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What changed in NI Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NI Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+281 added−290 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-08)

Top changes in NI Holdings, Inc.'s 2023 10-K

281 paragraphs added · 290 removed · 244 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

89 edited+8 added−9 removed86 unchanged
Biggest changeThe following chart shows our direct premiums written during the last two years and our relative market share within each of our states during the year ended December 31, 2021: Year Ended December 31, 2022 Year Ended December 31, 2021 Direct Premiums Written Direct Premiums Written Market Size Rank in State North Dakota $ 159,260 $ 148,119 $ 2,991,000 5 th Illinois 70,599 51,350 30,485,000 67 th Nebraska 47,554 43,247 6,073,000 31 st South Dakota 26,880 23,047 3,049,000 32 nd Georgia 15,448 13,085 26,513,000 118 th Maryland 14,227 13,548 13,834,000 79 th New Jersey 9,732 8,294 24,785,000 139 th Virginia 8,606 6,262 16,597,000 130 th Pennsylvania 8,486 8,235 28,339,000 164 th North Carolina 8,110 6,641 19,677,000 141 st Minnesota 5,075 3,350 14,037,000 141 st Nevada 4,552 8,132 7,050,000 85 th District of Columbia 4,182 4,055 2,328,000 59 th South Carolina 3,630 2,783 12,104,000 159 th Delaware 1,545 1,502 3,262,000 107 th Arizona 1,175 475 14,087,000 242 nd Tennessee 516 — — — Kentucky 83 — — — West Virginia 46 90 3,141,000 182 nd Total direct premiums written $ 389,706 $ 342,215 Market size information is not yet available for the year ended December 31, 2022. 6 Table of Contents Organic Growth Strategy We believe we have many opportunities to organically grow our business.
Biggest changeThe following chart shows our direct premiums written during the last two years and our relative market share within each of our states during the year ended December 31, 2022: Year Ended December 31, 2023 Year Ended December 31, 2022 Direct Premiums Written Direct Premiums Written Market Size Rank in State North Dakota $ 163,505 $ 159,260 $ 3,629,000 6 th Illinois 86,348 70,599 33,307,000 63 rd Nebraska 50,698 47,554 6,905,000 30 th South Dakota 29,660 26,880 3,671,000 31 st Maryland 13,389 14,227 14,857,000 83 rd North Carolina 11,822 8,110 21,714,000 136 th Virginia 11,554 8,606 18,087,000 126 th New Jersey 11,539 9,732 26,686,000 139 th Georgia 7,576 15,448 29,009,000 117 th Pennsylvania 6,279 8,486 30,235,000 173 rd South Carolina 4,976 3,630 13,279,000 153 rd District of Columbia 4,342 4,182 2,606,000 60 th Arizona 4,077 1,175 15,628,000 215 th Minnesota 4,008 5,075 15,533,000 130 th Nevada 2,938 4,552 7,672,000 110 th Tennessee 2,552 516 15,561,000 262 nd Delaware 2,122 1,545 3,516,000 112 th Kentucky 1,014 83 9,268,000 274 th West Virginia — 46 3,342,000 220 th Total direct premiums written $ 418,399 $ 389,706 Market size information is not yet available for the year ended December 31, 2023. 6 Organic Growth Strategy We believe we have many opportunities to organically grow our business.
These consolidated financial statements include include the financial position and results of operations of NI Holdings and the following other entities: ● Nodak Insurance – a wholly-owned subsidiary of NI Holdings; ● Nodak Agency, Inc.
These consolidated financial statements include the financial position and results of operations of NI Holdings and the following other entities: ● Nodak Insurance – a wholly-owned subsidiary of NI Holdings; ● Nodak Agency, Inc.
The consolidated financial statements of NI Holdings presented herein include the financial position and results of operations of NI Holdings, Direct Auto, Westminster, and Nodak Insurance, including Nodak Insurance’s subsidiaries American West and Primero, and its affiliate Battle Creek.
The consolidated financial statements of NI Holdings presented herein include the financial position and results of operations of NI Holdings, Direct Auto, Westminster, and Nodak Insurance, including Nodak Insurance’s subsidiaries of American West and Primero and its affiliate Battle Creek.
Each of the six insurance companies is subject to examination and comprehensive regulation by the insurance department of its state of domicile. Market Overview We market our personal lines products in the upper Midwest states of North Dakota, South Dakota, Nebraska, and Minnesota. We offer non-standard auto insurance in the states of Nevada, Arizona, North Dakota, South Dakota, and Illinois.
Each of the six insurance companies is subject to examination and comprehensive regulation by the insurance department of its state of domicile. Market Overview We market our personal lines products in the upper Midwest states of North Dakota, Nebraska, South Dakota, and Minnesota. We offer non-standard auto insurance in the states of Illinois, Arizona, Nevada, South Dakota, and North Dakota.
We offer commercial multi-peril insurance in the states of New Jersey, Maryland, Pennsylvania, Virginia, Georgia, North Carolina, Delaware, South Carolina, West Virginia, North Dakota, South Dakota, Tennessee, Kentucky, and the District of Columbia.
We offer commercial multi-peril insurance in the states of Maryland, North Carolina, Virginia, New Jersey, Georgia, North Dakota, Pennsylvania, South Carolina, Tennessee, Delaware, Kentucky, South Dakota, West Virginia, and the District of Columbia.
American Farm Bureau Insurance Services (“AFBIS”) underwrites all of our multi-peril crop and crop hail insurance policies, as well as several other state Farm Bureau-affiliated insurers. AFBIS also processes and administers all claims made by policyholders under such policies.
American Farm Bureau Insurance Services (“AFBIS”) underwrites all of our, as well as several other state Farm Bureau affiliated insurers, multi-peril crop and crop hail insurance policies. AFBIS also processes and administers all claims made by policyholders under such policies.
Westminster is headquartered in Owings Mills, Maryland and underwrites commercial multi-peril insurance in the states of Delaware, Georgia, Kentucky, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, and the District of Columbia. Westminster was acquired by NI Holdings on January 1, 2020, via a stock purchase agreement.
Westminster is headquartered in Owings Mills, Maryland and underwrites commercial multi-peril insurance in the states of Delaware, Georgia, Kentucky, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and the District of Columbia. Westminster was acquired by NI Holdings on January 1, 2020, via a stock purchase agreement.
During the year ended December 31, 2022, our insurance company subsidiaries produced results outside the acceptable range for as many as six of the IRIS tests, primarily driven by our significant net loss for the current year that negatively impacted IRIS ratios related to the operating ratio and certain ratios based on policyholders’ surplus.
During the year ended December 31, 2022, our insurance company subsidiaries produced results outside the acceptable range for as many as six of the IRIS tests, primarily driven by our significant net loss for the year that negatively impacted IRIS ratios related to the operating ratio and certain ratios based on policyholders’ surplus.
The NAIC has established an acceptable range for each of the IRIS financial ratios. If four or more of its IRIS ratios fall outside the range deemed acceptable by the NAIC, an insurance company may receive inquiries from individual state insurance departments. However, a ratio falling outside the usual range may not necessarily be considered adverse.
The NAIC has established an acceptable range for each of the IRIS financial ratios. If four or more of its IRIS ratios fall outside the range deemed acceptable by the NAIC, an 13 insurance company may receive inquiries from individual state insurance departments. However, a ratio falling outside the usual range may not necessarily be considered adverse.
Nodak Insurance distributes its insurance products through exclusive agents in North Dakota, while American West, Battle Creek, Primero, Direct Auto, and Westminster rely on independent agents. We review our agents with respect to both premium volume and profitability.
Nodak Insurance distributes its insurance products through exclusive agents in North Dakota, while American West, Battle Creek, Primero, Direct Auto, and Westminster rely on independent agents. 9 We review our agents with respect to both premium volume and profitability.
However, beginning on December 31, 2022, we are no longer an EGC and will no longer have the ability to delay adoption of these new or revised accounting standards, or to take advantage of reduced corporate governance disclosures.
However, beginning on December 31, 2022, we are no longer an EGC and no longer have the ability to delay adoption of these new or revised accounting standards or to take advantage of reduced corporate governance disclosures.
For the years ended December 31, 2022, 2021, and 2020, the pooling share percentages by insurance company were: Pool Percentage Nodak Insurance Company 66.0% American West Insurance Company 7.0% Primero Insurance Company 3.0% Battle Creek Mutual Insurance Company 2.0% Direct Auto Insurance Company 13.0% Westminster American Insurance Company 9.0% Total 100.0% Nodak Insurance Company Nodak Insurance is the largest domestic property and casualty insurance company in North Dakota, offering private passenger auto, homeowners, farmowners, commercial multi-peril, crop hail, and Federal multi-peril crop insurance coverages through its captive agents in the state.
For the years ended December 31, 2023, 2022, and 2021, the pooling share percentages by insurance company were: Pool Percentage Nodak Insurance Company 66.0% American West Insurance Company 7.0% Primero Insurance Company 3.0% Battle Creek Mutual Insurance Company 2.0% Direct Auto Insurance Company 13.0% Westminster American Insurance Company 9.0% Total 100.0% Nodak Insurance Company Nodak Insurance is the largest domestic property and casualty insurance company in North Dakota, offering private passenger auto, homeowners, farmowners, commercial multi-peril, crop hail, and Federal multi-peril crop insurance coverages through its captive agents in the state.
The Company makes available on its website, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after it electronically files such material with, or furnish it to, the United States Securities and Exchange Commission (“SEC”).
The Company makes available on its website, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“the Exchange Act”) as soon as reasonably practicable after it electronically files such material with, or furnish it to, the United States Securities and Exchange Commission (“SEC”).
We hold regular training sessions when we introduce new products or product changes, and we identify specific topics that may help our agents more effectively market our products. For the year ended December 31, 2022, no individual agent was responsible for more than 5% of the Company’s direct premiums written. Agents are compensated through a fixed base commission structure.
We hold regular training sessions when we introduce new products or product changes, and we identify specific topics that may help our agents more effectively market our products. For the year ended December 31, 2023, no individual agent was responsible for more than 5% of the Company’s direct premiums written. Agents are compensated through a fixed base commission structure.
General Information Nodak Insurance markets and distributes its policies through its captive agents, while all other companies utilize the independent agent distribution channel. Additionally, all of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by AM Best. 5 Table of Contents The same executive management team provides oversight and strategic direction for the entire organization.
General Information Nodak Insurance markets and distributes its policies through its captive agents, while all other companies utilize the independent agent distribution channel. Additionally, all of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by AM Best. 5 The same executive management team provides oversight and strategic direction for the entire organization.
The substantial amount by which the fair value of the fixed maturity portfolio exceeds the value of the net insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of high-quality liquid bonds, contribute to the Company’s ability to fund claim payments without having to sell illiquid assets or access its credit facilities.
The substantial amount by which the fair value of the fixed income portfolio exceeds the value of the net insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of high-quality liquid bonds, contribute to the Company’s ability to fund claim payments without having to sell illiquid assets or access its credit facilities.
To support these objectives, the Company’s human resources programs are designed to recruit and retain talented individuals; provide training and development within the Company and the insurance industry; reward and support employees through competitive pay and benefit programs; keep employees safe and healthy; and provide opportunities for community involvement.
To support these objectives, our human resources programs are designed to recruit and retain talented individuals; provide training and development within the Company and the insurance industry; reward and support employees through competitive pay and benefit programs; keep employees safe and healthy; and provide opportunities for community involvement.
Human Capital The Company’s key human capital management objectives are to attract, retain, and develop talent to deliver on the Company’s strategy.
Human Capital Our key human capital management objectives are to attract, retain, and develop talent to deliver on the Company’s strategy.
Under the current license agreement, Nodak Insurance is required to pay to the NDFB an annual royalty payment equal to 1.3% of Nodak Insurance’s written premiums (excluding multi-peril crop insurance premiums), subject to a minimum annual payment of $900 and a maximum annual payment of $1,576.
Under the current license agreement, Nodak Insurance is required to pay to the NDFB an annual royalty payment equal to 1.3% of Nodak Insurance’s written premiums (excluding multi-peril crop insurance premiums), subject to a minimum annual payment of $900 and a maximum annual payment of $1,623.
Going forward, we plan to consider other strategic investments and acquisitions that can enhance our businesses, provide diversification with respect to geography and product line, and achieve appropriate risk-adjusted returns over time. 7 Table of Contents Corporate Capital Strategy Our philosophy is to deploy capital in a manner that provides long-term protection for our policyholders and creates long-term value for our shareholders.
Going forward, we plan to consider other strategic investments and acquisitions that can enhance our businesses, provide diversification with respect to geography and product line, and achieve appropriate risk-adjusted returns over time. 7 Corporate Capital Strategy Our philosophy is to deploy capital in a manner that provides long-term protection for our policyholders and creates long-term value for our shareholders.
