year, partially offset by the resumption of share repurchases in the current year.

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.

activities totaled $38,506 compared to $51,028 net cash provided by operating activities during 2023.

This change was primarily driven

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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.

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.

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 during 2023.

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 during 2023.

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.

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

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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,

No dividends were declared or paid by Direct Auto during the years ended December 31, 2024, 2023, or 2022.

The amount available for payment of dividends from Direct Auto to NI

Holdings during 2026 without the prior approval of the North Dakota Insurance Department is approximately $3,829 as of December 31, 2025.

No dividends were declared or paid by Direct Auto during the years ended December 31, 2024 and 2023.

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

4 unchanged sentences

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.

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.

December 31, 2024 and 2023.

See Part II, Item 8, Note 20 “Discontinued Operations” for additional information.

11 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis