UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to _____

Commission file number 001-37973

NI HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

NORTH DAKOTA (State or other jurisdiction of incorporation or organization)		81-2683619 (IRS Employer Identification No.)

1101 First Avenue North Fargo, North Dakota		58102
(Address of principal executive offices)		(Zip Code)

(701) 298-4200
Registrant’s telephone number, including area code

Not applicable
Former name, former address, and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	NODK	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).☒ Yes No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒

The number of shares of Registrant’s common stock outstanding on ~~April 30,~~July 31, 2021 was ~~21,337,959.~~21,285,433. No preferred shares are issued or outstanding.

TABLE OF CONTENTS


Part I. - FINANCIAL INFORMATION	3
Item 1. - Financial Statements	3
Unaudited Consolidated Balance Sheets	3
Unaudited Consolidated Statements of Operations	4
Unaudited Consolidated Statements of Comprehensive Income (Loss)	5
Unaudited Consolidated Statements of Changes in Shareholders’ Equity	6
Unaudited Consolidated Statements of Cash Flows	78
Notes to Unaudited Consolidated Financial Statements	89
Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations	3835
Item 3. - Quantitative and Qualitative Disclosures about Market Risk	6159
Item 4. - Controls and Procedures	6159
Part II. - OTHER INFORMATION	6260
Item 1. - Legal Proceedings	6260
Item 1A. - Risk Factors	6260
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds	6361
Item 3. - Defaults upon Senior Securities	6462
Item 4. - Mine Safety Disclosures	6462
Item 5. - Other Information	6462
Item 6. - Exhibits	6462
Signatures	6563

Table of Contents

CERTAIN IMPORTANT INFORMATION

Unless the context otherwise requires, as used in this quarterly report on Form 10-Q:

•

“NI Holdings”, “the Company”, “we”, “us”, and “our” refer to NI Holdings, Inc., together with Nodak Insurance Company and its subsidiaries and its affiliate (Battle Creek Mutual Insurance Company), Direct Auto Insurance Company (acquired August 31, 2018), and Westminster American Insurance Company (acquired January 1, 2020), for periods discussed after completion of the conversion, and for periods discussed prior to completion of the conversion refer to Nodak Mutual Insurance Company and all of its subsidiaries and Battle Creek Mutual Insurance Company;

•

“Nodak Mutual Group” refers to Nodak Mutual Group, Inc., which is the majority shareholder of NI Holdings;

•

the “conversion” refers to the series of transactions consummated on March 13, 2017 by which Nodak Mutual Insurance Company converted from a mutual insurance company to a stock insurance company, as Nodak Insurance Company, and became a wholly-owned subsidiary of NI Holdings, an intermediate stock holding company formed on the date of conversion;

•

“Nodak ~~Stock” refers to Nodak Insurance Company, the successor company to Nodak Mutual Insurance Company after the conversion;~~

•

~~“Nodak~~ Mutual” refers to Nodak Mutual Insurance Company, the predecessor company to Nodak ~~Stock~~Insurance Company prior to the conversion;

•

“Nodak Insurance” refers to Nodak ~~Stock~~Insurance Company or Nodak Mutual Insurance Company interchangeably;

•

“members” refers to the policyholders of Nodak Insurance, who are the named insureds under insurance policies issued by Nodak Insurance;

•

“Battle Creek” refers to Battle Creek Mutual Insurance Company. Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Battle Creek is controlled by Nodak Insurance as a result of an affiliation agreement between Battle Creek and Nodak Insurance, and is consolidated with Nodak Insurance for financial reporting purposes;

•

“Direct Auto” refers to Direct Auto Insurance Company. On August 31, 2018, NI Holdings completed the acquisition of 100% of the common stock of Direct Auto from the private shareholders of Direct Auto. Direct Auto became a consolidated subsidiary of NI Holdings on this date. Direct Auto is a property and casualty insurance company specializing in non-standard automobile insurance in the state of Illinois;

•

“American West” refers to American West Insurance Company. American West is a wholly-owned subsidiary of Nodak Insurance;

•

“Primero” refers to Primero Insurance Company. Primero is an indirect, wholly-owned subsidiary of Nodak Insurance;

•

“Westminster” refers to Westminster American Insurance Company. On January 1, 2020, NI Holdings completed the acquisition of 100% of the common stock of Westminster from the private shareholder of Westminster. The financial results of Westminster have been included in the Consolidated Financial Statements herein since January 1, 2020. Westminster is a property and casualty insurance company specializing in commercial multi-peril insurance in the Mid-Atlantic states; and

•

“Nodak Agency” refers to Nodak Agency, Inc. Nodak Agency is a wholly-owned subsidiary of Nodak Insurance.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements, which can be identified by the use of such words as “estimate”, “project”, “believe”, “could”, “may”, “intend”, “anticipate”, “plan”, “seek”, “expect” and similar expressions. These forward-looking statements include:

•

statements of goals, intentions, and expectations;

•

statements regarding prospects and business strategy; and

•

estimates of future costs, benefits, and results.

Table of Contents

•

~~estimates of future costs, benefits, and results.~~

The forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, among other things, the factors discussed under the heading “Risk Factors” in this Quarterly Report and our Annual Report on Form 10-K (“2020 Annual Report”) that could affect the actual outcome of future events.

All of these factors are difficult to predict and many are beyond our control. These important factors include those discussed under “Risk Factors” and those listed below:

•

material changes to the federal crop insurance program;

•

future economic conditions in the markets in which we compete that are less favorable than expected;

•

the effect of legislative, judicial, economic, demographic, and regulatory events in the jurisdictions where we do business;

•

our ability to enter new markets successfully and capitalize on growth opportunities either through acquisitions or the expansion of our producer network;

•

our ability to successfully integrate acquired businesses;

•

financial market conditions, including, but not limited to, changes in interest rates and the stock markets causing a reduction of investment income or investment gains and a reduction in the value of our investment portfolio;

•

heightened competition, including specifically the intensification of price competition, the entry of new competitors, and the development of new products by new or existing competitors, resulting in a reduction in the demand for our products;

•

changes in general economic conditions, including inflation, unemployment, interest rates, and other factors;

•

the impact of national or global events, including pandemics, military conflicts, and other wide-spread events;

•

estimates and adequacy of loss reserves and trends in loss and loss adjustment expenses;

•

changes in the coverage terms required by state laws with respect to minimum auto liability insurance, including higher minimum limits;

•

our inability to obtain regulatory approval of, or to implement, premium rate increases;

•

our ability to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us and to collect amounts that we believe we are entitled to under such reinsurance;

•

the potential impact on our reported net income that could result from the adoption of future accounting standards issued by the Securities and Exchange Commission, the Financial Accounting Standards Board, or other standard-setting bodies;

•

unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations;

•

the potential impact of fraud, operational errors, systems malfunctions, or cybersecurity incidents;

•

adverse litigation or arbitration results; and

•

adverse changes in applicable laws, regulations or rules governing insurance holding companies and insurance companies, and tax or accounting matters including limitations on premium levels, increases in minimum capital and reserves, and other financial viability requirements, and changes that affect the cost of, or demand for our products.

Because forward-looking information is subject to various risks and uncertainties, actual results may differ materially from that expressed or implied by the forward-looking information.

Table of Contents

PART I. - FINANCIAL INFORMATION

Item 1. - Financial Statements

NI Holdings, Inc.

~~Unaudited~~ Consolidated Balance Sheets

(dollar amounts in thousands, except par value)

							June 30, 2021			December 31, 2020
	March 31, 2021			December 31, 2020			(Unaudited)
Assets:
Cash and cash equivalents	$	52,683		$	101,077		$	61,223		$	101,077
Fixed income securities, at fair value		361,330			320,410			369,738			320,410
Equity securities, at fair value		79,363			69,952			78,368			69,952
Other investments		2,089			2,924			2,071			2,924
Total cash and investments		495,465			494,363			511,400			494,363

Premiums and agents' balances receivable		49,325			48,523			84,463			48,523
Deferred policy acquisition costs		26,575			23,968			29,657			23,968
Reinsurance premiums receivable		0-			93			0-			93
Reinsurance recoverables on losses		9,270			8,710			24,574			8,710
Income tax recoverable								2,549			0-
Accrued investment income		2,281			2,141			2,476			2,141
Property and equipment		9,843			9,899			9,971			9,899
Receivable from Federal Crop Insurance Corporation		5,182			6,646			17,191			6,646
Goodwill and other intangibles		18,076			18,194			17,958			18,194
Other assets		5,368			5,066			8,186			5,066
Total assets	$	621,385		$	617,603		$	708,425		$	617,603

Liabilities:
Unpaid losses and loss adjustment expenses	$	111,522		$	105,750		$	152,340		$	105,750
Unearned premiums		123,458			119,363			161,592			119,363
Reinsurance premiums payable		700			0-			2,646			0-
Income tax payable		1,917			754			0-			754
Deferred income taxes		7,851			8,757			8,046			8,757
Westminster consideration payable		12,720			19,287			12,820			19,287
Accrued expenses and other liabilities		10,627			14,820			20,042			14,820
Total liabilities		268,795			268,731			357,486			268,731

Commitments and contingencies		0-			0-			-			-

Shareholders’ equity:
Common stock, $0.01 par value, authorized: 25,000,000 shares; issued: 23,000,000 shares; and outstanding: 2021 – 21,372,772 shares, 2020 – 21,318,638 shares		230			230
Common stock, $0.01 par value, authorized: 25,000,000 shares; issued: 23,000,000 shares; and outstanding: 2021 – 21,302,167 shares, 2020 – 21,318,638 shares								230			230
Preferred stock, without par value, authorized 5,000,000 shares, 0 shares issued or outstanding		0-			0-			0-			0-
Additional paid-in capital		96,511			97,911			96,729			97,911
Unearned employee stock ownership plan shares		(1,427	)		(1,427	)		(1,427	)		(1,427	)
Retained earnings		268,444			258,741			265,816			258,741
Accumulated other comprehensive income, net of income taxes		7,417			12,840			9,556			12,840
Treasury stock, at cost, 2021 – 1,484,488 shares, 2020 – 1,538,622 shares		(23,012	)		(23,968	)
Treasury stock, at cost, 2021 – 1,555,093 shares, 2020 – 1,538,622 shares								(24,403	)		(23,968	)
Non-controlling interest		4,427			4,545			4,438			4,545
Total shareholders’ equity		352,590			348,872			350,939			348,872

Total liabilities and shareholders’ equity	$	621,385		$	617,603		$	708,425		$	617,603

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended					Three Months Ended					Six Months Ended
	March 31,					June 30,					June 30,
	2021		2020			2021			2020		2021		2020
Revenues:
Net premiums earned	$	63,135	$	58,772		$	76,281		$	82,006	$	139,416	$	140,778
Fee and other income		317		362			520			446		837		808
Net investment income		1,536		1,971			1,710			2,018		3,246		3,989
Net capital gain (loss) on investments		5,811		(14,919	)		4,701			11,197		10,512		(3,722	)
Total revenues		70,799		46,186			83,212			95,667		154,011		141,853

Expenses:
Losses and loss adjustment expenses		36,889		30,422			62,918			52,364		99,807		82,786
Amortization of deferred policy acquisition costs		13,587		9,387			19,886			14,829		33,473		24,216
Other underwriting and general expenses		7,651		10,772			3,703			4,796		11,354		15,568
Total expenses		58,127		50,581			86,507			71,989		144,634		122,570

Income (loss) before income taxes		12,672		(4,395	)		(3,295	)		23,678		9,377		19,283
Income tax expense (benefit)		2,890		(840	)		(561	)		4,911		2,329		4,071
Net income (loss)		9,782		(3,555	)		(2,734	)		18,767		7,048		15,212
Net income attributable to non-controlling interest		113		32
Net income (loss) attributable to non-controlling interest							(90	)		34		23		66
Net income (loss) attributable to NI Holdings, Inc.	$	9,669	$	(3,587	)	$	(2,644	)	$	18,733	$	7,025	$	15,146


Earnings (loss) per common share:
Basic	$	0.45	$	(0.16	)	$	(0.12	)	$	0.86	$	0.33	$	0.69
Diluted	$	0.45	$	(0.16	)	$	(0.12	)	$	0.85	$	0.32	$	0.68

Share data:
Weighted average common shares outstanding used in basic per common share calculations		21,462,641		22,218,073			21,464,840			21,886,930		21,463,747		22,052,501
Plus: Dilutive securities		236,358		0-			0-			138,293		224,312		129,772
Weighted average common shares used in diluted per common share calculations		21,698,999		22,218,073			21,464,840			22,025,223		21,688,059		22,182,273

The accompanying notes are an integral part of these consolidated financial statements.

Three Months Ended March 31, 2021
Three Months Ended March 31, 2020
Attributable
to NI
Holdings, Inc.
Attributable
to Non-
Controlling Interest
Total
Attributable
to NI
Holdings, Inc.
Attributable
to Non-
Controlling Interest
Total
Net income (loss)
$
9,669

$
113
$
9,782

$
(3,587
)
$
32
$
(3,555
)

Other comprehensive loss, before income taxes:
Holding losses on investments
(6,763
)
(293
)
(7,056
)
(4,456
)
(86
)
(4,542
)
Reclassification adjustment for net realized capital gain included in net income (loss)
(101
)
0-

(101
)
(57
)
(5
)
(62
)
Other comprehensive loss, before income taxes
(6,864
)
(293
)
(7,157
)
(4,513
)
(91
)
(4,604
)
Income tax benefit related to items of other comprehensive loss
1,441
62
1,503
948
19
967
Other comprehensive loss, net of income taxes
(5,423
)
(231
)
(5,654
)
(3,565
)
(72
)
(3,637
)

Comprehensive income (loss)
$
4,246

$
(118
)
$
4,128

$
(7,152
)
$
(40
)
$
(7,192
)

	Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
	Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total			Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total
Net income (loss)	$	(2,644	)	$	(90	)	$	(2,734	)	$	7,025		$	23		$	7,048

Other comprehensive income (loss), before income taxes:
Holding gains (losses) on investments		3,032			128			3,160			(3,731	)		(165	)		(3,896	)
Reclassification adjustment for net realized capital gain included in net income (loss)		(325	)		0-			(325	)		(426	)		0-			(426	)
Other comprehensive income (loss), before income taxes		2,707			128			2,835			(4,157	)		(165	)		(4,322	)
Income tax benefit (expense) related to items of other comprehensive income (loss)		(568	)		(27	)		(595	)		873			35			908
Other comprehensive income (loss), net of income taxes		2,139			101			2,240			(3,284	)		(130	)		(3,414	)

Comprehensive income (loss)	$	(505	)	$	11		$	(494	)	$	3,741		$	(107	)	$	3,634

	Three Months Ended June 30, 2020									Six Months Ended June 30, 2020
	Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total			Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total
Net income	$	18,733		$	34		$	18,767		$	15,146		$	66		$	15,212

Other comprehensive income, before income taxes:
Holding gains on investments		11,269			194			11,463			6,813			108			6,921
Reclassification adjustment for net realized capital gain included in net income		(88	)		(5	)		(93	)		(145	)		(10	)		(155	)
Other comprehensive income, before income taxes		11,181			189			11,370			6,668			98			6,766
Income tax expense related to items of other comprehensive income		(2,348	)		(40	)		(2,388	)		(1,400	)		(21	)		(1,421	)
Other comprehensive income, net of income taxes		8,833			149			8,982			5,268			77			5,345

Comprehensive income	$	27,566		$	183		$	27,749		$	20,414		$	143		$	20,557

The accompanying notes are an integral part of these consolidated financial statements.

Three Months Ended March 31, 2021
Common
Stock
Additional
Paid-in
Capital
Unearned
Employee
Stock
Ownership
Plan Shares
Retained
Earnings
Accumulated
Other
Comprehensive
Income, Net of
Income Taxes
Treasury
Stock
Non-Controlling
Interest
Total Shareholders’ Equity
Balance, January 1, 2021
$
230
$
97,911
$
(1,427
)
$
258,741
$
12,840
$
(23,968
)
$
4,545
$
348,872

Net income
-
-
-
9,669
-
-
113
9,782
Other comprehensive loss, net of income taxes
-
-
-
-
(5,423
)
-
(231
)
(5,654
)
Purchase of treasury stock
-
-
-
-
-
(596
)
-
(596
)
Share-based compensation
-
672
-
-
-
-
-
672
Issuance of vested award shares
-
(2,072
)
-
34

-
1,552
-
(486
)
Balance, March 31, 2021
$
230
$
96,511
$
(1,427
)
$
268,444
$
7,417
$
(23,012
)
$
4,427
$
352,590

Three Months Ended June 30, 2021
	Common Stock		Additional Paid-in Capital			Unearned Employee Stock Ownership Plan Shares			Retained Earnings			Accumulated Other Comprehensive Income, Net of Income Taxes		Treasury Stock			Non-Controlling Interest			Total Shareholders’ Equity
Balance, April 1, 2021	$	230	$	96,511		$	(1,427)		$	268,444		$	7,417	$	(23,012)		$	4,427		$	352,590

Net loss		-		-			-			(2,644	)		-		-			(90	)		(2,734	)
Other comprehensive income, net of income taxes		-		-			-			-			2,139		-			101			2,240
Purchase of treasury stock		-		-			-			-			-		(1,671	)		-			(1,671)
Share-based compensation		-		516			-			-			-		-			-			516
Issuance of vested award shares		-		(298	)		-			16			-		280			-			(2	)
Balance, June 30, 2021	$	230	$	96,729		$	(1,427	)	$	265,816		$	9,556	$	(24,403	)	$	4,438		$	350,939

Three Months Ended March 31, 2020
Common
Stock
Additional
Paid-in
Capital
Unearned
Employee
Stock
Ownership
Plan Shares
Retained
Earnings
Accumulated
Other
Comprehensive
Income, Net of
Income Taxes
Treasury
Stock
Non-Controlling
Interest
Total Shareholders’ Equity
Balance, January 1, 2020
$
230
$
95,961
$
(1,671
)
$
218,480
$
5,612
$
(12,308
)
$
3,499
$
309,803

Net income (loss)
-
-
-
(3,587
)
-
-
32
(3,555
)
Other comprehensive loss, net of income taxes
-
-
-
-
(3,565
)
-
(72
)
(3,637
)
Purchase of treasury stock
-
-
-
-
-
(1,502
)
-
(1,502
)
Share-based compensation
-
713
-
-
-
-
-
713
Issuance of vested award shares
-
(300
)
-
(82
)
-
351
-
(31
)
Balance, March 31, 2020
$
230
$
96,374
$
(1,671
)
$
214,811
$
2,047
$
(13,459
)
$
3,459
$
301,791

Six Months Ended June 30, 2021
	Common Stock		Additional Paid-in Capital			Unearned Employee Stock Ownership Plan Shares			Retained Earnings		Accumulated Other Comprehensive Income, Net of Income Taxes			Treasury Stock			Non-Controlling Interest			Total Shareholders’ Equity
Balance, January 1, 2021	$	230	$	97,911		$	(1,427)		$	258,741	$	12,840		$	(23,968)		$	4,545		$	348,872

Net income		-		-			-			7,025		-			-			23			7,048
Other comprehensive loss, net of income taxes		-		-			-			-		(3,284	)		-			(130	)		(3,414	)
Purchase of treasury stock		-		-			-			-		-			(2,267	)		-			(2,267	)
Share-based compensation		-		1,188			-			-		-			-			-			1,188
Issuance of vested award shares		-		(2,370	)		-			50		-			1,832			-			(488	)
Balance, June 30, 2021	$	230	$	96,729		$	(1,427	)	$	265,816	$	9,556		$	(24,403	)	$	4,438		$	350,939

The accompanying notes are an integral part of these consolidated financial statements.

Unaudited Consolidated Statements of ~~Cash Flows~~Changes in Shareholders’ Equity

Three Months Ended March 31,
2021
2020
Cash flows from operating activities:
Net income (loss)
$
9,782

$
(3,555
)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Net capital (gain) loss on investments
(5,811
)
14,919
Deferred income tax expense (benefit)
597

(2,708
)
Depreciation of property and equipment
170
187
Amortization of intangibles
118
1,882
Share-based compensation
672
713
Amortization of deferred policy acquisition costs
13,587
9,387
Deferral of policy acquisition costs
(16,194
)
(13,152
)
Net amortization of premiums and discounts on investments
482
282
Loss on sale of property and equipment
4
0-
Changes in operating assets and liabilities:
Premiums and agents’ balances receivable
(802
)
(3,085
)
Reinsurance premiums receivable / payable
793
181
Reinsurance recoverables on losses
(560
)
(3,259
)
Accrued investment income
(140
)
60
Receivable from Federal Crop Insurance Corporation
1,464
8,990
Income tax recoverable / payable
1,163

(1,034
)
Other assets
(302
)
72
Unpaid losses and loss adjustment expenses
5,772

(4,418
)
Unearned premiums
4,095
523
Accrued expenses and other liabilities
(4,096
)
(2,369
)
Net cash flows from operating activities
10,794
3,616

Cash flows from investing activities:
Proceeds from maturities and sales of fixed income securities
13,079
19,872
Proceeds from sales of equity securities
8,246
6,016
Purchases of fixed income securities
(61,536
)
(27,016
)
Purchases of equity securities
(11,946
)
(5,503
)
Purchases of property and equipment
(117
)
(310
)
Acquisition of Westminster American Insurance Company (cash consideration paid net of cash and cash equivalents acquired)
0-

(703
)
Proceeds from sale of other investments and other
835
66
Net cash flows from investing activities
(51,439
)
(7,578
)

Cash flows from financing activities:
Purchases of treasury stock
(596
)
(1,502
)
Installment payment on Westminster consideration payable
(6,667
)
0-

Issuance of restricted stock awards
(486
)
(31
)
Net cash flows from financing activities
(7,749
)
(1,533
)

Net decrease in cash and cash equivalents
(48,394
)
(5,495
)

Cash and cash equivalents at beginning of period
101,077
62,132

Cash and cash equivalents at end of period
$
52,683
$
56,637

Non-cash item: Present value of installment payable issued in connection with acquisition of Westminster American Insurance Company
$
0-
$
18,787

Federal and state income taxes paid
$
1,130
$
2,900

Three Months Ended June 30, 2020
	Common Stock		Additional Paid-in Capital			Unearned Employee Stock Ownership Plan Shares			Retained Earnings			Accumulated Other Comprehensive Income, Net of Income Taxes		Treasury Stock			Non-Controlling Interest		Total Shareholders’ Equity
Balance, April 1, 2020	$	230	$	96,374		$	(1,671	)	$	214,811		$	2,047	$	(13,459	)	$	3,459	$	301,791

Net income		-		-			-			18,733			-		-			34		18,767
Other comprehensive income, net of income taxes		-		-			-			-			8,833		-			149		8,982
Purchase of treasury stock		-		-			-			-			-		(5,281	)		-		(5,281)
Share-based compensation		-		464			-			-			-		-			-		464
Issuance of vested award shares		-		(177	)		-			(46	)		-		223			-		-
Balance, June 30, 2020	$	230	$	96,661		$	(1,671	)	$	233,498		$	10,880	$	(18,517	)	$	3,642	$	324,723

Six Months Ended June 30, 2020
	Common Stock		Additional Paid-in Capital			Unearned Employee Stock Ownership Plan Shares			Retained Earnings			Accumulated Other Comprehensive Income, Net of Income Taxes		Treasury Stock			Non-Controlling Interest		Total Shareholders’ Equity
Balance, January 1, 2020	$	230	$	95,961		$	(1,671	)	$	218,480		$	5,612	$	(12,308	)	$	3,499	$	309,803

Net income		-		-			-			15,146			-		-			66		15,212
Other comprehensive income, net of income taxes		-		-			-			-			5,268		-			77		5,345
Purchase of treasury stock		-		-			-			-			-		(6,783	)		-		(6,783	)
Share-based compensation		-		1,177			-			-			-		-			-		1,177
Issuance of vested award shares		-		(477	)		-			(128	)		-		574			-		(31	)
Balance, June 30, 2020	$	230	$	96,661		$	(1,671	)	$	233,498		$	10,880	$	(18,517	)	$	3,642	$	324,723

The accompanying notes are an integral part of these consolidated financial statements.

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income	$	7,048		$	15,212
Adjustments to reconcile net income to net cash flows from operating activities:
Net capital (gain) loss on investments		(10,512	)		3,722
Deferred income tax expense (benefit)		197			(972	)
Depreciation of property and equipment		341			365
Amortization of intangibles		236			3,711
Share-based compensation		1,188			1,177
Amortization of deferred policy acquisition costs		33,473			24,216
Deferral of policy acquisition costs		(39,162	)		(33,021	)
Net amortization of premiums and discounts on investments		1,024			557
Loss on sale of property and equipment		4			8
Changes in operating assets and liabilities:
Premiums and agents’ balances receivable		(35,940	)		(43,138	)
Reinsurance premiums receivable / payable		2,739			(2,269	)
Reinsurance recoverables on losses		(15,864	)		(4,203	)
Accrued investment income		(335	)		(90	)
Receivable from Federal Crop Insurance Corporation		(10,545	)		1,936
Income tax recoverable / payable		(3,303	)		2,142
Other assets		(3,120	)		119
Unpaid losses and loss adjustment expenses		46,590			14,196
Unearned premiums		42,229			31,325
Accrued expenses and other liabilities		5,420			6,810
Net cash flows from operating activities		21,708			21,803

Cash flows from investing activities:
Proceeds from maturities and sales of fixed income securities		35,483			45,539
Proceeds from sales of equity securities		17,247			9,429
Purchases of fixed income securities		(89,729	)		(51,944	)
Purchases of equity securities		(15,559	)		(11,207	)
Purchases of property and equipment		(417	)		(443	)
Acquisition of Westminster American Insurance Company (cash consideration paid net of cash and cash equivalents acquired)		0-			(703	)
Proceeds from sale of other investments and other		835			66
Net cash flows from investing activities		(52,140	)		(9,263	)

Cash flows from financing activities:
Purchases of treasury stock		(2,267	)		(6,783	)
Installment payment on Westminster consideration payable		(6,667	)		0-
Issuance of restricted stock awards		(488	)		(31	)
Net cash flows from financing activities		(9,422	)		(6,814	)

Net (decrease) increase in cash and cash equivalents		(39,854	)		5,726

Cash and cash equivalents at beginning of period		101,077			62,132

Cash and cash equivalents at end of period	$	61,223		$	67,858


Non-cash item: Present value of installment payable issued in connection with acquisition of Westminster American Insurance Company	$	0-		$	18,787

Federal and state income taxes paid	$	5,435		$	2,900

The accompanying notes are an integral part of these consolidated financial statements.

NI Holdings, Inc. (“NI Holdings”) is a North Dakota business corporation that is the stock holding company of Nodak Insurance Company and became such in connection with the conversion of Nodak Mutual Insurance Company from a mutual to stock form of organization and the creation of a mutual holding company. The conversion was consummated on March 13, 2017. Immediately following the conversion, all of the outstanding shares of common stock of Nodak Insurance Company (the successor to Nodak Mutual Insurance Company) were issued to Nodak Mutual Group, Inc., which then contributed the shares to NI Holdings in exchange for 55% of the outstanding shares of common stock of NI Holdings. Nodak Insurance Company then became a wholly-owned stock subsidiary of NI Holdings. Prior to completion of the conversion, NI Holdings conducted no business and had no assets or liabilities. As a result of the conversion, NI Holdings became the holding company for Nodak Insurance Company and its existing subsidiaries. The newly issued shares of NI Holdings were available for public trading on March 16, 2017.

These Consolidated Financial Statements of NI Holdings include the financial position and results of NI Holdings and seven other entities:

Nodak Insurance Company (“Nodak Insurance”, formerly Nodak Mutual Insurance Company prior to the conversion);

Battle Creek Mutual Insurance Company (“Battle Creek”, an affiliated company with Nodak Insurance);

Nodak Insurance is the largest domestic property and casualty insurance company in North Dakota. Nodak Insurance was incorporated on April 15, 1946 under the laws of North Dakota, and benefits from a strong marketing affiliation with the North Dakota Farm Bureau (“NDFB”). Nodak Insurance specializes in providing private passenger auto, homeowners, farmowners, commercial multi-peril, crop hail, and Federal multi-peril crop insurance coverages.

Nodak Agency, a wholly-owned subsidiary of Nodak Insurance, is an inactive shell corporation.

American West, a wholly-owned subsidiary of Nodak Insurance, is a property and casualty insurance company licensed in eight states in the Midwest and Western regions of the United States. American West began writing policies in 2002 and primarily writes personal auto, homeowners, and farm coverages in South Dakota. American West also writes personal auto coverage in North Dakota, as well as crop hail and Federal multi-peril crop insurance coverages in Minnesota and South Dakota.

Primero is a wholly-owned subsidiary of Tri-State, Ltd. Tri-State, Ltd. is an inactive shell corporation 100% owned by Nodak Insurance. Primero is a property and casualty insurance company writing non-standard automobile coverage in the states of Nevada, Arizona, North Dakota and South Dakota.

Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek. Battle Creek is controlled by Nodak Insurance via a surplus note. The terms of the surplus note allow Nodak Insurance to appoint two-thirds of the Battle Creek Board of Directors. Battle Creek is a property and casualty insurance company writing personal auto, homeowners, and farm coverages solely in the state of Nebraska.

Direct Auto, a wholly-owned subsidiary of NI Holdings, is a property and casualty company licensed in Illinois. Direct Auto began writing non-standard automobile coverage in 2007, and was acquired by NI Holdings on August 31, 2018 via a stock purchase agreement.

Westminster, a wholly-owned subsidiary of NI Holdings, is a property and casualty insurance company licensed in seventeen states and the District of Columbia. Westminster is headquartered in Owings Mills, Maryland and underwrites commercial multi-peril ~~commercial~~ insurance in the states of Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia, and the District of Columbia. Westminster was acquired by NI Holdings on January 1, 2020 via a stock purchase agreement. The financial results of Westminster have been included in the Consolidated Financial Statements herein since January 1, 2020. See Note 4.3.

The same executive management team provides oversight and strategic direction for the entire organization. Nodak Insurance provides common product oversight, pricing practices, and underwriting standards, as well as underwriting and claims administration, to itself, American West, and Battle Creek. Primero, Direct Auto, and Westminster personnel manage the day-to-day operations of their respective companies. The insurance companies share a combined business plan to achieve market penetration and underwriting profitability objectives. Distinctions within the products of the insurance companies generally relate to the states in which the risk is located and specific risk profiles targeted within similar classes of business.

The accompanying ~~Unaudited~~ Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation ~~S-X. Accordingly, they do not include all of the information~~S-X and ~~footnotes required by GAAP for complete financial statements.~~are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. ~~Operating results for the interim period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021.~~All material intercompany transactions and balances have been eliminated. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2020 (“2020 Annual Report”).

The preparation of the interim Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim Consolidated Financial Statements and the reported amounts of revenues, claims, and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the interim period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021.

Our Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries, as well as Battle Creek, an entity we control via contract. ~~We have eliminated all significant inter-company accounts and transactions in consolidation.~~ The terms “we”, “us”, “our”, or “the Company” as used herein refer to the consolidated entity.

~~Notes~~our results of operations, financial condition, and liquidity. The accounting policies and estimation process described in the 2020 Annual Report were consistently applied to the Unaudited Consolidated Financial Statements

In preparing our Consolidated Financial Statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet and revenues and expenses for the ~~periods then ended. Actual results could differ significantly from those estimates.~~

We make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our Consolidated Financial Statements. The most significant estimates relate to our reserves for unpaid losses and loss adjustment expenses, earned premiums for crop insurance, valuation of investments, determination of other-than-temporary impairments, valuation allowances for deferred income tax assets, deferred policy acquisition costs, and the valuations used to establish intangible assets acquired related to business combinations. While we believe our estimates are appropriate, the ultimate amounts may differ from the estimates provided. We regularly review our methods for making these estimates as well as the continuing appropriateness of the estimated amounts, and we reflect any adjustment we consider necessary in our current results of operations.

~~Any company deemed to be a variable interest entity (“VIE”) is required to be consolidated by the primary beneficiary of the VIE.~~

We assess our investments in other entities at inception to determine if any meet the qualifications of a VIE. We consider an investment in another company to be a VIE if (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or the rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events, we would reassess our initial determination of whether the investment is a VIE.

We evaluate whether we are the primary beneficiary of each VIE and we consolidate the VIE if we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity. We consider the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights, and board representation of the respective parties in determining whether we qualify as the primary beneficiary. Our assessment of whether we are the primary beneficiary of a VIE is performed at least annually.

We control Battle Creek via a surplus note which provides us with the ability to appoint two-thirds of the Board of Directors of Battle Creek. Under the quota share reinsurance agreement that existed through December 31, 2019, Battle Creek’s operating results included only net investment income, bad debt expense, and income taxes. Effective January 1, 2020, the Company implemented an intercompany pooling reinsurance agreement, and Battle Creek’s operating results now include their participation in the underwriting results of the pool (2% during 2020 and 2021). See Note 13. Because we have concluded that we control Battle Creek, we consolidate the financial statements of Battle Creek, and Battle Creek’s policyholders’ interest in Battle Creek is reflected as a non-controlling interest in shareholders’ equity in our Consolidated Balance Sheet.

~~Cash and cash equivalents include certain investments in highly liquid debt instruments with original maturities of three months or less. Cost approximates fair value for these short-term investments.~~

We have categorized our investment portfolio as “available-for-sale” and have reported the portfolio at fair value. Unrealized gains and losses on fixed income securities, net of income taxes, are reported in accumulated other comprehensive income. Changes in unrealized gains and losses on equity securities are reported as a component of net capital gain on investments in our operating results.

~~Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair~~

value is estimated using quoted market prices for similar securities. Amortization of premium and accretion of discount are computed using an effective interest method. Net investment income includes interest and dividend income together with amortization of purchase premiums and discounts, and is net of investment management and custody fees. Realized gains and losses on investments are determined using the specific identification method and are included in net capital gain (loss) on investments, along with the change in unrealized gains and losses on equity securities.

We review our investments each quarter to determine whether a decline in fair value below the amortized cost basis is other than temporary. Accordingly, we assess whether we intend to sell or it is more likely than not that we will be required to sell a security before recovery of its amortized cost basis. For fixed income securities that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows discounted at the security’s effective yield. The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and, therefore, is not required to be recognized as losses in the Consolidated Statement of Operations, but is recognized in other comprehensive income (loss).

We classify each fair value measurement at the appropriate level in the fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted market price in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements). An asset’s or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its valuation.

~~Level I – Quoted price in active markets for identical assets and liabilities.~~

Level II – Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level II inputs include quoted prices for similar assets or liabilities other than quoted in prices in Level I, quoted prices in markets that are not active, or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level III – Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions that market participants would use in pricing the asset or liability. Level III assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Our other financial instruments, aside from investments, are cash and cash equivalents, premiums and agents’ balances receivable, and accrued expenses and accounts payable. The carrying amounts for cash and cash equivalents, premiums and agents’ balances receivable, and accrued expenses and accounts payable approximate their fair value based on their short-term nature. Other invested assets that do not have observable inputs and little or no market activity are carried on a cost basis, which is not materially different from fair value. All other invested assets have been assessed for impairment.

~~We record premiums written at policy inception and recognize them as revenue on a pro rata basis over the policy term or, in the case of crop insurance, over the~~six month period of risk. The portion of premiums that could be earned in the future is deferred and reported as unearned premiums. When policies lapse, the Company reverses the unearned portion of the written premium and removes the applicable unearned premium. Policy-related fee income is recognized when collected.

The period of risk for our crop insurance program, which is comprised primarily of spring-planted crops, typically runs from April 1 (the approximate time when farmers can begin to work their fields) through December 15 (last date claims can be made for the most recent planting season). The crop insurance program provides indemnification for acreage that cannot be planted because of flood, drought, or other natural disaster (known as “prevented planting”). In cases where a valid prevented planting claim is made by an insured, the Company assumes that the risk period has ended ~~as there will be no additional coverage under the policy, and the Company will immediately recognize the remaining unearned premium.~~

The Company uses the direct write-off method for recognizing bad debts. Accounts billed directly to the policyholder are provided grace payment and cancellation notice periods per state insurance regulations. Any earned but uncollected premiums are written off within 90 days after the effective date of policy cancellation.

Direct Auto also provides for agency billing for a portion of their agents. Accounts billed to agents are due within 60 days of the statement date. The balances are carried as agents’ balances receivable until it is determined the amount is not collectible from the agent. At that time, the balance is written off as uncollectible. The agent is responsible for all past due balances. As part of its agent appointment, Direct Auto requires a personal guarantee for all balances due to Direct Auto from the principal of the contracted agency.

We defer our policy acquisition costs, consisting primarily of commissions, state premium taxes and certain other underwriting costs, reduced by ceding commissions, which vary with and relate directly to the production of business. We amortize these deferred policy acquisition costs over the period in which we earn the premiums. The method we follow in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value, which gives effect to the premium to be earned, related investment income, losses and loss adjustment expenses, and certain other costs we expect to incur as we earn the premium.

~~We report property and equipment at cost less accumulated depreciation. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets.~~

Liabilities for unpaid losses and loss adjustment expenses are estimates at a given point in time of the amounts we expect to pay with respect to policyholder claims based on facts and circumstances then known. At the time of establishing our estimates, we recognize that our ultimate liability for losses and loss adjustment expenses will exceed or be less than such estimates. We base our estimates of liabilities for unpaid losses and loss adjustment expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability, and other factors. During the loss adjustment period, we may learn additional facts regarding certain claims, and, consequently, it often becomes necessary for us to refine and adjust our estimates of the liability. We reflect any adjustments to our liabilities for unpaid losses and loss adjustment expenses in our operating results in the period in which we determine the need for a change in the estimates.

We maintain liabilities for unpaid losses and loss adjustment expenses with respect to both reported and unreported claims. We establish these liabilities for the purpose of covering the ultimate costs of settling all losses, including investigation and litigation costs. We base the amount of our liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim, and the insurance policy provisions relating to the type of loss our policyholder incurred. We determine the amount of our liability for unreported losses and loss adjustment expenses on the basis of historical information by line of insurance. Inflation is not explicitly selected in the loss reserve analysis. However, historical inflation is embedded in the estimated loss development factors. We closely monitor our liabilities and update them periodically using new information on reported claims and a variety of statistical techniques. We do not discount our liabilities for unpaid losses and loss adjustment expenses.

Reserve estimates can change over time because of unexpected changes in assumptions related to our external environment and, to a lesser extent, assumptions as to our internal operations. Assumptions related to our external environment include the absence of significant changes in tort law and the legal environment which may impact liability exposure, the trends in judicial interpretations of insurance coverage and policy provisions, and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodologies, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business, and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent we determine that underlying factors impacting our assumptions have changed, we attempt to make appropriate adjustments for such changes in our reserves. Accordingly, our ultimate liability for unpaid losses and loss adjustment expenses will likely differ from the amount recorded.

With the exception of Battle Creek, which files a stand-alone federal income tax return, we currently file a consolidated federal income tax return which includes NI Holdings and its wholly-owned subsidiaries. Direct Auto and Westminster became part of the consolidated federal income tax return as of their acquisition dates.

Insurance companies typically pay state premium taxes rather than state income taxes. However, Direct Auto is subject to state income taxes in the state of Illinois, in addition to state premium taxes. Additionally, NI Holdings, on a stand-alone basis, pays state income taxes to the state of North Dakota for income or losses generated as a separate financial entity. While state premium taxes are included as a part of amortization of deferred policy acquisition costs, state income taxes are combined with federal income taxes within the financial reporting category labeled income tax expense (benefit).

The Company does not have any material uncertain tax positions. The Company’s policy is to recognize tax-related interest and penalties accrued related to unrecognized benefits as a component of income tax expense (benefit). The Company did not recognize any tax-related interest and penalties, nor did it have any tax-related interest or penalties accrued as of March 31, 2021 and December 31, 2020.

We account for deferred income taxes using the asset and liability method. The objective of the asset and liability method is to establish deferred income tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of our assets and liabilities at enacted tax rates expected to be in effect when we realize or settle such amounts.

We re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs, and record an offset for the net amount of the change as a component of income tax expense from continuing operations in the period of enactment. We also record any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards to be reflected as a component of income tax expense (benefit) from continuing operations.

~~The Company has elected to reclassify any tax effects stranded in accumulated other comprehensive income as a result of a change in income tax rates to retained earnings.~~

Earnings per share are computed by dividing net income available to common shareholders for the period by the weighted average number of common shares outstanding for the same period. Unearned shares related to the Company’s Employee Stock Ownership Plan are not considered outstanding until they are released and allocated to plan participants. Unearned shares related to the Company’s Restricted Stock Units and Performance Share Units are not considered outstanding until they are earned by award participants. See Notes 14 and 20.

Our primary investment objective is to earn competitive returns by investing in a diversified portfolio of securities. Our portfolio of fixed income securities and, to a lesser extent, short-term investments, is subject to credit risk. We define this risk as the potential loss in fair value resulting from adverse changes in the borrower’s ability to repay the debt. We manage this risk by performing an analysis of prospective investments and through regular reviews of our portfolio by our management team and investment advisors. We also limit the amount of our total investment portfolio that we invest in any one security.

Property and liability insurance coverages are marketed through captive agents in North Dakota and through independent insurance agencies located throughout all other operating areas. All business, except for the majority of Direct Auto’s business, is billed directly to the policyholders.

We maintain cash balances primarily at one bank, which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250. During the normal course of business, balances are maintained above the FDIC insurance limit. The Company maintains short-term investment balances in investment grade money market accounts that are insured by the Securities Investor Protection Corporation (“SIPC”) up to $ 500. On occasion, balances for these accounts are maintained in excess of the SIPC insurance limit.

The Company limits the maximum net loss that can arise from large risks or risks in concentrated areas of exposure by reinsuring (ceding) certain levels of risks to other insurers or reinsurers, either on an automatic basis under general reinsurance contracts knows as “treaties” or by negotiation on substantial individual risks. Ceded reinsurance is treated as the risk and liability of the assuming companies.

Reinsurance contracts do not relieve the Company from its obligations to policyholders. In the event that all or any of the reinsuring companies might be unable to meet their obligations under existing reinsurance agreements, the Company would be liable for such defaulted amounts.

Goodwill represents the excess of the purchase price over the underlying fair value of acquired entities. When completing acquisitions, we seek also to identify separately identifiable intangible assets that we have acquired. We assess goodwill and other intangibles with an indefinite useful life for impairment annually. We also assess goodwill and other intangibles for impairment upon the occurrence of certain events. In making our assessment, we consider a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and current market data. Inherent uncertainties exist with respect to these factors and to our judgment in applying them when we make our assessment. Impairment of goodwill and other intangibles could result from changes in economic and operating conditions in future periods. We did not record any impairments of goodwill or other intangibles during the three month periods ended March 31, 2021 and 2020.

Goodwill arising from the acquisition of Primero in 2014 represents the excess of the purchase price over the fair value of the net assets acquired. The purchase price in excess of the fair value of net assets acquired was negotiated at arms-length with an unrelated party and was based upon the strategic decision by Company management to expand both the geographic footprint and product lines of the Company. The nature of the business acquired was such that there were limited intangibles not reflected in the net assets acquired. The purchase price was paid with a combination of cash and cancellation of obligations owed to the acquired company by the sellers. The goodwill which arose from this transaction is included in the basis of the net assets acquired and is not deductible for income tax purposes.

Intangible assets arising from the acquisition of Direct Auto in 2018 represent the estimated fair values of certain intangible assets, including a favorable lease contract, a state insurance license, the value of the Direct Auto trade name, and the value of business acquired (“VOBA”). The state insurance license asset has an indefinite life, while the favorable lease contract, Direct Auto trade name, and VOBA assets will be amortized over eighteen months, five years, and twelve months, respectively, from the August 31, 2018 acquisition/valuation date.

Goodwill arising from the acquisition of Westminster in January 2020 represents the excess of the purchase price over the fair value of the net assets acquired. The purchase price in excess of the fair value of net assets acquired was negotiated at arms-length with an unrelated party and was based upon the strategic decision by Company management to expand both the geographic footprint and commercial business product line of the Company. Other intangible assets arising from the acquisition of Westminster represent the estimated fair values of certain intangible assets, including state insurance licenses, the value of Westminster’s distribution network, the value of the Westminster trade name, and the VOBA. The state insurance license asset has an indefinite life, while the distribution networks, Westminster trade name, and VOBA assets will be amortized over twenty years, ten years, and twelve months, respectively, from the January 1, 2020 acquisition/valuation date.

On January 1, 2020, the Company completed the acquisition of 100% of the common stock of Westminster from the private shareholder of Westminster, and Westminster became a consolidated subsidiary of the Company. Westminster is a property and casualty insurance company specializing in multi-peril commercial insurance in nine states and the District of Columbia.

Westminster remains headquartered in Owings Mills, Maryland, and continues to be led by its president and other key management in place at the time of the acquisition. The results of Westminster are included as part of the Company’s commercial business segment following the closing date.

We account for business acquisitions in accordance with the acquisition method of accounting, which requires, among other things, that most assets acquired, liabilities assumed, and contingent consideration be recognized at their fair values as of the acquisition date, which is the closing date for the Westminster transaction. During the measurement period, adjustments to provisional purchase price allocations are recognized if new information is obtained about the facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as it is determined that no more information is obtainable, but in no case shall the measurement period exceed one year from the acquisition date. The measurement period for the Westminster acquisition ended December 31, 2020.

~~The Company incurred acquisition-related costs of $828 and $83 during the years ended December 31, 2020, and 2019, respectively.~~

The Company paid $20,000 in cash consideration to the private shareholder of Westminster as of the closing date, with an additional $20,000 to be paid in 3 equal annual installments. The acquisition of Westminster did not include any contingent consideration other than a provision regarding future changes to federal income tax rates. The following table summarizes the consideration transferred to acquire Westminster and the amounts of identified assets acquired and liabilities assumed at the acquisition date:

The fair value of the assets acquired includes premiums and agents’ balances receivable of $8,507 and reinsurance recoverables on losses of $763. These are the gross amounts due from policyholders and reinsurers, respectively, none of which is anticipated to be uncollectible. The Company did not acquire any other material class of receivable as a result of the acquisition of Westminster.

The fair values of the acquired distribution network, state insurance licenses, Westminster trade name, and VOBA intangible assets were $6,700, $1,800, $500, and $4,750, respectively. The state insurance license intangible has an indefinite life, while the other intangible assets will be amortized over useful lives of up to twenty years. The goodwill is not deductible for income tax purposes.

~~The first installment of the additional consideration was paid during the first quarter of~~June 30, 2021.

As an emerging growth company, we have elected to use the extended transition period for complying with any new or revised financial accounting standards from the Financial Accounting Standards Board (“FASB”) pursuant to Section 13(a) of the Exchange Act. The following discussion includes effective dates for both public business entities and emerging growth companies, as well as whether specific guidance may be adopted early.

In January 2020, the Company adopted amended guidance from the FASB that shortened the amortization period of premiums on certain fixed income securities held at a premium to the earliest call date rather than through the maturity date of the callable security. The adoption of this guidance did not materially impact the Company’s financial position, results of operations, or cash flows.

In March 2020, the Company adopted modified disclosure requirements from the FASB relating to the fair value of assets and liabilities. The modifications primarily related to Level 3 fair value measurements. The Company does not currently carry any Level 3 assets or liabilities. As a result, there was no impact to the Company’s financial statement disclosures.

In February 2016, the FASB issued new guidance that requires lessees to recognize leases, including operating leases, on the lessee’s Consolidated Balance Sheet, unless a lease is considered a short-term lease. The new guidance also requires entities to make new judgments to identify leases. In July 2018, the FASB issued additional guidance to allow an optional transition method. An entity may apply the new leases guidance at the beginning of the earliest period presented in the financial statements, or at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The

new guidance, which replaces the current lease guidance, is effective for annual and interim reporting periods beginning after December 15, 2018 for public business entities. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted for all entities. We do not expect the adoption of this new guidance to have a significant impact on our financial position, results of operations, or cash flows. Upon adoption, the Company will recognize a right of use asset and operating lease liabilities on its Consolidated Balance Sheet. The cumulative adjustment to retained earnings is not expected to be significant.

In June 2016, the FASB issued a new standard that will require timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The guidance will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better form their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the guidance requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Finally, the guidance amends the accounting for credit losses on available-for-sale fixed income securities and purchased financial assets with credit deterioration. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,

2019 for filers with the Securities and Exchange Commission (“SEC”) excluding smaller reporting companies, and emerging growth companies that did not relinquish private company relief. For all other entities, this guidance is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted for all entities. Based on our evaluation, adoption of this new standard will not have a significant impact on our financial position, results of operations, and cash flows.

In December 2019, the FASB issued amended guidance to simplify the accounting for income taxes. The amended guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, for public business entities. For private companies and emerging growth companies, this amended guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted, including adoption in an interim period. We are evaluating the impact this new guidance will have on our financial position, results of operations, and cash flows.

On January 1, 2020, the Company completed the acquisition of 100% of the common stock of Westminster from the private shareholder of Westminster, and Westminster became a consolidated subsidiary of the Company. Westminster is a property and casualty insurance company specializing in commercial multi-peril insurance in nine states and the District of Columbia.

The Company incurred acquisition-related costs of $828 and $83 during the years ended December 31, 2020, and 2019, respectively.

The fair value of the assets acquired included premiums and agents’ balances receivable of $8,507 and reinsurance

recoverables on losses of $763. These are the gross amounts due from policyholders and reinsurers, respectively, none of which are anticipated to be uncollectible. The Company did not acquire any other material receivables as a result of the acquisition of Westminster.

The fair values of the acquired distribution network, state insurance licenses, Westminster trade name, and value of business acquired (“VOBA”) intangible assets were $6,700, $1,800, $500, and $4,750, respectively. The state insurance license intangible has an indefinite life, while the other intangible assets will be amortized over useful lives of up to twenty years. The goodwill is not deductible for income tax purposes.

The first installment of the additional consideration was paid during the first quarter of 2021.

The amortized cost and estimated fair value of fixed income securities as of ~~March 31,~~June 30, 2021 and December 31, 2020, were as follows:

The amortized cost and estimated fair value of fixed income securities by contractual maturity are shown below. Actual maturities could differ from contractual maturities because issuers of the securities may have the right to call or prepay certain obligations, which may or may not include call or prepayment penalties.

Fixed income securities with a fair value of ~~$7,852~~$8,059 at ~~March 31,~~June 30, 2021 and $6,093 at December 31, 2020, were deposited with various state regulatory agencies as required by law. The Company has not pledged any assets to secure any obligations.

The investment category and duration of the Company’s gross unrealized losses on fixed income securities were as follows:

	March 31, 2021															June 30, 2021
	Less than 12 Months					Greater than 12 months					Total					Less than 12 Months					Greater than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed income securities:
U.S. Government and agencies	$	3,177	$	(145	)	$	0-	$	0-		$	3,177	$	(145	)	$	2,758	$	(80	)	$	0-	$	0-		$	2,758	$	(80	)
Obligations of states and political subdivisions		8,498		(269	)		0-		0-			8,498		(269	)		8,264		(122	)		0-		0-			8,264		(122	)
Corporate securities		38,660		(1,341	)		1,481		(96	)		40,141		(1,437	)		33,910		(433	)		405		(8	)		34,315		(441	)
Residential mortgage-backed securities		14,466		(206	)		0-		0-			14,466		(206	)		11,289		(107	)		0-		0-			11,289		(107	)
Commercial mortgage-backed securities		4,575		(106	)		0-		0-			4,575		(106	)		2,140		(14	)		0-		0-			2,140		(14	)
Asset-backed securities		14,237		(177	)		1,486		(11	)		15,723		(188	)		13,220		(120	)		1,235		(11	)		14,455		(131	)
Total fixed income securities	$	83,613	$	(2,244	)	$	2,967	$	(107	)	$	86,580	$	(2,351	)	$	71,581	$	(876	)	$	1,640	$	(19	)	$	73,221	$	(895	)

	December 31, 2020
	Less than 12 Months					Greater than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed income securities:
U.S. Government and agencies	$	931	$	(6	)	$	0-	$	0-		$	931	$	(6	)
Obligations of states and political subdivisions		1,806		(35	)		0-		0-			1,806		(35	)
Corporate securities		3,215		(97	)		734		(50	)		3,949		(147	)
Residential mortgage-backed securities		68		(1	)		0-		0-			68		(1	)
Commercial mortgage-backed securities		1,103		(21	)		0-		0-			1,103		(21	)
Asset-backed securities		5,785		(31	)		4,188		(55	)		9,973		(86	)
Total fixed income securities	$	12,908	$	(191	)	$	4,922	$	(105	)	$	17,830	$	(296	)

Investments with unrealized losses are categorized with a duration of greater than 12 months when all positions of a security have continually been in a loss position for at least 12 months.

We frequently review our investment portfolio for declines in fair value. Our process for identifying declines in the fair value of investments that are other than temporary involves consideration of several factors. These factors include (i) the time period in which there has been a significant decline in value, (ii) an analysis of the liquidity, business prospects, and overall financial condition of the issuer, (iii) the significance of the decline, and (iv) our intent and ability to hold the investment for a sufficient period of time for the value to recover. When our analysis of the above factors results in the conclusion that declines in fair values are other than temporary, the ~~cost~~credit loss component of the ~~securities~~impairment is ~~written down to fair value and the previously unrealized loss is therefore~~ reflected in net income (loss) as a realized capital loss on ~~investment.~~

~~The~~investment if the Company ~~did~~does not ~~record~~intend to sell the security, and the remaining portion of the other-than-temporary loss is recognized in other comprehensive income (loss), net of income taxes. If the Company intends to sell the security, or determines that it is more likely than not that it will be required to sell the security prior to recovering its cost or amortized cost basis less any current-period credit losses, the full amount of the other-than-temporary ~~impairments during the three month periods ended March 31, 2021 and 2020.~~loss is recognized in net income (loss).

The Company did not record any other-than-temporary impairments during the three or six month periods ended June 30, 2021 and 2020.

As of ~~March 31,~~June 30, 2021, we held ~~167~~145 fixed income securities with unrealized losses. As of December 31, 2020, we held 67 fixed income securities with unrealized losses. In conjunction with our outside investment advisors, we analyzed the credit ratings of the securities as well as the historical monthly amortized cost to fair value ratio of securities in an unrealized loss position. This analysis yielded no fixed income securities which had fair values less than 80% of amortized cost for the preceding 12-month period.

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Gross realized gains:
Fixed income securities	$	110		$	85		$	331		$	392		$	441		$	477
Equity securities		3,915			1,515			2,605			735			6,520			2,250
Total gross realized gains		4,025			1,600			2,936			1,127			6,961			2,727

Gross realized losses, excluding other-than-temporary impairment losses:
Fixed income securities		(9	)		(23	)		(6	)		(300	)		(14	)		(323	)
Equity securities		(114	)		(562	)		(55	)		(457	)		(170	)		(1,019	)
Total gross realized losses, excluding other-than-temporary impairment losses		(123	)		(585	)		(61	)		(757	)		(184	)		(1,342	)

Net realized gain on investments		3,902			1,015			2,875			370			6,777			1,385

Change in net unrealized gain on equity securities		1,909			(15,934	)		1,826			10,827			3,735			(5,107	)
Net capital gain (loss) on investments	$	5,811		$	(14,919	)	$	4,701		$	11,197		$	10,512		$	(3,722	)

We maximize the use of observable inputs in our valuation techniques and apply unobservable inputs only to the extent that observable inputs are unavailable. The largest class of assets and liabilities carried at fair value by the Company at ~~March 31,~~June 30, 2021 and December 31, 2020 were fixed income securities.

Prices provided by independent pricing services and independent broker quotes can vary widely, even for the same security.

Our available-for-sale investments are comprised of a variety of different securities, which are classified into levels based on the valuation technique and inputs used in their valuation. The valuation of money market funds classified as cash equivalents and equity securities are generally based on Level I inputs, which use the market approach valuation technique. The valuation of fixed income securities generally incorporates significant Level II inputs using the market and income approach techniques. We may assign a lower level to inputs typically considered to be Level II based on our assessment of liquidity and relative level of uncertainty surrounding inputs. There were no assets or liabilities classified as Level III at ~~March 31,~~June 30, 2021 or December 31, 2020.

The following tables set forth our assets which are measured at fair value on a recurring basis by the level within the fair value hierarchy in which fair value measurements fall:

	March 31, 2021								June 30, 2021
	Total		Level I		Level II		Level III		Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	15,730	$	0-	$	15,730	$	0-	$	14,757	$	0-	$	14,757	$	0-
Obligations of states and political subdivisions		67,960		0-		67,960		0-		71,962		0-		71,962		0-
Corporate securities		156,942		0-		156,942		0-		160,768		0-		160,768		0-
Residential mortgage-backed securities		42,094		0-		42,094		0-		41,904		0-		41,904		0-
Commercial mortgage-backed securities		27,989		0-		27,989		0-		30,819		0-		30,819		0-
Asset-backed securities		50,615		0-		50,615		0-		49,528		0-		49,528		0-
Total fixed income securities		361,330		0-		361,330		0-		369,738		0-		369,738		0-

Equity securities:
Basic materials		1,607		1,607		0-		0-		1,066		1,066		0-		0-
Communications		8,757		8,757		0-		0-		8,033		8,033		0-		0-
Consumer, cyclical		11,125		11,125		0-		0-		11,047		11,047		0-		0-
Consumer, non-cyclical		16,045		16,045		0-		0-		16,298		16,298		0-		0-
Energy		2,015		2,015		0-		0-		2,089		2,089		0-		0-
Financial		6,737		6,737		0-		0-		6,841		6,841		0-		0-
Industrial		15,002		15,002		0-		0-		15,088		15,088		0-		0-
Technology		17,742		17,742		0-		0-		17,809		17,809		0-		0-
Utility		333		333				-		97		97
Total equity securities		79,363		79,363		0-		0-		78,368		78,368		0-		0-

Cash and cash equivalents		52,683		37,694		14,989		0-
Cash equivalents										42,197		42,197		0-		0-
Total assets at fair value	$	493,376	$	117,057	$	376,319	$	0-	$	490,303	$	120,565	$	369,738	$	0-

	December 31, 2020								December 31, 2020
	Total		Level I		Level II		Level III		Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	14,383	$	0-	$	14,383	$	0-	$	14,383	$	0-	$	14,383	$	0-
Obligations of states and political subdivisions		64,244		0-		64,244		0-		64,244		0-		64,244		0-
Corporate securities		128,434		0-		128,434		0-		128,434		0-		128,434		0-
Residential mortgage-backed securities		36,494		0-		36,494		0-		36,494		0-		36,494		0-
Commercial mortgage-backed securities		25,655		0-		25,655		0-		25,655		0-		25,655		0-
Asset-backed securities		51,200		0-		51,200		0-		51,200		0-		51,200		0-
Total fixed income securities		320,410		0-		320,410		0-		320,410		0-		320,410		0-

Equity securities:
Basic materials		1,285		1,285		0-		0-		1,285		1,285		0-		0-
Communications		7,455		7,455		0-		0-		7,455		7,455		0-		0-
Consumer, cyclical		9,929		9,929		0-		0-		9,929		9,929		0-		0-
Consumer, non-cyclical		14,633		14,633		0-		0-		14,633		14,633		0-		0-
Energy		1,499		1,499		0-		0-		1,499		1,499		0-		0-
Financial		6,235		6,235		0-		0-		6,235		6,235		0-		0-
Industrial		12,733		12,733		0-		0-		12,733		12,733		0-		0-
Technology		16,145		16,145		0-		0-		16,145		16,145		0-		0-
Utility		38		38		-		-		38		38
Total equity securities		69,952		69,952		0-		0-		69,952		69,952		0-		0-

Cash and cash equivalents		101,077		65,354		35,723		0-
Cash equivalents										65,354		65,354		0-		0-
Total assets at fair value	$	491,439	$	135,306	$	356,133	$	0-	$	455,716	$	135,306	$	320,410	$	0-

There were no liabilities measured at fair value on a recurring basis at ~~March 31,~~June 30, 2021 or December 31, 2020.

The Company will assume and cede certain premiums and losses to and from various companies and associations under various reinsurance agreements. The Company seeks to limit the maximum net loss that can arise from large risks or risks in concentrated areas of exposure through use of these agreements, either on an automatic basis under general reinsurance contracts known as treaties or by negotiation on substantial individual risks.

Reinsurance contracts do not relieve the Company from its obligation to policyholders. Additionally, failure of reinsurers to honor their obligations could result in significant losses to us. There can be no assurance that reinsurance will continue to be available to us at the same extent, and at the same cost, as it has in the past. The Company may choose in the future to reevaluate the use of reinsurance to increase or decrease the amounts of risk ceded to reinsurers.

As a group, during the ~~three~~six month period ended ~~March 31,~~June 30, 2021, the Company retained the first ~~$ 10,000~~$10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to ~~$ 117,000~~$117,000 in excess of its ~~$ 10,000~~$10,000 retained risk. During the year ended December 31, 2020, the Company retained the first $10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $97,000 in excess of its $10,000 retained risk.

The Company actively monitors and evaluates the financial condition of the reinsurers and develops estimates of the uncollectible amounts due from reinsurers. Such estimates are made based on periodic evaluation of balances due from reinsurers, judgments regarding reinsurers’ solvency, known disputes, reporting characteristics of the underlying reinsured business, historical experience, current economic conditions, and the state of reinsurer relations in general. Collection risk is mitigated from reinsurers by entering into reinsurance arrangements only with reinsurers that have strong credit ratings and statutory surplus above certain levels. The Company’s reinsurance recoverables on paid and unpaid losses were due from reinsurance companies with A.M. Best ratings of “A” or higher.

A reconciliation of direct to net premiums on both a written and an earned basis is as follows:

A reconciliation of direct to net losses and loss adjustment expenses is as follows:

If 100% of our ceded reinsurance was cancelled as of ~~March 31,~~June 30, 2021 or December 31, 2020, no ceded commissions would need to be returned to the reinsurers. Reinsurance contracts are typically effective from January 1 through December 31 each year.

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:

	Three Months Ended March 31,				Six Months Ended June 30,
	2021		2020		2021			2020
Balance at beginning of period:
Liability for unpaid losses and loss adjustment expenses	$	105,750	$	93,250	$	105,750		$	93,250
Reinsurance recoverables on losses		8,710		4,045		8,710			4,045
Net balance at beginning of period		97,040		89,205		97,040			89,205

Acquired unpaid losses and loss adjustment expenses related to:
Current year		0-		0-		0-			0-
Prior years		0-		8,568		0-			8,568
Total incurred		0-		8,568		0-			8,568

Incurred related to:
Current year		34,366		29,912		102,004			85,318
Prior years		2,523		510		(2,197	)		(2,532	)
Total incurred		36,889		30,422		99,807			82,786

Paid related to:
Current year		13,415		12,532		40,664			33,194
Prior years		18,262		26,330		28,417			40,362
Total paid		31,677		38,862		69,081			73,556

Balance at end of period:
Liability for unpaid losses and loss adjustment expenses		111,522		97,400		152,340			116,014
Reinsurance recoverables on losses		9,270		8,067		24,574			9,011
Net balance at end of period	$	102,252	$	89,333	$	127,766		$	107,003

During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company’s reported incurred losses and LAE included ~~$2,523~~$2,197 of net ~~unfavorable~~favorable development on prior accident years, compared to ~~$510~~$2,532 of net ~~unfavorable~~favorable development on prior accident years during the ~~three~~six months ended ~~March 31,~~June 30, 2020. Increases and decreases are generally the result of ongoing analysis of loss development trends. As additional information becomes known regarding individual claims, original estimates are increased or decreased accordingly.

Depreciation expense was ~~$170~~$171 and ~~$187~~$178 for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $341 and $365 for the six months ended June 30, 2021 and 2020, respectively.

The following table presents the carrying amount of the Company’s goodwill by segment:

The following table presents the carrying amount of the Company’s other intangible assets:

Amortization expense was $118 and ~~$1,882~~$1,829 for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $236 and $3,711 for the six months ended June 30, 2021 and 2020, respectively.

Other intangible assets that have finite lives, including trade names and distribution networks, are amortized over their useful lives. As of ~~March 31,~~June 30, 2021, the estimated amortization of other intangible assets with finite lives for the next five years in the period ended December 31, 2025, and thereafter is as follows:

Effective January 1, 2020, all of our insurance subsidiary and affiliate companies entered into an intercompany reinsurance pooling agreement. This agreement was finalized, approved, and implemented during the fourth quarter of 2020, retroactive to the January 1 effective date. Nodak Insurance is the lead company of the pool, and assumes the net premiums, net losses, and underwriting expenses from each of the other five companies. Nodak Insurance then retrocedes balances back to each company, while retaining its own share of the pool’s net underwriting results, based on individual pool percentages established in the respective pooling agreement. This arrangement allows each insurance company to rely upon the capacity of the pool’s total statutory capital and surplus. As a result, they are evaluated by A.M. Best on a group basis and hold a single combined financial strength rating, long-term issuer credit rating, and financial size category.

In connection with the pooling agreement, the quota share agreement between Battle Creek and Nodak Insurance was cancelled. As a result, the Company’s consolidated financial position and results of operations are impacted by the portion of Battle Creek’s underwriting results that are allocated to the policyholders of Battle Creek rather than the shareholders of NI Holdings.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021 and the year ended December 31, 2020, the pooling share percentages by insurance company subsidiary were:


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	%

We were organized by the NDFB to provide insurance protection for its members. We have a royalty agreement with the NDFB that recognizes the use of their trademark and provides royalties to the NDFB based on the premiums written on Nodak Insurance’s insurance policies. Royalties paid to the NDFB were ~~$337~~$395 and ~~$336~~$393 during the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $732 and $729 for the six months ended June 30, 2021 and 2020, respectively. Royalty amounts payable of ~~$125~~$144 and $113 were accrued as a liability to the NDFB at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

State insurance laws require our insurance subsidiaries to maintain certain minimum capital and surplus amounts on a statutory basis. Our insurance subsidiaries are subject to regulations that restrict the payment of dividends from statutory surplus and may require prior approval from their domiciliary insurance regulatory authorities. Our insurance subsidiaries are also subject to risk-based capital (“RBC”) requirements that may further affect their ability to pay dividends. Our insurance subsidiaries statutory capital and surplus at December 31, 2020 exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements, by a significant margin.