Private Passenger Auto Nodak Insurance, Battle Creek, and American West each write private passenger auto insurance to provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured.
Private Passenger Auto Nodak Insurance, Battle Creek, and American West each write private passenger auto insurance to provide protection against liability for bodily injury and property damage arising from automobile accidents as well as protection against loss from damage to automobiles owned by the insured.
The current license agreement between the NDFB and Nodak Insurance renewed on October 1, 2022, with an expiration date of September 30, 2023. The agreement has historically been renewed annually by a vote of the Nodak Insurance Board of Directors.
The current license agreement between the NDFB and Nodak Insurance renewed on October 1, 2023, with an expiration date of September 30, 2024. The agreement has historically been renewed annually by a vote of the Nodak Insurance Board of Directors.
Most of the multi-peril crop insurance policies written today combine both yield and revenue protection, with the revenue component providing the policyholder with the option to calculate price-based losses on the higher of the prevailing price when the crop is planted or the price at harvest. 9 Table of Contents Beginning in 1980, the U.S.
Most of the multi-peril crop insurance policies written today combine both yield and revenue protection, with the revenue component providing the policyholder with the option to calculate price-based losses on the higher of the prevailing price when the crop is planted or the price at harvest. Beginning in 1980, the U.S.
Crop Insurance Crop insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops (yield) due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural products.
Crop Insurance Crop insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops (yield) due to natural disasters such as hail, freezing, plant disease, drought, and floods, or the loss of revenue due to declines in the prices of agricultural products.
(“Nodak Agency”) – a wholly-owned subsidiary of Nodak Insurance; ● American West Insurance Company (“American West”) – a wholly-owned subsidiary of Nodak Insurance; ● Primero Insurance Company (“Primero”) – an indirect wholly-owned subsidiary of Nodak Insurance; ● Battle Creek Mutual Insurance Company (“Battle Creek”) – an affiliated company of Nodak Insurance; ● Direct Auto Insurance Company (“Direct Auto”) – a wholly-owned subsidiary of NI Holdings; and ● Westminster American Insurance Company (“Westminster”) – a wholly-owned subsidiary of NI Holdings. 2 Table of Contents A chart of the corporate structure as of December 31, 2022, and a more complete description of each of the NI Holdings subsidiaries, is included below.
(“Nodak Agency”) – a wholly-owned subsidiary of Nodak Insurance; ● American West Insurance Company (“American West”) – a wholly-owned subsidiary of Nodak Insurance; ● Primero Insurance Company (“Primero”) – an indirect wholly-owned subsidiary of Nodak Insurance; ● Battle Creek Mutual Insurance Company (“Battle Creek”) – an affiliated company of Nodak Insurance; ● Direct Auto Insurance Company (“Direct Auto”) – a wholly-owned subsidiary of NI Holdings; and ● Westminster American Insurance Company (“Westminster”) – a wholly-owned subsidiary of NI Holdings. 2 A chart of the corporate structure as of December 31, 2023, and a more complete description of each of the NI Holdings subsidiaries, is included below.
The Company may choose in the future to reevaluate the use of reinsurance to increase or decrease the amounts of risk ceded to reinsurers. For additional information, see Part II, Item 8, Note 7 “Reinsurance”. Unpaid Losses and Loss Adjustment Expenses We maintain reserves for unpaid losses and loss adjustment expenses.
We may choose in the future to reevaluate the use of reinsurance to increase or decrease the amounts of risk ceded to reinsurers. For additional information, see Part II, Item 8, Note 6 “Reinsurance”. Unpaid Losses and Loss Adjustment Expenses We maintain reserves for unpaid losses and loss adjustment expenses.
The Company determines a provision for the ultimate cost of those claims without regard to how long it takes to settle them or the time value of money. The determination of reserves involves actuarial and statistical projections of what we expect to be the cost of the ultimate settlement and administration of such claims.
We determine a provision for the ultimate cost of those claims without regard to how long it takes to settle them or the time value of money. The determination of reserves involves actuarial and statistical projections of what we expect to be the cost of the ultimate settlement and administration of such claims.
As of December 31, 2022, Battle Creek distributed its policies through independent agents in 124 contracted agencies. Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Effective January 1, 2020, all of our insurance company subsidiaries entered into an intercompany reinsurance pooling agreement.
As of December 31, 2023, Battle Creek distributed its policies through independent agents in 114 contracted agencies. Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Effective January 1, 2020, all of our insurance company subsidiaries entered into an intercompany reinsurance pooling agreement.
The AIPs are required to use the policies, premium rates, and loss adjustment 13 Table of Contents procedures set by the RMA without modification and are required to issue a policy to any eligible applicant regardless of risk or profitability. The RMA conducts audits of AIPs with respect to claims and loss adjustment procedures.
The AIPs are required to use the policies, premium rates, and loss adjustment procedures set by the RMA without modification and are required to issue a policy to any eligible applicant regardless of risk or profitability. The RMA conducts audits of AIPs with respect to claims and loss adjustment procedures.
The liability for unpaid losses and loss adjustment expenses is set based on facts and circumstances then known, estimates of future trends in claims severity, and other variable factors such as inflation and changing judicial theories of liability.
The liability for unpaid losses and loss adjustment expenses is set based on facts and circumstances then known, estimates of future trends in claims severity, and other variable factors such as inflation and changing judicial theories of liability. Our liability for unpaid losses and loss adjustment expenses is not discounted.
The Company also invests a much smaller percentage of the portfolio in private placement debt offerings and equity securities, which have the potential for higher returns but also involve varying degrees of risk, including higher volatility and/or less liquidity. The Executive Committee of NI Holdings’ Board of Directors reviews and approves the Company’s investment policy periodically.
We also invest a much smaller percentage of the portfolio in private placement debt offerings and equity securities, which have the potential for higher returns but also involve varying degrees of risk, including higher volatility and/or less liquidity. The Executive Committee of NI Holdings’ Board of Directors reviews and approves the Company’s investment policy periodically.
Information contained on such website is not incorporated by reference into this 2022 Annual Report, and such information should not be considered to be part of this 2022 Annual Report. 3 Table of Contents Subsidiary and Affiliate Companies Intercompany Reinsurance Pooling Arrangement Effective January 1, 2020, all of our active insurance subsidiary and affiliate companies entered into an intercompany reinsurance pooling agreement.
Information contained on such website is not incorporated by reference into this 2023 Annual Report, and such information should not be considered to be part of this 2023 Annual Report. 3 Subsidiary and Affiliate Companies Intercompany Reinsurance Pooling Arrangement Effective January 1, 2020, all of our active insurance subsidiary and affiliate companies entered into an intercompany reinsurance pooling agreement.
The maximum royalty payment is adjusted annually based upon the June index month for the Consumer Price Index. As of December 31, 2022, Nodak Insurance distributed its insurance products through 70 exclusive agents appointed by Nodak Insurance. Nodak Agency, Inc. Nodak Agency is an inactive shell corporation. Tri-State, Ltd.
The maximum royalty payment is adjusted annually based upon the June index month for the Consumer Price Index. As of December 31, 2023, Nodak Insurance distributed its insurance products through 66 exclusive agents appointed by Nodak Insurance. Nodak Agency, Inc. Nodak Agency is an inactive shell corporation. Tri-State, Ltd.
This segment also includes an assumed reinsurance book of business, with $4,045 of assumed premiums written on a consolidated basis during 2022. The Company made the decision to non-renew its participation in this assumed book of business as of January 1, 2022, and the associated assumed premiums represent run-off of this business.
This segment also includes an assumed reinsurance book of business, with $836 of assumed premiums written on a consolidated basis during 2023. The Company made the decision to non-renew its participation in this assumed book of business as of January 1, 2022, and the associated assumed premiums represent run-off of this business.
NI HOLDINGS, INC. ORGANIZATIONAL CHART Nodak Mutual Group, Inc. ≥ 55% ownership NI Holdings, Inc. 100% 100% 100% ownership ownership ownership Direct Auto Insurance Company Nodak Insurance Company Westminster American Insurance Company 100% 100% 100% ownership ownership Affiliation ownership Nodak Agency, Inc.
NI HOLDINGS, INC. ORGANIZATIONAL CHART Nodak Mutual Group, Inc. ≥ 60% ownership NI Holdings, Inc. 100% 100% 100% ownership ownership ownership Direct Auto Insurance Company Nodak Insurance Company Westminster American Insurance Company 100% 100% 100% ownership ownership Affiliation ownership Nodak Agency, Inc.
All Other In addition to the products described above, Nodak Insurance and American West write excess liability coverages. Collectively, these other coverages accounted for $5,238 (1.3%) of the direct premiums written by the Company on a consolidated basis during 2022.
All Other In addition to the products described above, Nodak Insurance and American West write excess liability coverages. Collectively, these other coverages accounted for $5,504 (1.3%) of the direct premiums written by the Company on a consolidated basis during 2023.
As of December 31, 2022, Direct Auto distributed its policies through independent agents in 147 contracted agencies, concentrated primarily in the Chicago area. Westminster American Insurance Company Westminster is a property and casualty insurance company licensed in 18 states and the District of Columbia.
As of December 31, 2023, Direct Auto distributed its policies through independent agents in 153 contracted agencies, concentrated primarily in the Chicago area. Westminster American Insurance Company Westminster is a property and casualty insurance company licensed in 18 states and the District of Columbia.
Tri-State, Ltd. is an inactive shell corporation. 4 Table of Contents American West Insurance Company American West is a property and casualty insurance company licensed in eight states in the Midwest and Western regions of the United States (“U.S.”). American West began writing policies in 2002 and primarily writes personal auto, homeowners, and farm coverages in South Dakota.
Tri-State, Ltd. is an inactive shell corporation. 4 American West Insurance Company American West is a property and casualty insurance company licensed in eight states in the Midwest and Western regions of the United States (“U.S.”). American West began writing policies in 2002 and primarily writes private passenger auto, homeowners, and farm coverages in South Dakota.
This acquisition expanded our commercial insurance business, geographically diversified our spread of insurance risks, and provided additional expense efficiencies. Prior to the IPO, we successfully acquired Primero in 2014, acquired control of Battle Creek in 2011, and acquired American West in 2001.
This acquisition expanded our commercial insurance business and geographically diversified our spread of insurance risks. Prior to the IPO, we successfully acquired Primero in 2014, acquired control of Battle Creek in 2011, and acquired American West in 2001.
The premium rates for multi-peril crop 12 Table of Contents insurance are established by the RMA and, accordingly, we compete with other insurance companies on factors such as agency relationships, claim service, and market reputation in the crop insurance market.
The premium rates for multi-peril crop insurance are established by the RMA and, accordingly, we compete with other insurance companies on factors such as agency relationships, claim service, and market reputation in the crop insurance market.
The investment portfolio is managed by Conning, Inc. and Disciplined Growth Investors. For additional information, see Part II, Item 7, “Critical Accounting Policies” and Part II, Item 8, Note 5 “Investments”. Financial Strength Ratings are an important factor in assessing the Company’s competitive position in the insurance industry.
The investment portfolio is managed by Conning, Inc. For additional information, see Part II, Item 7, “Critical Accounting Policies” and Part II, Item 8, Note 4 “Investments”. Financial Strength Ratings are an important factor in assessing the Company’s competitive position in the insurance industry.
Total North Dakota multi-peril crop premiums for the industry were $1,537,758, $1,083,565, and $861,567 for the years ended December 31, 2022, 2021, and 2020, respectively. With respect to writing property and casualty insurance, competitive factors include pricing, agency relationships, policy support, claim service, and market reputation.
Total North Dakota multi-peril crop premiums for the industry were $1,491,650, $1,537,758, and $1,083,565 for the years ended December 31, 2023, 2022, and 2021, respectively. With respect to writing property and casualty insurance, competitive factors include pricing, agency relationships, policy support, claim service, and market reputation.
We believe that our relationship with the NDFB and our leading market share are significant factors in maintaining our market share of the crop insurance business in North Dakota. The Company’s multi-peril crop insurance premiums for North Dakota were $45,465, $38,325, and $32,674 for the years ended December 31, 2022, 2021, and 2020, respectively.
We believe that our relationship with the NDFB and our leading market share are significant factors in maintaining our market share of the crop insurance business in North Dakota. The Company’s multi-peril crop insurance premiums for North Dakota were $39,073, $45,465, and $38,325 for the years ended December 31, 2023, 2022, and 2021, respectively.
American West also writes personal auto coverage in North Dakota, as well as crop hail and Federal multi-peril crop insurance coverages in Minnesota and South Dakota. As of December 31, 2022, American West distributed its products through independent agents in 74 contracted agencies. Primero Insurance Company Primero is a wholly-owned subsidiary of Tri-State, Ltd.
American West also writes private passenger auto coverage in North Dakota, as well as crop hail and Federal multi-peril crop insurance coverages in Minnesota and South Dakota. As of December 31, 2023, American West distributed its products through independent agents in 71 contracted agencies. Primero Insurance Company Primero is a wholly-owned subsidiary of Tri-State, Ltd.
As of December 31, 2022, Primero distributed its policies through independent agents in 350 contracted agencies in those four states. Battle Creek Mutual Insurance Company Battle Creek is a property and casualty insurance company writing personal auto, homeowners, and farm coverages solely in the state of Nebraska.
As of December 31, 2023, Primero distributed its policies through independent agents in 313 contracted agencies in those four states. Battle Creek Mutual Insurance Company Battle Creek is a property and casualty insurance company writing private passenger auto, homeowners, and farm coverages solely in the state of Nebraska.
Strategies we employ to achieve this growth include: ● continued emphasis on our relationship with the NDFB, a key advocacy group for agricultural and rural interests which enjoys a high profile and favorable reputation throughout North Dakota; ● leveraging our AM Best financial strength rating and financial size category to strategically grow Westminster’s commercial business; ● expansion and enhancement of independent agency relationships, including the use of technology such as mobile apps, online quoting, and policy issuance initiatives to make it easy for agents and insureds to do business with us; ● expansion of our non-standard auto business in selective markets; ● capitalizing on our excellent claims service for all insureds; and ● selective expansion of our insurance products in states where we currently operate, as well as those states where we hold insurance licenses.
Strategies we employ to achieve this growth include: ● continued emphasis on our relationship with the NDFB, a key advocacy group for agricultural and rural interests which enjoys a high profile and favorable reputation throughout North Dakota; ● expansion and enhancement of independent agency relationships, including the use of technology such as mobile apps, online quoting, and policy issuance initiatives to make it easy for agents and insureds to do business with us; ● capitalizing on our excellent claims service for all insureds; and ● selective expansion of our insurance products in states where we currently operate, as well as those states where we hold insurance licenses.
Pricing flexibility allows us to provide a fair rate commensurate with the assumed risk. If our pricing strategy cannot yield sufficient premium to cover our costs on a particular type of risk, we may choose not to underwrite that risk.
Pricing flexibility allows us to provide a fair rate commensurate with the assumed risk. If our pricing strategy cannot yield sufficient premium to cover our costs on a particular type of risk, we may choose not to underwrite that risk. It is our philosophy not to sacrifice profitability for premium growth.
Notice of certain material transactions between NI Holdings and any person or entity in our holding company system will be required to be given to the Department of Insurance of the applicable domiciliary state. Certain transactions cannot be completed without the prior approval of the various Departments of Insurance.
Notice of certain material transactions between NI Holdings and any person or entity in our holding company system will be required to be given to the Department of Insurance of the applicable domiciliary state.
The Company regularly monitors the effective duration of its fixed maturity investments, and the Company’s investment purchases and sales are executed with the objective of having adequate funds available to satisfy its insurance and debt obligations. Generally, the expected principle and interest payments produced by the Company’s fixed maturity portfolio adequately fund the estimated runoff of the Company’s insurance reserves.
We regularly monitor the effective duration of our fixed income investments, and our investment purchases and sales are executed with the objective of having adequate funds available to satisfy our insurance and debt obligations. Generally, the expected principal and interest payments produced by our fixed income portfolio adequately fund the estimated runoff of the Company’s insurance reserves.
For additional information, see Part II, Item 8, Note 13 “Benefit Plans” and Note 19 “Share-Based Compensation” for further discussion of our benefit plans and stock-based compensation. As of December 31, 2022, NI Holdings and its subsidiaries had 233 total employees, of which 230 were full-time employees.
For additional information, see Part II, Item 8, Note 12 “Benefit Plans” and Note 18 “Share-Based Compensation” for further discussion of our benefit plans and stock-based compensation. As of December 31, 2023, NI Holdings and its subsidiaries had 234 total employees, of which 219 were full-time employees.
Our largest competitors include Farmers Union Mutual Insurance Company, North Star Mutual Insurance Company, American Family Insurance, and Liberty Mutual Insurance Company. In Nebraska and South Dakota, we have a small farmowners market share, which is dominated by the large national and regional carriers.
Based on 2022 data, Nodak Insurance is the second largest writer of farmowners insurance in North Dakota. Our largest competitors include Farmers Union, North Star Mutual, American Family, and Farmers Alliance insurance companies. In Nebraska and South Dakota, we have a small farmowners market share, which is dominated by the large national and regional carriers.
Private passenger auto accounted for $82,311 (21.1%) of direct premiums written by the Company on a consolidated basis during 2022. Non-standard Auto Primero and Direct Auto write non-standard auto insurance with a focus on minimum-limit auto liability coverage. Non-standard auto insurance accounted for $77,798 (20.0%) of direct premiums written by the Company on a consolidated basis during 2022.
Private passenger auto accounted for $92,077 (22.0%) of direct premiums written by the Company on a consolidated basis during 2023. Non-standard Auto Primero and Direct Auto write non-standard auto insurance with a focus on minimum-limit auto liability coverage.
Congress, state legislatures, and regulatory authorities are expected to consider additional regulation relating to privacy and other aspects of customer information. As mandated by the Gramm-Leach-Bliley Act (“GLBA”), states have promulgated laws and regulations that require financial institutions, including insurance companies, to take steps to protect the privacy of certain consumer and customer information.
As mandated by the Gramm-Leach-Bliley Act (“GLBA”), states have promulgated laws and regulations that require financial institutions, including insurance companies, to take steps to protect the privacy of certain consumer and customer information.
Federal Regulation The U.S. federal government generally does not directly regulate the insurance industry except for certain areas of the market, such as insurance for crops, flood, nuclear, and terrorism risks.
We cannot predict the amount and timing of any future assessments under these laws. Federal Regulation The U.S. federal government generally does not directly regulate the insurance industry except for certain areas of the market, such as insurance for crops, flood, nuclear, and terrorism risks.
In exchange, an intercompany cash payment was made to compensate Battle Creek for the transfer of these liabilities. The $3.0 million surplus note originally issued by Battle Creek and purchased by Nodak Insurance in connection with their affiliation agreement remains in place. It bears interest at an annual rate of 1.0% and matures on December 30, 2040.
In exchange, an intercompany cash payment was made to compensate Battle Creek for the transfer of these liabilities. As of December 31, 2023, the $3.0 million surplus note originally issued by Battle Creek and purchased by Nodak Insurance in connection with their affiliation agreement remained in place.
Approval of the state insurance commissioner is required prior to any transaction affecting the control of an insurer domiciled in that state. In North Dakota, the acquisition of 10% or more of the outstanding voting securities of an insurer or its holding company is presumed to be a change in control.
In North Dakota, the acquisition of 10% or more of the outstanding voting securities of an insurer or its holding company is presumed to be a change in control.
As of December 31, 2022, Westminster distributed its policies through independent agents in 61 contracted agencies in those 11 states and the District of Columbia. The financial results of Westminster have been included in the consolidated financial statements and the Company’s commercial segment following the acquisition date. See Part II, Item 8, Note 4 “Acquisition of Westminster American Insurance Company.
As of December 31, 2023, Westminster distributed its policies through independent agents in 53 contracted agencies in those 10 states and the District of Columbia. The financial results of Westminster have been included in the consolidated financial statements and the Company’s commercial segment following the acquisition date.
Multi-peril crop insurance is a federal program that protects against crop yield losses from all types of natural causes including drought, excessive moisture, freeze, and disease. Crop hail insurance is a private insurance product designed to provide protection against losses to farmer’s crops due primarily to hail damage.
Multi-peril crop insurance is a federal program that protects against crop yield losses from all types of natural causes and loss of revenue due to declines in the prices of agricultural products. Crop hail insurance is a private insurance product designed to provide protection against losses to farmers’ crops due primarily to hail damage.
The multi-disciplinary ERMC regularly monitors risk reports and metrics regarding a variety of continuing and emerging risks that may adversely affect the Company, its shareholders, its policyholders, or other stakeholders. The Audit Committee of the Board of Directors oversees risk management and regularly receives reports from the ERMC. Cybersecurity risk is an important and evolving focus for the Company.
The multi-disciplinary ERMC regularly monitors risk reports and metrics regarding a variety of continuing and emerging risks that may adversely affect the Company, its shareholders, its policyholders, or other stakeholders.
The NAIC provides guidance to the states with respect to standardized laws and regulations (including the accounting practices and procedures discussed above), which represent an effort to standardize insurance industry practices across state lines, oftentimes referred to as “Model Regulations”.
Our domiciliary states generally conform to National Association of Insurance Commissioners (“NAIC”) accounting practices and procedures, so our examination reports and other filings generally are accepted by other states. 12 The NAIC provides guidance to the states with respect to standardized laws and regulations (including the accounting practices and procedures discussed above), which represent an effort to standardize insurance industry practices across state lines, oftentimes referred to as “Model Regulations”.
We are also subject to the Fair and Accurate Credit Transactions Act of 2003 and the Health Insurance Portability and Accountability Act of 1996, both of which require us to protect the privacy of our customers’ information, including health and credit information.
We are also subject to the Fair and Accurate Credit Transactions Act of 2003 and the Health Insurance Portability and Accountability Act of 1996, both of which require us to protect the privacy of our customers’ information, including health and credit information. 14 Privacy We are subject to numerous U.S. federal and state laws governing the collection, disclosure, and protection of personal and confidential information of our clients or employees.
The principal competitors in our markets for multi-peril crop insurance include Chubb Corporation, QBE Insurance Group, Rural Community Insurance Services, CGB Enterprises, and Great American Insurance Group.
The principal competitors in our markets for multi-peril crop insurance include Chubb, QBE Insurance Group, Zurich, American Agri-Business Insurance Company, and Great American Insurance Group.
Investments The majority of funds available for investments are deployed in a widely diversified portfolio of high quality, liquid, taxable U.S. government, tax-exempt, and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds.
For additional information, see Part II, Item 7, “Critical Accounting Policies” and Part II, Item 8, Note 8 “Unpaid Losses and Loss Adjustment Expenses”. Investments The majority of funds available for investments are deployed in a widely diversified portfolio of high quality, liquid taxable U.S. government, tax-exempt and taxable U.S. municipal, taxable corporate, and U.S. agency mortgage-backed bonds.
Collectively, crop insurance accounted for $53,215 (13.7%) of direct premiums written by the Company on a consolidated basis during 2022. Commercial Nodak Insurance, American West, and Westminster write commercial multi-peril policies. Collectively, commercial insurance accounted for $80,443 (20.6%) of the direct premiums written by the Company on a consolidated basis during 2022.
Collectively, crop insurance accounted for $45,272 (10.8%) of direct premiums written by the Company on a consolidated basis during 2023. Commercial Nodak Insurance, American West, and Westminster write commercial multi-peril policies. Collectively, commercial insurance accounted for $83,854 (20.0%) of the direct premiums written by the Company on a consolidated basis during 2023.
Employee turnover averaged 25.2% during 2022, compared to 14.7% during 2021, and 17.3% during 2020. 16 Table of Contents
Employee turnover averaged 22.7% during 2023, compared to 25.2% during 2022, and 14.7% during 2021. 16
Our insurance company subsidiaries prepare statutory-basis financial statements in accordance with accounting practices and procedures prescribed or permitted by the state in which they are domiciled. Our domiciliary states generally conform to National Association of Insurance Commissioners (“NAIC”) accounting practices and procedures, so our examination reports and other filings generally are accepted by other states.
Our insurance company subsidiaries prepare statutory-basis financial statements in accordance with accounting practices and procedures prescribed or permitted by the state in which they are domiciled.
American West Insurance Company Battle Creek Mutual Insurance Company Tri-State, Ltd 100% ownership Primero Insurance Company The executive offices of NI Holdings and Nodak Insurance are located at 1101 First Avenue North, Fargo, North Dakota 58102, and the main office phone number is 701-298-4200. NI Holdings’ website address is www.niholdingsinc.com .
See Part II, Item 8, Note 22 “Subsequent Event” for additional information regarding changes to Battle Creek Mutual Insurance Company. The executive offices of NI Holdings and Nodak Insurance are located at 1101 First Avenue North, Fargo, North Dakota 58102, and the main office phone number is 701-298-4200. NI Holdings’ website address is www.niholdingsinc.com.
Our excess capital deployment priorities are to (1) invest in existing businesses where we see opportunities for profitable growth, (2) make strategic investments and acquisitions that enhance our businesses and achieve appropriate risk-adjusted returns over time, and (3) return capital to shareholders through share repurchases or shareholder dividends. 8 Table of Contents Insurance Products by Segment The Company’s consolidated financial results include our Private Passenger Auto, Non-Standard Auto, Home and Farm, Commercial, Crop, and All Other reporting segments.
Our excess capital deployment priorities are to (1) invest in existing businesses where we see opportunities for profitable growth, (2) make strategic investments and acquisitions that enhance our businesses and achieve appropriate risk-adjusted returns over time, and (3) return capital to shareholders through share repurchases or shareholder dividends.
The NAIC Amendments, when adopted by the various states, are designed to respond to perceived gaps in the regulation of insurance holding company systems in the U.S. The NAIC Amendments include a requirement that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report”.
The NAIC Amendments include a requirement that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report”.
Battle Creek must obtain prior approval from the appropriate state of domicile before making any payment of interest or principal on the surplus note. Pursuant to the affiliation agreement, so long as the surplus note remains outstanding, Nodak Insurance is entitled to appoint two-thirds of the Board of Directors of Battle Creek.
Pursuant to the affiliation agreement, so long as the surplus note remains outstanding, Nodak Insurance is entitled to appoint two-thirds of the Board of Directors of Battle Creek.
Our Enterprise Risk Management Committee (the “ERMC”) is responsible for the alignment of operational risk management strategies as the coordination point for enterprise-level direction setting with regard to risk management issues.
We consider an enterprise-wide risk management program to be an integral part of managing our business and a key element in our approach to corporate governance. Our Enterprise Risk Management Committee (the “ERMC”) is responsible for the alignment of operational risk management strategies as the coordination point for enterprise-level direction setting with regard to risk management issues.
We establish reserves relating to insurance companies that are subject to insolvency proceedings when it becomes probable that we will be subject to an assessment and the amount of such assessment can be estimated. We cannot predict the amount and timing of any future assessments under these laws.
For the years ended December 31, 2023, 2022, and 2021, we paid only minimal assessments pursuant to state insurance guaranty association laws. We establish reserves relating to insurance companies that are subject to insolvency proceedings when it becomes probable that we will be subject to an assessment and the amount of such assessment can be estimated.
State regulatory authorities generally enforce these provisions through periodic market conduct examinations. Guaranty Fund Laws All states have guaranty fund laws under which insurers doing business in the state can be assessed to fund policyholder liabilities of insolvent insurance companies.
Guaranty Fund Laws All states have guaranty fund laws under which insurers doing business in the state can be assessed to fund policyholder liabilities of insolvent insurance companies. Under these laws, an insurer is subject to assessment depending upon its market share in the state of a given line of business.
Home and farm accounted for $90,701 (23.3%) of direct premiums written by the Company on a consolidated basis during 2022. Crop Crop hail and multi-peril crop insurance policies are also offered by Nodak Insurance, American West, and Battle Creek.
These policies also cover liability arising from injury to other persons or their property while on the insured’s premises. Home and farm accounted for $96,396 (23.0%) of direct premiums written by the Company on a consolidated basis during 2023. Crop Nodak Insurance, American West, and Battle Creek offer crop hail and multi-peril crop insurance policies.
They are located primarily at our home office in Fargo, North Dakota, as well as our office in Battle Creek, Nebraska, and underwrite coverage issued by Nodak Insurance, American West, and Battle Creek. Primero and Direct Auto employ 12 underwriters in connection with their non-standard auto insurance businesses.
Our Nodak Insurance underwriting staff includes 20 employees with approximately 285 combined years of experience in property and casualty underwriting. They are located primarily at our home office in Fargo, North Dakota, as well as our office in Battle Creek, Nebraska, and underwrite coverage issued by Nodak Insurance, American West, and Battle Creek.
Information regarding products and services offered in each segment is included below. Additionally, revenues, underwriting results, and identifiable assets and liabilities for each segment are shown in Part II, Item 8, Note 20 “Segment Information”. The financial performance of each segment is discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Insurance Products by Segment Our consolidated financial results include our Private Passenger Auto, Non-Standard Auto, Home and Farm, Commercial, Crop, and All Other reporting segments. Information regarding products and services offered in each segment is included below. Additionally, revenues, underwriting results, and identifiable assets and liabilities for each segment are shown in Part II, Item 8, Note 20 “Segment Information”.
Home and Farm Nodak Insurance, Battle Creek, and American West each write homeowners and farmowners policies to provide coverage for damage to buildings, equipment, and contents for a variety of perils, including fire, lightning, wind, hail, and theft. These policies also cover liability arising from injury to other persons or their property while on the insured’s premises.
Non-standard auto insurance accounted for $95,295 (22.8%) of direct premiums written by the Company on a consolidated basis during 2023. 8 Home and Farm Nodak Insurance, Battle Creek, and American West each write homeowners and farmowners policies to provide coverage for damage to buildings, equipment, and contents for a variety of perils, including fire, lightning, wind, hail, and theft.
In some years, it may not be unusual for financially sound companies to have several ratios with results outside the usual ranges.
In some years, it may not be unusual for financially sound companies to have several ratios with results outside the usual ranges. During the years ended December 31, 2023 and 2021, none of our insurance company subsidiaries produced results outside the acceptable range for more than three of the IRIS tests.
All of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by AM Best, which is the third highest out of 15 possible ratings, under a group rating due to the intercompany pooling reinsurance agreement. Effective April 14, 2022, AM Best has affirmed a stable financial strength outlook to the group.
This rating can also affect an insurer’s level of premium writings, the lines of business it can write, and, for insurers like us that are also public registrants, the market value of its securities. 11 All of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by AM Best, which is the third highest out of 15 possible ratings, under a group rating due to the intercompany pooling reinsurance agreement.
Competition The property casualty and crop insurance markets are competitive. We compete with stock insurance companies, mutual companies, and other underwriting organizations. Our largest competitors in North Dakota for private passenger auto and homeowners include Progressive Casualty Insurance Company, State Farm Mutual Insurance Company, American Family Insurance, Allstate Corporation, Farmers Union Mutual Insurance Company, and Auto-Owners Insurance.
Our largest competitors in North Dakota for private passenger auto and homeowners include Progressive, State Farm, American Family, National General, Farmers Union, and Auto-Owners insurance companies. In South Dakota and Nebraska, we have small market shares and our competitors are the large national and regional companies as well as Farmers Mutual of Nebraska.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, certain provisions of our Articles of Incorporation, such as the existence of a classified Board of Directors, the prohibition of cumulative voting for the election of directors, and the prohibition on any person or group acquiring and having the right to vote in excess of 10% of our outstanding stock without the prior approval of the Board of Directors will make removal of the Company’s management difficult. 22 Table of Contents Our status as an insurance holding company with no direct operations could adversely affect our ability to fund operations, execute future share repurchases, or meet potential future shareholder dividend and/or debt obligations.
Biggest changeIn addition, certain provisions of our Articles of Incorporation, such as the prohibition of cumulative voting for the election of directors and the prohibition on any person or group acquiring and having the right to vote in excess of 10% of our outstanding stock without the prior approval of the Board of Directors will make removal of the Company’s management difficult.
Potential higher interest rates could reduce the carrying value of our fixed maturity and short-term investments, negatively impacting the Company’s carrying value in the short-term. Over the long-term, however, higher interest rates would provide an incremental benefit to our net investment income as excess cash and the proceeds of maturing bonds are reinvested at higher rates.
Potential higher interest rates could reduce the carrying value of our fixed income and short-term investments, negatively impacting the Company’s carrying value in the short-term. Over the long-term, however, higher interest rates would provide an incremental benefit to our net investment income as excess cash and the proceeds of maturing bonds are reinvested at higher rates.
If legislation is adopted to reduce the amount of risk the government assumes, the amount of insurance premium subsidy provided to farmers or otherwise reduce the coverage provided under multi-peril crop insurance policies, losses would increase and purchases of multi-peril crop insurance could experience a significant decline nationwide and in our market area.
If legislation is adopted to reduce the amount of risk the government assumes, the amount of insurance premium subsidy provided to farmers or otherwise reduce the coverage provided under multi-peril crop insurance policies, losses 21 would increase and purchases of multi-peril crop insurance could experience a significant decline nationwide and in our market area.
The ability to effectively underwrite risks and price products appropriately is subject to a number of uncertainties, including: ● availability of sufficient reliable data and our ability to properly analyze available data; ● market and competitive conditions; ● regulatory or legislative changes; ● selection and application of appropriate pricing techniques; and ● adverse changes in claims experience, such as distracted driving or a more aggressive tort environment. 18 Table of Contents Under the federal crop insurance program, each insurer is required to accept every application for multi-peril crop insurance that they receive, and the premiums and the policy terms are set by the RMA, which is the federal government agency administering the federal crop insurance program.
The ability to effectively underwrite risks and price products appropriately is subject to a number of uncertainties, including: ● availability of sufficient reliable data and our ability to properly analyze available data; ● market and competitive conditions; ● regulatory or legislative changes; ● selection and application of appropriate pricing techniques; and ● adverse changes in claims experience, such as distracted driving or a more aggressive tort environment. 18 Under the federal crop insurance program, each insurer is required to accept every application for multi-peril crop insurance that they receive, and the premiums and the policy terms are set by the RMA, which is the federal government agency administering the federal crop insurance program.
We may be unable to maintain our desired reinsurance coverage or to obtain other reinsurance coverage in adequate amounts and/or favorable rates. If we are unable to maintain appropriate reinsurance coverage, it may be difficult for us to manage our underwriting risks and operate our business profitably.
We may be unable to maintain our desired reinsurance coverage or to obtain other reinsurance coverage in adequate amounts and/or at favorable rates. If we are unable to maintain appropriate reinsurance coverage, it may be difficult for us to manage our underwriting risks and operate our business profitably.
We rely heavily on our operating systems in connection with issuing policies, paying claims, and providing the information we need to conduct our business. We also rely on the operating systems of AFBIS in connection with various processes with respect to our crop lines of business.
We rely heavily on our operating systems in connection with issuing policies, paying claims, and providing the information we need to conduct our business. We also rely on the operating systems of AFBIS in 20 connection with various processes with respect to our crop lines of business.
For additional information, see Part II, Item 8, Note 3 “Summary of Significant Accounting Policies” and Note 7 “Reinsurance.” If actual losses exceed our loss and loss adjustment expense reserves or if changes in the estimated level of loss and loss adjustment expense reserves are necessary as a result of changes in the legal, regulatory, and economic environments in which we operate, our financial results could be materially and adversely affected.
For additional information, see Part II, Item 8, Note 3 “Summary of Significant Accounting Policies” and Note 6 “Reinsurance.” If actual losses exceed our loss and loss adjustment expense reserves or if changes in the estimated level of loss and loss adjustment expense reserves are necessary as a result of changes in the legal, regulatory, and economic environments in which we operate, our financial results could be materially and adversely affected.
For additional information, see Part II, Item 8, Note 7 “Reinsurance.” Business and Operational Risks The impact of a future pandemic, and related economic conditions, could materially affect our results of operations, financial position, and/or liquidity. We face risks associated with pandemics, including the impact of reduced economic activity and unemployment, government actions, and capital markets disruption.
For additional information, see Part II, Item 8, Note 6 “Reinsurance.” Business and Operational Risks The impact of a future pandemic, and related economic conditions, could materially affect our results of operations, financial position, and/or liquidity. We face risks associated with pandemics, including the impact of reduced economic activity and unemployment, government actions, and capital markets disruption.
Any significant or long-running negative changes in the fixed income or equity markets could have a material adverse effect on our financial condition, results of operations, or cash flows. The Company’s investment portfolio is also subject to credit and cash flow risk, including risks associated with its investments in asset-backed and mortgage-backed securities.
Any significant or long-running negative changes in the fixed income or equity markets could have a material adverse effect on our financial condition, results of operations, or cash flows. Our investment portfolio is also subject to credit and cash flow risk, including risks associated with our investments in asset-backed and mortgage-backed securities.
For additional information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Losses and Loss Adjustment Expenses”, and Part II, Item 8, Note 9 “Unpaid Losses and Loss Adjustment Expenses.” 17 Table of Contents It is possible that, among other things, past or future steps taken by the federal government and the Federal Reserve to manage the U.S. economy, including fiscal and monetary policy measures, could lead to higher than anticipated levels of inflation, which generally leads to increased loss costs and other operating expenses.
For additional information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Losses and Loss Adjustment Expenses”, and Part II, Item 8, Note 8 “Unpaid Losses and Loss Adjustment Expenses.” 17 It is possible that, among other things, past or future steps taken by the federal government and the Federal Reserve to manage the U.S. economy, including fiscal and monetary policy measures, could lead to higher than anticipated levels of inflation, which generally leads to increased loss costs and other operating expenses.
Because the Company’s investment portfolio is the largest component of its assets and a multiple of its shareholders’ equity, adverse changes in economic conditions could result in impairments that are material to our financial condition and operating results.
Because our investment portfolio is the largest component of our assets and a multiple of our shareholders’ equity, adverse changes in economic conditions could result in impairments that are material to our financial condition and operating results.
For additional information, see Part II, Item 8, Note 7 “Reinsurance.” If we cannot collect loss recoveries from our reinsurers in accordance with our reinsurance agreements, we may incur additional losses.
For additional information, see Part II, Item 8, Note 6 “Reinsurance.” If we cannot collect loss recoveries from our reinsurers in accordance with our reinsurance agreements, we may incur additional losses.
State guaranty associations levy assessments, up to prescribed limits, on all insurance companies doing business in the state based on their proportionate share of premiums written in the lines of business in which the impaired, insolvent, or failed insurance companies are engaged. Accordingly, the assessments 21 Table of Contents levied on us may increase as we increase our written premiums.
State guaranty associations levy assessments, up to prescribed limits, on all insurance companies doing business in the state based on their proportionate share of premiums written in the lines of business in which the impaired, insolvent, or failed insurance companies are engaged. Accordingly, the assessments levied on us may increase as we increase our written premiums.
Such economic changes could arise from overall changes in the financial markets or specific changes to industries, companies, or municipalities in which we maintain investment holdings. See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.” 23 Table of Contents We may not be able to manage our growth effectively.
Such economic changes could arise from overall changes in the financial markets or specific changes to industries, companies, or municipalities in which we maintain investment holdings. See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.” We may not be able to manage our growth effectively.
Any potential future acquisitions involve a number of risks that could materially adversely affect our business and operating results, including: ● problems integrating the acquired operations into our existing business; ● operating and underwriting results of the acquired operations not meeting our expectations; ● diversion of management’s time and attention from our existing business; ● higher than anticipated capital requirements; ● difficulties in retaining business relationships with agents and policyholders of the acquired company; ● risks associated with entering markets in which we lack extensive prior experience; ● tax issues associated with acquisitions; ● acquisition-related disputes, including disputes over contingent consideration and escrows; ● potential loss of key employees of the acquired company; and ● potential impairment of related goodwill and intangible assets.
Any acquisitions involve a number of risks that could materially adversely affect our business and operating results, including: ● problems integrating the acquired operations into our existing business; ● operating and underwriting results of the acquired operations not meeting our expectations; ● diversion of management’s time and attention from our existing business; ● higher than anticipated capital requirements; ● difficulties in retaining business relationships with agents and policyholders of the acquired company; ● risks associated with entering markets in which we lack extensive prior experience; ● tax issues associated with acquisitions; ● acquisition-related disputes, including disputes over contingent consideration and escrows; ● loss of key employees of the acquired company; ● impairment of related goodwill and intangible assets; and ● changes in strategy resulting in the sale of an acquired business which may result in a capital loss.
Our most recent rating by AM Best was issued on April 14, 2022. Financial strength ratings are used by agents, customers, lenders, and other insurance carriers as a means of assessing the financial strength and quality of insurance companies. If our financial position deteriorates, we may not maintain our favorable financial strength rating from AM Best.
Our most recent rating by AM Best was affirmed on April 25, 2023. Financial strength ratings are used by agents, customers, lenders, and other insurance carriers as a means of assessing the financial strength and quality of insurance companies. If our financial position deteriorates, we may not maintain our favorable financial strength rating from AM Best.
General economic conditions, stock market volatility, changes in tax laws, and many other factors beyond our control can adversely affect the value of these securities and potentially reduce our net investment income and/or lead to net investment losses.
Unlike fixed income securities, the changes in the fair value of our equity securities are recognized in net income. General economic conditions, stock market volatility, changes in tax laws, and many other factors beyond our control can adversely affect the value of these securities and potentially reduce our net investment income and/or lead to net investment losses.
Any damage caused by such a failure or loss may cause interruptions in our business operations that may adversely affect our service levels and business. 24 Table of Contents
Any damage caused by such a failure or loss may cause interruptions in our business operations that may adversely affect our service levels and business.
In 2022, 2021, and 2020, our direct premiums written generated from the multi-peril crop insurance line of business were 12.8%, 12.0%, and 11.5%, respectively, of total written premiums.
In 2023, 2022, and 2021, our direct premiums written generated from the multi-peril crop insurance line of business were 10.2%, 12.8%, and 12.0%, respectively, of total written premiums.
A significant source of funds available to us for the payment of operating expenses, share repurchases, and potential future dividends to shareholders and/or debt servicing are remaining net proceeds from our IPO retained at the holding company, management fees, and dividends from our subsidiaries. The payment of dividends by our subsidiaries are restricted by North Dakota’s insurance law.
A significant source of funds available to us for the payment of operating expenses, share repurchases, and potential future dividends to shareholders and/or debt servicing are management fees, dividends from our subsidiaries, or other sources of capital. The payment of dividends by our subsidiaries are restricted by North Dakota’s insurance law.
To the extent that current and 19 Table of Contents potential policyholders change their insurance shopping preferences, this may have an adverse effect on our ability to grow, financial position, and results of operations. Future acquisitions could disrupt our business and harm our financial condition or results of operations.
To the extent that current and potential policyholders change their insurance shopping preferences, this may have an adverse effect on our ability to grow, financial position, and results of operations. Acquisitions could disrupt our business and harm our financial condition or results of operations. As part of our growth strategy, we will continue to evaluate acquisition opportunities.
Our reinsurance coverage includes a catastrophe excess of loss program, which in 2022 limited our catastrophe exposure to $15 million retention per event, with $125 million of reinsurance coverage placed in excess of this retention. In 2023, our catastrophe exposure was increased to $20 million retention per event, with $133 million of reinsurance coverage placed in excess of this retention.
Our reinsurance coverage includes a catastrophe excess of loss program, which in 2023 limited our catastrophe exposure to $20 million retention per event, with $133 million of reinsurance coverage placed in excess of this retention. For 2024, we anticipate that these amounts will remain consistent.
We could be materially adversely affected if one or more of our employees cause a significant operational breakdown or failure, either as a result of human error or intentional sabotage or fraudulent manipulation of our operations or systems. 20 Table of Contents Cyberattacks, security breaches, or similar events affecting the technologies and systems we rely on to operate our business and to maintain and protect sensitive Company and customer data could disrupt our operations, harm our reputation, and result in material losses.
Cyberattacks, security breaches, or similar events affecting the technologies and systems we rely on to operate our business and to maintain and protect sensitive Company and customer data could disrupt our operations, harm our reputation, and result in material losses.
We may not be able to grow our business if we cannot retain and expand our captive and independent agent relationships, we cannot provide competitive products for these agents to sell, and/or consumers seek other distribution methods offered by our competitors.
Additionally, potential capital markets disruption could lead to our fixed income portfolio being adversely impacted by ratings downgrades, increased bankruptcies, declines in real estate valuations, and/or declines in fixed income yields, along with increased volatility in our equity portfolio. 19 We may not be able to grow our business if we cannot retain and expand our captive and independent agent relationships, we cannot provide competitive products for these agents to sell, and/or consumers seek other distribution methods offered by our competitors.
We manage our exposure to interest rate increases by monitoring the duration within our investment portfolio and maintaining maturities that minimize any forced sales within the portfolio. However, even with such monitoring efforts, we may be forced to sell securities at a loss, which would adversely affect our results of operations.
We manage our exposure to interest rate increases by monitoring the duration within our investment portfolio and maintaining maturities that minimize any forced sales within the portfolio.
Plaintiffs in class action and other lawsuits against us may seek large or indeterminate amounts of damages, including punitive and treble damages, which may remain unknown for substantial periods of time.
Plaintiffs in class action and other lawsuits against us may seek large or indeterminate amounts of damages, including punitive and treble damages, which may remain unknown for substantial periods of time. 22 Risks Related to Our Common Stock Nodak Mutual Group’s majority control of our common stock will enable it to exercise voting control over most matters put to a vote of shareholders.
If we believe the policy will expose us to too much risk in a particular geographic area or if we are unwilling to insure the crop, we have the ability to decline to issue the policy. Our ability to manage our exposure to underwriting risks depends on the availability and cost of reinsurance coverage.
If we believe the policy will expose us to too much risk in a particular geographic area or if we are unwilling to insure the crop, we have the ability to decline to issue the policy. Volatility in crop prices and yields, as a result of weather conditions or other events, could adversely impact our financial condition and operating results.
We also invest a portion of our assets in equity securities, which are subject to greater volatility in their investment returns than fixed maturity investments. Unlike fixed income securities, the changes in the fair value of our equity securities are recognized in net income.
However, even with such monitoring efforts, we may be forced to sell securities at a loss, which would adversely affect our results of operations. 23 We also invest a portion of our assets in equity securities, which are subject to greater volatility in their investment returns than fixed income investments.
NI Holdings is an insurance holding company that transacts substantially all of its business through its subsidiaries.
Our status as an insurance holding company with no direct operations could adversely affect our ability to fund operations, execute future share repurchases, or meet potential future shareholder dividend and/or debt obligations. NI Holdings is an insurance holding company that transacts substantially all of its business through its subsidiaries.
Removed
Additionally, potential capital markets disruption could lead to our fixed income portfolio being adversely impacted by ratings downgrades, increased bankruptcies, declines in real estate valuations, and/or declines in fixed income yields, along with increased volatility in our equity portfolio.
Added
Unpredictable weather conditions and other events such as excessive rain, flooding, droughts, hail, pests, and plant diseases can significantly impact crop prices and yields, creating volatility in our crop insurance business. In addition, the amount of multi-peril crop insurance business we retain is subject to the terms of the SRA and is dependent on the actual direct loss ratio experience.
Removed
As part of our growth strategy, we will continue to evaluate acquisition opportunities.
Added
A significant decrease in crop prices and variability in the loss experience could have a material negative effect on our business and results of operations. Our ability to manage our exposure to underwriting risks depends on the availability and cost of reinsurance coverage.
Removed
Risks Related to Our Common Stock Nodak Mutual Group’s majority control of our common stock will enable it to exercise voting control over most matters put to a vote of shareholders.
Added
We could be materially adversely affected if one or more of our employees cause a significant operational breakdown or failure, either as a result of human error or intentional sabotage or fraudulent manipulation of our operations or systems.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 4. Mine Safety Disclosures Not applicable. 25 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the six months ended June 30, 2020, we completed the repurchase of 402,056 shares of our common stock for $4,996 to close out this authorization. On May 4, 2020, our Board of Directors approved an additional authorization for the repurchase of up to approximately $10,000 of the Company’s outstanding common stock.
Biggest changeOn May 4, 2020, our Board of Directors approved an authorization for the repurchase of up to approximately $10,000 of the Company’s outstanding common stock. During the year ended December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $7,238 under this authorization.
This law requires our total assets to exceed our total liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of holders of stock with senior liquidation rights if we were to be dissolved at the time the dividend or distribution is paid. 27 Table of Contents Unregistered Securities The Company has not sold any unregistered securities within the past three years.
This law requires our total assets to exceed our total liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of holders of stock with senior liquidation rights if we were to be dissolved at the time the dividend or distribution is paid. 27 Unregistered Securities The Company has not sold any unregistered securities within the past three years.
There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on January 17, 2017. 28 Table of Contents Issuer Stock Purchases The Company had no common shares outstanding prior to March 13, 2017.
There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on January 17, 2017. 28 Issuer Stock Purchases The Company had no common shares outstanding prior to March 13, 2017.
The graph assumes that the value of the investment in the common stock and each index was $100 on March 16, 2017, and that all dividends were reinvested. 26 Table of Contents Dividend Policy Our Board of Directors continues to evaluate a potential policy of paying regular cash dividends, but has not decided on the amounts that may be paid, the frequency of any payment, or when any payments may begin.
The graph assumes that the value of the investment in the common stock and each index was $100 on December 31, 2018, and that all dividends were reinvested. 26 Dividend Policy Our Board of Directors continues to evaluate a potential policy of paying regular cash dividends but has not decided on the amounts that may be paid, the frequency of any payment, or when any payments may begin.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities Market Information The Company’s common shares trade on the NASDAQ Capital Market under the symbol “NODK”. As of February 28, 2023, there were approximately 558 shareholders of record for the Company’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities Market Information The Company’s common shares trade on the NASDAQ Capital Market under the symbol “NODK”. As of February 29, 2024, there were approximately 533 shareholders of record for the Company’s common stock.
Stock Performance Graph The following graph shows the cumulative total shareholder return (stock price increase plus dividends) on our common stock from March 16, 2017 (the first date that shares of our common stock were available for trading) through December 31, 2022, along with the corresponding returns for the Russell 2000 Index (as the broad stock market index) and the Standard & Poor’s (S&P) 1500 US P&C Insurance Index (as the published industry index).
Stock Performance Graph The following graph shows the cumulative total shareholder return (stock price increase plus dividends) on our common stock from December 31, 2018 through December 31, 2023, along with the corresponding returns for the Russell 2000 Index (as the broad stock market index) and the Standard & Poor’s (S&P) 1500 US P&C Insurance Index (as the published industry index).
During the year ended December 31, 2022, we completed the repurchase of 214,937 shares of our common stock for $3,446 to close out this authorization. On May 9, 2022, our Board of Directors approved an additional authorization for the repurchase of up to approximately $10,000 of the Company’s outstanding common stock.
On May 9, 2022, our Board of Directors approved an authorization for the repurchase of up to approximately $10,000 of the Company’s outstanding common stock. During the year ended December 31, 2022, we completed the repurchase of 54,223 shares of our common stock for $734 under this authorization.
The repurchases made in the three months ended December 31, 2022, are shown below: Period in 2022 Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2) (in thousands) October 1 – 31, 2022 25,314 $ 13.95 25,314 $ 10,222 November 1 – 30, 2022 18,625 13.63 18,625 9,968 December 1 – 31, 2022 51,802 13.57 51,802 9,265 Total 95,741 $ 13.68 95,741 $ 9,265 (1) Shares purchased pursuant to the August 11, 2021, and May 9, 2022, publicly announced share repurchase authorizations of up to approximately $5,000 and $10,000, respectively, of the Company’s outstanding common stock.
Share repurchase activity during the three months ended December 31, 2023, is presented below: Period in 2023 Total Number of Shares Purchased Average Price Paid Per Share (3) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2)(3) (in thousands) October 1 – 31, 2023 — $ — — $ 2,052 November 1 – 30, 2023 — — — 2,052 December 1 – 31, 2023 — — — 2,052 Total — $ — — $ 2,052 (1) Shares purchased pursuant to the May 9, 2022, publicly announced share repurchase authorizations of up to approximately $10,000 of the Company’s outstanding common stock.
On August 11, 2021, our Board of Directors approved an additional authorization for the repurchase of up to approximately $5,000 of the Company’s outstanding common stock. During the year ended December 31, 2021, we completed the repurchase of 81,095 shares of our common stock for $1,554 under this new authorization.
During the nine months ended September 30, 2021, we repurchased an additional 144,110 shares of our common stock for $2,762 to close out this authorization. On August 11, 2021, our Board of Directors approved an authorization for the repurchase of up to approximately $5,000 of the Company’s outstanding common stock.
North Dakota law limits the amount of dividends and other distributions that Nodak Insurance, Direct Auto, and Westminster may pay to us.
We are not currently subject to regulatory restrictions on the payment of dividends to our shareholders. However, any future dividends may be restricted to those received from our insurance subsidiaries. North Dakota law limits the amount of dividends and other distributions that Nodak Insurance, Direct Auto, and Westminster may pay to us.
The August 11, 2021, repurchase authorization was completed in November 2022. (2) Maximum dollar value of shares that may yet be purchased consist of up to approximately $9,265 under the May 9, 2022, publicly announced share repurchase authorization.
(2) Maximum dollar value of shares that may yet be purchased consist of up to approximately $2,052 under the May 9, 2022, publicly announced share repurchase authorization. (3) The Inflation Reduction Act of 2022 imposed a 1% excise tax on the net value of certain share repurchases made after December 31, 2022.
During the year ended December 31, 2022, we completed the repurchase of 54,223 shares of our common stock for $734 under this authorization. In total during the year ended December 31, 2022, we completed the repurchase of 269,160 shares of our common stock for $4,180.
During the year ended December 31, 2021, we completed the repurchase of 81,095 shares of our common stock for $1,554 under this new authorization. During the year ended December 31, 2022, we completed the repurchase of 214,937 shares of our common stock for $3,446 to close out this authorization.
During the year ended December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $7,238 under this authorization. During the nine months ended September 30, 2021, we repurchased an additional 144,110 shares of our common stock for $2,762 to close out this authorization.
During the year ended December 31, 2023, we repurchased an additional 548,549 shares of our common stock for $7,278, including the effect from applicable excise taxes. At December 31, 2023, $2,052 remains available under this authorization.
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The price weighted Dow Jones US P&C Insurance Index historically presented within the following graph was replaced in this Annual Report in favor of the market capitalization weighted S&P 1500 US P&C Insurance Index.
Added
All dollar amounts presented exclude such excise taxes, as applicable.
Removed
We are not currently subject to regulatory restrictions on the payment of dividends to our shareholders. However, any future dividends may be restricted to those received from our insurance subsidiaries, as our income is limited to earnings from the invested capital remaining from our initial IPO.
Removed
On February 28, 2018, our Board of Directors approved an authorization for the repurchase of up to approximately $10,000 of the Company’s outstanding common stock. We completed the repurchase of 191,265 shares of our common stock for $2,966 during 2018, and an additional 116,034 shares for $2,006 during 2019.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe overall expense ratio increased 2.1 percentage points in the year ended December 31, 2021, compared to the same period in 2020. 34 Table of Contents Underwriting Gain (Loss) and Combined Ratio Year Ended December 31, 2022 2021 2020 Underwriting gain (loss): Private passenger auto $ (9,416 ) $ (7,704 ) $ 6,512 Non-standard auto 622 1,362 2,651 Home and farm (52,512 ) (475 ) 17,260 Crop 12,294 (9,195 ) (468 ) Commercial (17,958 ) 2,506 1,500 All other 1,794 427 2,665 Total underwriting gain (loss) $ (65,176 ) $ (13,079 ) $ 30,120 Year Ended December 31, 2022 2021 2020 Combined ratio: Private passenger auto 112.1% 110.6% 91.0% Non-standard auto 99.1% 97.7% 95.1% Home and farm 167.0% 100.7% 77.0% Crop 64.6% 134.3% 101.4% Commercial 129.2% 95.6% 96.1% All other 80.6% 95.9% 70.5% Total combined ratio 119.9% 104.3% 89.4% Underwriting gain (loss) measures the pre-tax profitability of our insurance operations.
Biggest changeThe 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. 34 Underwriting Gain (Loss) and Combined Ratio Year Ended December 31, 2023 2022 2021 Underwriting gain (loss): Private passenger auto $ (1,341 ) $ (9,416 ) $ (7,704 ) Non-standard auto (12,654 ) 622 1,362 Home and farm 7,752 (52,512 ) (475 ) Crop 8,762 12,294 (9,195 ) Commercial (18,576 ) (17,958 ) 2,506 All other 3,992 1,794 427 Total underwriting loss $ (12,065 ) $ (65,176 ) $ (13,079 ) Year Ended December 31, 2023 2022 2021 Combined ratio: Private passenger auto 101.6% 112.1% 110.6% Non-standard auto 114.4% 99.1% 97.7% Home and farm 90.7% 167.0% 100.7% Crop 66.1% 64.6% 134.3% Commercial 128.8% 129.2% 95.6% All other 37.0% 80.6% 95.9% Total combined ratio 103.4% 119.9% 104.3% Underwriting gain (loss) measures the pre-tax profitability of our insurance operations.
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 Company claims personnel to settle the claims, and average payment amounts when estimating reserve amounts.
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.
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 the Company to experience adverse development and higher loss payments in future years.
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.
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.
The resulting dollars are then multiplied by the expected percentage of unpaid (or 39 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.
Changes in unrealized investment gains or losses on the fixed income securities, net of applicable income taxes, are reflected directly in shareholders’ equity as a component of other comprehensive income (loss) and, accordingly, have no effect on net income (loss). Changes in unrealized investments gains or losses on equity securities are reported in net income (loss).
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).
If we estimate the damages to be in excess of the retained catastrophe amount, reinsurers are notified immediately of a potential loss so that the Company can quickly recover reinsurance payments once the retention is exceeded.
If we estimate the damages to be in excess 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.
For example, demand surge caused by a significant catastrophe, such as a hurricane, 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 the Company’s historic reserves would reflect.
For example, demand surge caused by a significant catastrophe, such as a hurricane, 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.
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 2022 Annual Report constitutes forward-looking information that involves risks and uncertainties.
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 2023 Annual Report constitutes forward-looking information that involves risks and uncertainties.
The Company’s property and casualty policies, other than some of our auto lines and the non-standard auto policies, typically have a term of twelve months.
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.
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, the Company’s actuaries consider many of the factors discussed above.
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.
The Company’s 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.
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.
Should future settlement patterns change due to the legal environment, Company 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.
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.
Investments The Company’s fixed income securities and equity securities are classified as available-for-sale and carried at estimated fair value as determined by management based upon quoted market prices or a recognized independent pricing service at the reporting date for those or similar investments.
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.
Deferred Policy Acquisition Costs and Value of Business Acquired 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.
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.
Economic inflation A sudden and extreme increase in the economic inflation rate could have a significant impact on the Company’s 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.
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.
These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining its deferred income tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change.
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.
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 the Company’s claims staff.
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.
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 Method described above, except that the data projected are the ratios of paid allocated loss adjustment expenses to paid losses.
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.
Selected ratios are then multiplied together to produce a set of loss development factors which when applied to the 39 Table of Contents most current data value, by accident year, 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.
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 year, 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.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 9, 2022.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 8, 2023.
Paid and Case Incurred Loss Development Method — The Paid and Case Incurred Loss Development Method utilizes ratios of cumulative paid or case incurred losses or loss adjustment expenses at each age of development as a percent of the preceding development age.
Paid and Case Incurred Loss Development (Chain-Ladder) Method — The Paid and Case Incurred Loss Development Method utilizes ratios of cumulative paid or case incurred losses or loss adjustment expenses at each age of development as a percent of the preceding development age.
If the time to settle the claim extends over a period of years, which is possible but unlikely as the Company usually settles claims in less than 50 days 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.
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 50 days on average, the initial reserve may not anticipate an economic inflation rate that is significantly higher than the 40 current inflation rate. This can also apply to IBNR reserves.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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 the Company’s investments, see Part II, Item 8, Note 5 “Investments” and Note 6 “Fair Value Measurements”.
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”.
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 established by the Company. As discussed above, the setting of IBNR reserves is not an exact science and involves the expert judgment of an actuary.
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.
Therefore, the reserves carried in these more recent accident years are generally more conservative than those carried for older accident years. As the Company has 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.
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.
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 written by the Company covers crops planted in the spring.
Except for claims occurring in the spring (primarily for prevented planting and required replanting claims), claims are 37 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.
The Company recognizes 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.
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 Company is required to make estimates and assumptions in certain circumstances that affect amounts reported in its 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.
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 38 reasonable under the circumstances.
The Company’s liability for unpaid losses and loss adjustment expenses consists of (1) case reserves, which are reserves for claims that have been reported to the Company, and (2) IBNR, which are reserves for claims that have been incurred but have not yet been reported and for the future development of reported claims.
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.
The Company estimates 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 the Company’s anticipated losses for this line of business.
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.
Return on Average Equity For the year ended December 31, 2022, the Company had annualized return on average equity, after non-controlling interest, of (17.9)%, compared to annualized return on average equity, after non-controlling interest, of 2.4% and 12.4% for the years ended December 31, 2021 and 2020, respectively.
Return on Average Equity For the year ended December 31, 2023, we had annualized return on average equity, after non-controlling interest, of (2.2)%, compared to annualized return on average equity, after non-controlling interest, of (17.9)% and 2.4% for the years ended December 31, 2022 and 2021, respectively.
The Company reflects 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.
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.
Should the economic inflation rate increase significantly, the Company may not anticipate the need to adjust the IBNR reserves accordingly, which could lead to the Company being deficient in its IBNR reserves. 40 Table of Contents 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.
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.
Any reduction in estimated future taxable income may require the Company to record a valuation allowance against its deferred income tax assets. As of December 31, 2022, the Company had no material unrecognized income tax benefits or accrued interest and penalties. Federal income tax returns for the years 2019 through 2021 are open for examination.
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, 2023, we had no material unrecognized income tax benefits or accrued interest and penalties. Federal income tax returns for the years 2020 through 2022 are open for examination.
For more information on the Company’s results of operations by segment, see Part II, Item 8, Note 20 “Segment Information”. 30 Table of Contents Years ended December 31, 2022, 2021, and 2020 The consolidated net loss for the Company was $53,775 for the year ended December 31, 2022, compared to net income of $8,332 for the year ended December 31, 2021, and $41,344 for the year ended December 31, 2020.
For more information on the Company’s results of operations by segment, see Part II, Item 8, Note 20 “Segment Information”. 30 Years ended December 31, 2023, 2022, and 2021 The consolidated net loss for the Company was $5,226 for the year ended December 31, 2023, compared to a net loss of $53,775 for the year ended December 31, 2022, and net income of $8,332 for the year ended December 31, 2021.
Change in Reporting Lag As discussed above, the Company and its actuaries utilize historical patterns to provide an accurate estimate of what will take place in the future.
Change in Reporting Lag As discussed above, we utilize historical patterns to provide an accurate estimate of what will take place in the future.
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.
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 Company recognizes realized gains when investments are sold for an amount greater than their cost or 37 Table of Contents 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 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.
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.
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.
This decrease was primarily driven by higher claim payments related to catastrophe losses during the current year and higher levels of premiums and agents’ balances receivable and federal income tax recoverable. For the year ended December 31, 2022, net cash provided by investing activities totaled $25,048 compared to $48,151 net cash used by investing activities a year ago.
For the year ended December 31, 2022, net cash used by operating activities totaled $30,388 compared to $29,168 net cash provided by operating activities a year ago. This decrease was primarily driven by higher claim payments related to catastrophe losses during the current year and higher levels of premiums and agents’ balances receivable and federal income tax recoverable.
A valuation allowance is required to be established for any portion of the deferred income tax asset for which the Company believes it is more likely than not that it will not be realized. A valuation allowance of $694 and $1,008 was maintained at December 31, 2022, and December 31, 2021, respectively.
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 $505 and $694 was maintained at December 31, 2023, and December 31, 2022, respectively.
Net investment income and net investment gains (losses) The Company invests its 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.
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.
The overall combined ratio increased 15.6 percentage points in the year ended December 31, 2022, compared to the same period in 2021. These results were driven by the factors discussed in the Losses and Loss Adjustment Expenses section above.
The overall combined ratio decreased 16.5 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 section above.
The valuation allowance against certain deferred income tax assets was $694 as of December 31, 2022 compared to $1,008 as of December 31, 2021.
The valuation allowance against certain deferred income tax assets was $505 as of December 31, 2023 compared to $694 as of December 31, 2022.
Net Investment Gains (Losses) Net investment gains (losses) consisted of the following: Year Ended December 31, 2022 2021 2020 Gross realized gains $ 7,195 $ 18,130 $ 9,740 Gross realized losses, excluding credit impairment losses (5,271 ) (362 ) (1,969 ) Net realized gains 1,924 17,768 7,771 Change in net unrealized gain on equity securities (15,050 ) (2,289 ) 5,853 Net investment gains (losses) $ (13,126 ) $ 15,479 $ 13,624 The Company had net realized gains of $1,924 for the year ended December 31, 2022, compared to $17,768 for the year ended December 31, 2021, and $7,771 for the year ended December 31, 2020.
Net Investment Gains (Losses) Net investment gains (losses) consisted of the following: Year Ended December 31, 2023 2022 2021 Gross realized gains $ 13,975 $ 7,195 $ 18,130 Gross realized losses, excluding credit impairment losses (1,924 ) (5,271 ) (362 ) Net realized gains 12,051 1,924 17,768 Change in net unrealized gain on equity securities (9,927 ) (15,050 ) (2,289 ) Net investment gains (losses) $ 2,124 $ (13,126 ) $ 15,479 We had net realized gains of $12,051 for the year ended December 31, 2023, compared to $1,924 for the year ended December 31, 2022, and $17,768 for the year ended December 31, 2021.
In addition, these changes could impact the creditworthiness of issuers of securities in which the Company invests, 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. 42 Table of Contents Liquidity and Capital Resources The Company generates sufficient funds from its operations and maintains a high degree of liquidity in its investment portfolio to meet the demands of claim settlements and operating expenses.
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. 42 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.
The expense ratio measures a company’s operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio decreased 1.9 percentage points in the year ended December 31, 2022, compared to the same period in 2021.
The expense ratio measures a company’s operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio increased 3.6 percentage points in the year ended December 31, 2023, compared to the same period in 2022.
A lag in reporting may be caused by changes in how claims are reported, the types or lines of business the Company writes, the Company’s distribution system, and the geographic area where the Company chooses to insure risk.
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.
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 one of the following actuarial methodologies, weighted averages of the methods, and judgment.
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 Company had gross deferred income tax assets of $17,900 at December 31, 2022, and $10,070 at December 31, 2021, arising primarily from unearned premiums, loss reserve discounting, net unrealized investment losses, and net operating loss carryforwards.
We had gross deferred income tax assets of $18,172 at December 31, 2023, and $17,900 at December 31, 2022, arising primarily from unearned premiums, loss reserve discounting, net unrealized investment losses, and net operating loss carryforwards.
The changes in cash and cash equivalents for the years ended December 31, 2022, 2021, and 2020 were as follows: Year Ended December 31, 2022 2021 2020 Net cash flows from operating activities $ (30,388 ) $ 29,168 $ 51,010 Net cash flows from investing activities 25,048 (48,151 ) 200 Net cash flows from financing activities (18,281 ) (11,471 ) (12,265 ) Net increase (decrease) in cash and cash equivalents $ (23,621 ) $ (30,454 ) $ 38,945 For the year ended December 31, 2022, net cash used by operating activities totaled $30,388 compared to $29,168 net cash provided by operating activities a year ago.
The changes in cash and cash equivalents for the years ended December 31, 2023, 2022, and 2021 were as follows: Year Ended December 31, 2023 2022 2021 Net cash flows from operating activities $ 25,970 $ (30,388 ) $ 29,168 Net cash flows from investing activities (8,813 ) 25,048 (48,151 ) Net cash flows from financing activities (7,466 ) (18,281 ) (11,471 ) Net increase (decrease) in cash and cash equivalents $ 9,691 $ (23,621 ) $ (30,454 ) For the year ended December 31, 2023, net cash provided by operating activities totaled $25,970 compared to $30,388 net cash used by operating activities a year ago.
Underwriting and General Expenses and Expense Ratio Year Ended December 31, 2022 2021 2020 Underwriting and general expenses: Amortization of deferred policy acquisition costs $ 66,803 $ 64,574 $ 51,472 Other underwriting and general expenses 32,231 31,715 33,596 Total underwriting and general expenses 99,034 96,289 85,068 Expense ratio 30.2% 32.1% 30.0% The expense ratio is calculated by dividing other underwriting and general expenses and amortization of deferred policy acquisition costs by net premiums earned.
Underwriting and General Expenses and Expense Ratio Year Ended December 31, 2023 2022 2021 Underwriting and general expenses: Amortization of deferred policy acquisition costs $ 82,991 $ 66,803 $ 64,574 Other underwriting and general expenses 35,799 32,231 31,715 Total underwriting and general expenses $ 118,790 $ 99,034 $ 96,289 Expense ratio 33.8% 30.2% 32.1% The expense ratio is calculated by dividing other underwriting and general expenses and amortization of deferred policy acquisition costs by net premiums earned.
There is no amount available for payment of dividends from Direct Auto to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss of Direct Auto as of December 31, 2022. No dividends were declared or paid by Direct Auto during the years ended December 31, 2022, 2021, or 2020.
The amount available for payment of dividends from Westminster to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $1,200 as of December 31, 2023. No dividends were declared or paid by Westminster during the years ended December 31, 2023, 2022 or 2021.
Income Taxes Current income taxes represent amounts paid to the federal government and certain states whose payment is based upon net income (subject to regulatory adjustments) generated by the Company. The Company uses the asset and liability method of accounting for deferred income taxes.
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.
Year Ended December 31, 2022 2021 2020 Net losses and loss adjustment expenses: Private passenger auto $ 65,420 $ 59,721 $ 45,511 Non-standard auto 39,400 34,453 30,347 Home and farm 107,823 52,145 36,745 Crop 19,418 27,831 31,379 Commercial 57,216 34,779 20,430 All other 5,155 7,450 4,061 Total net losses and loss adjustment expenses $ 294,432 $ 216,379 $ 168,473 Year Ended December 31, 2022 2021 2020 Loss and loss adjustment expenses ratio: Private passenger auto 84.3% 82.3% 63.2% Non-standard auto 58.9% 58.8% 56.5% Home and farm 137.6% 70.7% 49.1% Crop 55.9% 103.7% 87.9% Commercial 93.1% 60.7% 53.4% All other 55.8% 70.6% 45.0% Total loss and loss adjustment expenses ratio 89.7% 72.2% 59.4% 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 increased 2.0 percentage points in 2022 compared to 2021.
Year Ended December 31, 2023 2022 2021 Net losses and loss adjustment expenses: Private passenger auto $ 60,204 $ 65,420 $ 59,721 Non-standard auto 63,041 39,400 34,453 Home and farm 50,935 107,823 52,145 Crop 10,793 19,418 27,831 Commercial 58,745 57,216 34,779 All other 694 5,155 7,450 Total net losses and loss adjustment expenses $ 244,412 $ 294,432 $ 216,379 Year Ended December 31, 2023 2022 2021 Loss and loss adjustment expenses ratio: Private passenger auto 72.2% 84.3% 82.3% Non-standard auto 71.8% 58.9% 58.8% Home and farm 61.1% 137.6% 70.7% Crop 41.8% 55.9% 103.7% Commercial 91.1% 93.1% 60.7% All other 11.0% 55.8% 70.6% Total loss and loss adjustment expenses ratio 69.6% 89.7% 72.2% 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 12.1 percentage points in 2023 compared to 2022.
The total underwriting loss increased $52,097, or 398.3%, for the year ended December 31, 2022, compared to the same period in 2021. These results were driven by the factors discussed in the Losses and Loss Adjustment Expenses section above.
The total underwriting loss decreased $53,111, or 81.5%, 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 section above.
The Company had gross deferred income tax liabilities of $8,201 at December 31, 2022, and $14,568 at December 31, 2021, arising primarily from deferred policy acquisition costs, net unrealized investment gains, and other intangible assets. The Company exercises significant judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets.
We had gross deferred income tax liabilities of $9,254 at December 31, 2023, and $8,201 at December 31, 2022, 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.
Westminster re-domesticated from Maryland to North Dakota during 2021, and is now subject to the same dividend restrictions as Nodak Insurance. There is no amount available for payment of dividends from Westminster to NI Holdings during 2023 without the prior approval of the North Dakota Insurance Department based upon the net loss of Westminster as of December 31, 2022.
Direct Auto re-domesticated from Illinois to North Dakota during 2021 and is now subject to the same dividend restrictions as Nodak Insurance. The amount available for payment of dividends from Direct Auto to NI Holdings during 2024 without the prior approval of the North Dakota Insurance Department is approximately $90 as of December 31, 2023.
The fixed income portfolio experienced an unfavorable change in net unrealized gains/losses of $46,362 during the year ended December 31, 2022, compared to a decrease in net unrealized gains of $9,796 during the year ended December 31, 2021. The changes were primarily the result of rising interest rates in the U.S.
The fixed income portion of the portfolio experienced net unrealized gains of $10,654 during the year ended December 31, 2023, compared to net unrealized losses of $46,362 during the year ended December 31, 2022. The changes were primarily the result of changes in U.S. interest rates.
Year Ended December 31, 2022 2021 2020 Net premiums earned: Private passenger auto $ 77,605 $ 72,533 $ 72,009 Non-standard auto 66,911 58,585 53,737 Home and farm 78,381 73,792 74,879 Crop 34,721 26,848 35,718 Commercial 61,431 57,285 38,288 All other 9,241 10,546 9,030 Total net premiums earned $ 328,290 $ 299,589 $ 283,661 Below are comments regarding significant changes in net premiums earned, by business segment: Private passenger auto – Net premiums earned for 2022 increased $5,072, or 7.0%, from 2021.
Year Ended December 31, 2023 2022 2021 Net premiums earned: Private passenger auto $ 83,360 $ 77,605 $ 72,533 Non-standard auto 87,760 66,911 58,585 Home and farm 83,389 78,381 73,792 Crop 25,817 34,721 26,848 Commercial 64,476 61,431 57,285 All other 6,335 9,241 10,546 Total net premiums earned $ 351,137 $ 328,290 $ 299,589 Below are comments regarding significant changes in net premiums earned by business segment: Private passenger auto – Net premiums earned for 2023 increased $5,755, or 7.4%, from 2022.
As a standalone entity, and outside of the net proceeds from the IPO, the Company’s principal source of long-term liquidity will be dividend payments from its directly-owned subsidiaries. 43 Table of Contents Nodak Insurance is restricted by the insurance laws of North Dakota as to the amount of liquid or other distributions it may pay to NI Holdings.
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.
The Nodak Insurance Board of Directors declared and paid dividends of $3,000 and $6,000 to NI Holdings during the years ended December 31, 2022 and 2020, respectively. No dividends were declared or paid by Nodak Insurance during the year ended December 31, 2021.
These restrictions or any subsequently imposed restrictions may affect our future liquidity. The Nodak Insurance Board of Directors declared and paid dividends of $3,000 to NI Holdings during the year ended December 31, 2022. No dividends were declared or paid by Nodak Insurance during the years ended December 31, 2023 and 2021.
Catastrophe losses, net of reinsurance, for the segment accounted for 72.1 percentage points of the net loss and loss adjustment expense ratio for the year ended December 31, 2022, compared to 9.9 percentage points for the same period for 2021.
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. 33 Crop – The net loss and loss adjustment expenses ratio decreased 14.1 percentage points in 2023 compared to 2022.
Net Income (Loss) For the year ended December 31, 2022, the Company had a net loss before non-controlling interest of $53,775, compared to income of $8,332 and $41,344 for the years ended December 31, 2021 and 2020, respectively.
Net Income (Loss) We had a net loss before non-controlling interest of $5,226 for the year ended December 31, 2023, a net loss of $53,775 for the year ended December 31, 2022, and net income of $8,332 for the year ended December 31, 2021.
We believe the following policies are the most sensitive to estimates and judgments. 38 Table of Contents Unpaid Losses and Loss Adjustment Expenses How reserves are established With respect to its traditional property and casualty insurance products, the Company maintains reserves for the payment of claims (indemnity losses) and expenses related to adjusting those claims (loss adjustment expenses).
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).
Average equity is calculated as the average between beginning and ending shareholders’ equity, excluding non-controlling interest, for the period. Principal Revenue Items The Company derives its revenue primarily from net premiums earned, net investment income, and net investment gains (losses).
Average equity is calculated as the average between beginning and ending equity, excluding non-controlling interest, for the period. 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.
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. and Disciplined Growth Investors.
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.
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.
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.
Results were driven by the Company’s decision to non-renew its participation in an assumed domestic and international reinsurance pool of business as of January 1, 2022. 32 Table of Contents Losses and Loss Adjustment Expenses Year Ended December 31, 2022 2021 2020 Net losses and loss adjustment expenses: Direct losses and loss adjustment expenses $ 333,397 $ 280,998 $ 185,370 Assumed losses and loss adjustment expenses 2,369 6,899 3,308 Ceded losses and loss adjustment expenses (41,334 ) (71,518 ) (20,205 ) Total net losses and loss adjustment expenses $ 294,432 $ 216,379 $ 168,473 The Company’s net losses and loss adjustment expenses for the year ended December 31, 2022 increased $78,053, or 36.1%, to $294,432, compared to $216,379 for the year ended December 31, 2021.
This 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. 32 Losses and Loss Adjustment Expenses Year Ended December 31, 2023 2022 2021 Net losses and loss adjustment expenses: Direct losses and loss adjustment expenses $ 293,978 $ 333,397 $ 280,998 Assumed losses and loss adjustment expenses 1,140 2,369 6,899 Ceded losses and loss adjustment expenses (50,706 ) (41,334 ) (71,518 ) Total net losses and loss adjustment expenses $ 244,412 $ 294,432 $ 216,379 The Company’s net losses and loss adjustment expenses for the year ended December 31, 2023 decreased $50,020, or 17.0%, to $244,412, compared to $294,432 for the year ended December 31, 2022.
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.
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.
The major components of our revenues and net income (loss) for the three periods are shown below: Year Ended December 31, 2022 2021 2020 Revenues: Net premiums earned $ 328,290 $ 299,589 $ 283,661 Fee and other income 1,453 1,775 1,801 Net investment income 7,820 7,131 7,271 Net investment gains (losses) (13,126 ) 15,479 13,624 Total revenues $ 324,437 $ 323,974 $ 306,357 Components of net income (loss): Net premiums earned $ 328,290 $ 299,589 $ 283,661 Losses and loss adjustment expenses 294,432 216,379 168,473 Amortization of deferred policy acquisition costs and other underwriting and general expenses 99,034 96,289 85,068 Underwriting gain (loss) (65,176 ) (13,079 ) 30,120 Fee and other income 1,453 1,775 1,801 Net investment income 7,820 7,131 7,271 Net investment gains (losses) (13,126 ) 15,479 13,624 Income (loss) before income taxes (69,029 ) 11,306 52,816 Income tax expense (benefit) (15,254 ) 2,974 11,472 Net income (loss) $ (53,775 ) $ 8,332 $ 41,344 31 Table of Contents Net Premiums Earned Year Ended December 31, 2022 2021 2020 Net premiums earned: Direct premium $ 368,886 $ 333,254 $ 301,061 Assumed premium 6,550 8,035 6,459 Ceded premium (47,146 ) (41,700 ) (23,859 ) Total net premiums earned $ 328,290 $ 299,589 $ 283,661 Net premiums earned for the year ended December 31, 2022 increased $28,701, or 9.6%, to $328,290, compared to $299,589 for the year ended December 31, 2021.
The major components of our revenues and net income (loss) for the three periods are shown below: Year Ended December 31, 2023 2022 2021 Revenues: Net premiums earned $ 351,137 $ 328,290 $ 299,589 Fee and other income 1,978 1,453 1,775 Net investment income 10,456 7,820 7,131 Net investment gains (losses) 2,124 (13,126 ) 15,479 Total revenues $ 365,695 $ 324,437 $ 323,974 Components of net income (loss): Net premiums earned $ 351,137 $ 328,290 $ 299,589 Losses and loss adjustment expenses 244,412 294,432 216,379 Amortization of deferred policy acquisition costs and other underwriting and general expenses 118,790 99,034 96,289 Underwriting loss (12,065 ) (65,176 ) (13,079 ) Fee and other income 1,978 1,453 1,775 Net investment income 10,456 7,820 7,131 Net investment gains (losses) 2,124 (13,126 ) 15,479 Goodwill impairment charge (6,756 ) — — Income (loss) before income taxes (4,263 ) (69,029 ) 11,306 Income tax expense (benefit) 963 (15,254 ) 2,974 Net income (loss) $ (5,226 ) $ (53,775 ) $ 8,332 31 Net Premiums Earned Year Ended December 31, 2023 2022 2021 Net premiums earned: Direct premium $ 401,945 $ 368,886 $ 333,254 Assumed premium 3,570 6,550 8,035 Ceded premium (54,378 ) (47,146 ) (41,700 ) Total net premiums earned $ 351,137 $ 328,290 $ 299,589 Net premiums earned for the year ended December 31, 2023 increased $22,847, or 7.0%, to $351,137, compared to $328,290 for the year ended December 31, 2022.
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 an increase in net unrealized gains of $9,264 during the year ended December 31, 2020.
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 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.
At December 31, 2023 and 2022, deferred policy acquisition costs (“DAC”) and the related liability for unearned premiums were as follows: December 31, 2023 2022 Deferred policy acquisition costs $ 34,120 $ 29,768 Liability for unearned premiums 164,100 148,513 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 41 incurred as the premium is earned.
When a catastrophe occurs, which in the Company’s case usually involves the weather perils of wind and hail, we utilize mapping technology through geographic coding of its property risks to overlay the path of the storm.
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.
Premiums earned Premiums earned is the earned portion of net premiums written. Gross premiums written include all premiums recorded by an insurance company during a specified policy period.
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. Gross premiums written include all premiums recorded by an insurance company during a specified policy period.
The Company’s net losses and loss adjustment expenses for the year ended December 31, 2021 increased $47,906, or 28.4%, to $216,379, compared to $168,473 for the year ended December 31, 2020.
The Company’s net losses and loss adjustment expenses for the year ended December 31, 2022 increased $78,053, or 36.1%, to $294,432, compared to $216,379 for the year ended December 31, 2021.
Net premiums earned for the year ended December 31, 2021 increased $15,928, or 5.6%, to $299,589, compared to $283,661 for the year ended December 31, 2020.
Net premiums earned for the year ended December 31, 2022 increased $28,701, or 9.6%, to $328,290, compared to $299,589 for the year ended December 31, 2021.
The Company reported no credit impairment losses during any of the periods presented. The Company experienced a decrease in net unrealized gains on equity securities of $15,050 during the year ended December 31, 2022, driven by changes in fair value attributable to unfavorable equity markets.
No credit impairment losses were reported during any of the periods presented. We experienced a decrease in net unrealized gains on equity securities of $9,927 during the year ended December 31, 2023.
This improvement was due to more favorable crop growing conditions in 2022 in comparison to the extreme drought conditions faced in 2021. Commercial – The net loss and loss adjustment expenses ratio increased 32.4 percentage points in 2022 compared to 2021.
This decrease was due to improved crop growing conditions in 2023 in comparison to 2022. Commercial – The net loss and loss adjustment expenses ratio decreased 2.0 percentage points in 2023 compared to 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe table below shows the interest rate sensitivity of the Company’s fixed income securities measured in terms of fair value (which is equal to the carrying value for all of its investment securities that are subject to interest rate changes) at December 31, 2022 and 2021: As of December 31, 2022 As of December 31, 2021 Hypothetical Change in Interest Rate Estimated Change in Fair Value Fair Value Estimated Change in Fair Value Fair Value 200 basis point increase $ (26,433 ) $ 276,891 $ (31,975 ) $ 332,676 100 basis point increase (13,504 ) 289,820 (16,116 ) 348,535 No change — 303,324 — 364,651 100 basis point decrease 13,986 317,310 16,018 380,669 200 basis point decrease 28,347 331,671 32,119 396,770 The interest rate exposure of the Company’s portfolio was proportionately consistent in the current year compared to the prior year, which is expected given the generally consistent composition and duration of the fixed income portfolio over this time. 46 Table of Contents Credit Risk Credit risk is the potential economic loss principally arising from adverse changes in the financial condition of a specific debt issuer.
Biggest changeThe table below shows the interest rate sensitivity of our fixed income securities measured in terms of fair value (which is equal to the carrying value for all of our investment securities that are subject to interest rate changes) at December 31, 2023 and 2022: As of December 31, 2023 As of December 31, 2022 Hypothetical Change in Interest Rate Estimated Change in Fair Value Fair Value Estimated Change in Fair Value Fair Value 200 basis point increase $ (31,125 ) $ 316,606 $ (26,433 ) $ 276,891 100 basis point increase (15,826 ) 331,905 (13,504 ) 289,820 No change — 347,731 — 303,324 100 basis point decrease 16,199 363,930 13,986 317,310 200 basis point decrease 32,572 380,303 28,347 331,671 The interest rate exposure of our portfolio was proportionately consistent in the current year compared to the prior year, which is expected given the generally consistent composition and duration of the fixed income portfolio over this time. 45 Credit Risk Credit risk is the potential economic loss principally arising from adverse changes in the financial condition of a specific debt issuer.
We manage the exposure to risks associated with interest rate fluctuations through active management and consultation with our outside fixed income portfolio manager. Higher interest rates, oftentimes correlated to inflation, reduce the carrying value of our fixed maturity and short-term investments, negatively impacting the Company’s book value in the short-term.
We manage the exposure to risks associated with interest rate fluctuations through active management and consultation with our outside fixed income portfolio manager. Higher interest rates, oftentimes correlated to inflation, reduce the carrying value of our fixed income and short-term investments, negatively impacting the Company’s book value in the short-term.
Additionally, we hold certain fixed income securities that have call features. In a potential declining interest rate environment, these securities may be called by their issuer and replaced with securities bearing lower interest rates. If we are required to sell fixed income securities in a rising interest rate environment, the Company may recognize investment losses.
Additionally, we hold certain fixed income securities that have call features. In a potential declining interest rate environment, these securities may be called by their issuer and replaced with securities bearing lower interest rates. If we are required to sell fixed income securities in a rising interest rate environment, we may recognize investment losses.
Additionally, the Company’s investment policy includes diversification rules that limit the credit exposure to any single issuer or asset class. Equity Risk Equity price risk is the risk that we will incur economic losses due to adverse changes in equity prices.
Additionally, our investment policy includes diversification rules that limit the credit exposure to any single issuer or asset class. Equity Risk Equity price risk is the risk that we will incur economic losses due to adverse changes in equity prices.
We develop our investment strategies based on a number of factors, including estimated duration of reserve liabilities, short and long-term liquidity needs, general economic conditions, expected rates of inflation and regulatory requirements. The portfolio duration of the fixed income securities in the Company’s investment portfolio at December 31, 2022 was 4.55 years.
We develop our investment strategies based on a number of factors, including estimated duration of reserve liabilities, short and long-term liquidity needs, general economic conditions, expected rates of inflation and regulatory requirements. The portfolio duration of the fixed income securities in our investment portfolio at December 31, 2023 was 4.52 years.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk Market risk is the risk that a company will incur losses due to adverse changes in the fair value of financial instruments. The Company has exposure to three principal types of market risk through its investment activities: interest rate risk, credit risk, and equity risk.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk Market risk is the risk that a company will incur losses due to adverse changes in the fair value of financial instruments. We have exposure to three principal types of market risk through our investment activities: interest rate risk, credit risk, and equity risk.
The Company’s investment policy helps mitigate these risks by diversifying the portfolio and establishing parameters to help manage exposures. 47 Table of Contents
Our investment policy helps mitigate these risks by diversifying the portfolio and establishing parameters to help manage exposures. 46

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