The amount available for payment of dividends from Nodak Insurance to NI Holdings during 2021 without the prior approval of the North Dakota Insurance Department is $21,628 based upon the ~~policyholders’~~ surplus of Nodak Insurance at December 31, 2020. Prior to its payment of any extraordinary dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if Nodak Insurance is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Nodak Insurance during the ~~three~~six months ended ~~March 31,~~June 30, 2021. The Board of Directors of Nodak Insurance declared and paid a $6,000 dividend to NI Holdings during the year ended December 31, 2020.

The amount available for payment of dividends from Direct Auto to NI Holdings during 2021 without the prior approval of the Illinois Department of Insurance is $3,582 based upon the ~~policyholders’~~ surplus of Direct Auto at December 31, 2020. Prior to its payment of any dividend, Direct Auto will be required to provide notice of the dividend to the Illinois Department of Insurance. This notice must be provided to the Illinois Department of Insurance within five business days following declaration of any dividend and no less than 30 days prior to the payment of an extraordinary dividend or 10 days prior to the payment of an ordinary dividend. The Illinois Department of Insurance has the power to limit or prohibit dividend payments if Direct Auto is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Direct Auto during the ~~three~~six months ended ~~March 31,~~June 30, 2021 or the year ended December 31, 2020.

The amount available for payment of dividends from Westminster to NI Holdings during 2021 without the prior approval of the Maryland Insurance Administration is $505 based upon the statutory net investment income of Westminster for the year ended December 31, 2020 and the three preceding years. Prior to its payment of any dividend, Westminster will be required to provide notice of the dividend to the Maryland Insurance Administration. This notice must be provided to the Maryland Insurance Administration within five business days following declaration of any dividend and no less than 30 days prior to the payment of an extraordinary dividend or 10 days prior to the payment of an ordinary dividend. The Maryland Insurance Administration has the power to limit or prohibit dividend payments if Westminster is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Westminster during the ~~three~~six months ended ~~March 31,~~June 30, 2021 or the year ended December 31, 2020.

The following tables illustrates the impact of including Battle Creek in our Consolidated Balance Sheets and Statements of Operations prior to intercompany eliminations:

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Assets:
Cash and cash equivalents	$	3,649	$	6,055	$	5,427	$	6,055
Investments		10,134		5,543		10,656		5,543
Premiums and agents’ balances receivable		4,577		4,738		5,023		4,738
Deferred policy acquisition costs		531		479		593		479
Pooling receivable ⁽¹⁾		0-		920		0-		920
Reinsurance recoverables on losses ⁽²⁾		6,096		5,646		6,506		5,646
Accrued investment income		52		27		54		27
Deferred income tax asset		133		101		129		101
Property and equipment		334		337		331		337
Other assets		47		49		49		49
Total assets	$	25,553	$	23,895	$	28,768	$	23,895

Liabilities:
Unpaid losses and loss adjustment expenses	$	2,549	$	2,445	$	3,332	$	2,445
Unearned premiums		2,453		2,381		2,707		2,381
Notes payable ⁽¹⁾		3,000		3,000		3,000		3,000
Reinsurance losses payable ⁽²⁾		10,349		11,221		10,740		11,221
Pooling payable ⁽¹⁾		2,536		0-		4,092		0-
Accrued expenses and other liabilities		239		303		459		303
Total liabilities		21,126		19,350		24,330		19,350

Equity:
Non-controlling interest		4,427		4,545		4,438		4,545
Total equity		4,427		4,545		4,438		4,545

Total liabilities and equity	$	25,553	$	23,895	$	28,768	$	23,895

	Three Months Ended March 31,						Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020			2021			2020		2021			2020
Revenues:
Net premiums earned	$	1,263		$	0-		$	1,832		$	0-	$	3,095		$	0-
Fee and other income		(3	)		(2	)
Fee and other income (expense)								1			2		(2	)		0-
Net investment income		8			39			15			37		23			76
Net capital gain on investments		0-			5			0-			4		0-			9
Total revenues		1,268			42			1,848			43		3,116			85

Expenses:
Losses and loss adjustment expenses		738			0-			1,531			0-		2,269			0-
Amortization of deferred policy acquisition costs		272			0-			397			0-		669			0-
Other underwriting and general expenses		116			0-			31			0-		147			0-
Total expenses		1,126			0-			1,959			0-		3,085			0-

Income before income taxes		142			42
Income tax expense		29			10
Net income	$	113		$	32
Income (loss) before income taxes								(111	)		43		31			85
Income tax expense (benefit)								(21	)		9		8			19
Net income (loss)							$	(90	)	$	34	$	23		$	66

~~The Company~~Nodak Insurance sponsors a money purchase plan that covers all eligible employees. Plan costs are funded annually as they are earned. ~~The Company~~Nodak Insurance reported expenses related to the money purchase plan totaling ~~$269~~$270 and ~~$201~~$202 during the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $539 and $403 during the six months ended June 30, 2021 and 2020, respectively.

~~The Company~~Nodak Insurance also sponsors a 401(k) plan with an automatic contribution to all eligible employees and a matching contribution for eligible employees of 50% up to 3% of eligible compensation. Primero, Direct Auto, and Westminster also sponsor 401(k) plans. The Company reported expenses related to the 401(k) plans totaling ~~$172~~$175 and ~~$163~~$162 during the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $347 and $325 during the six months ended June 30, 2021 and 2020, respectively. All fees associated with ~~both~~the plans are deducted from the eligible employee accounts.

The Board of Directors has authorized a non-qualified deferred compensation plan covering key executives of the Company (as designated by the Board of Directors). The Company’s policy is to fund the plan by amounts that represent the excess of the maximum contribution allowed by the Employee Retirement Income Security Act (“ERISA”) over the key executives’ allowable 401(k) contribution. The plan also allows employee-directed deferral of key executive’s compensation or incentive payments. The Company reported expenses related to this plan totaling ~~$418~~$149 and $14 during the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $567 and $28 during the six months ended June 30, 2021 and 2020, respectively.

The Company has established an Employee Stock Ownership Plan (the “ESOP”). The ESOP is intended to be an employee stock ownership plan within the meaning of Internal Revenue Code Section 4975(e)(7) and will invest solely in common stock of the Company.

In connection with our initial public offering in March 2017, Nodak Insurance loaned $2,400 to the ESOP’s related trust (the “ESOP Trust”). The ESOP loan will be for a period of ten years and bears interest at the long-term Applicable Federal Rate effective on the closing date of the offering (2.79% annually). The ESOP Trust used the proceeds of the loan to purchase shares in our initial public offering, which results in the ESOP Trust owning approximately 1.0% of the Company’s authorized shares. The ESOP has purchased the shares for investment and not for resale.

The shares purchased by the ESOP Trust in the offering are held in a suspense account as collateral for the ESOP loan. Nodak Insurance will make semi-annual cash contributions to the ESOP in amounts no smaller than the amounts required for the ESOP Trust to make its loan payments to Nodak Insurance. While the ESOP makes two loan payments per year, a pre-determined portion of the shares will be released from the suspense account and allocated to participant accounts at the end of the calendar year. This release and allocation will occur on an annual basis over the ten-year term of the ESOP loan. Nodak Insurance will have a lien on the shares of common stock of the Company held by the ESOP to secure repayment of the loan from the ESOP to Nodak Insurance. If the ESOP is terminated as a result of a change in control of the Company, the ESOP may be required to pay the costs of terminating the plan.

It is anticipated that the only assets held by the ESOP will be shares of the Company’s common stock. Participants in the ESOP cannot direct the investment of any assets allocated to their accounts. The initial ESOP participants are employees of Nodak Insurance. The employees of Primero, Direct Auto, and Westminster do not participate in the ESOP. American West and Battle Creek have no employees.

Each employee of Nodak Insurance will automatically become a participant in the ESOP if such employee is at least 21 years old, has completed a minimum of one thousand hours of service with Nodak Insurance, and has completed an Eligibility Computation Period. Employees are not permitted to make any contributions to the ESOP. Participants in the ESOP will receive annual reports from the Company showing the number of shares of common stock of the Company allocated to the participant’s account and the market value of those shares. The shares are allocated to participants based on compensation as provided for in the ESOP.

In connection with the initial public offering, the Company created a contra-equity account on the Company’s Consolidated Balance Sheet equal to the ESOP’s basis in the shares. The basis of those shares was set at $10.00 per share as part of the initial public offering. As shares are released from the ESOP suspense account, the contra-equity account will be credited, which shall reduce the impact of the contra-equity account on the Company’s Consolidated Balance Sheet. The Company shall record a compensation expense related to the shares released, which compensation expense is equal to the number of shares released from the suspense account multiplied by the average market value of the Company’s stock during the period.

The Company recognized compensation expense of $117 and $83 during the three months ended June 30, 2021 and 2020, respectively, related to the ESOP, and $226 and $172 during the six months ended June 30, 2021 and 2020, respectively.

~~The Company recognized compensation expense of $109 and $89 during the three months ended March 31, 2021 and 2020, respectively, related to the ESOP.~~

Through ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had released and allocated 97,260 ESOP shares to participants, with a remainder of 142,740 ESOP shares in suspense at ~~March 31,~~June 30, 2021 and December 31, 2020. Using the Company’s quarter-end market price of ~~$18.48~~$19.01 per share, the fair value of the unearned ESOP shares was ~~$2,638~~$2,713 at ~~March 31,~~June 30, 2021.

Nodak Insurance has a $5,000 line of credit with Wells Fargo Bank, N.A. The terms of the line of credit include a floating interest rate with a floor rate of 3.25%. There were no outstanding amounts during the ~~three~~six months ended ~~March 31,~~June 30, 2021, or the year ended December 31, 2020. This line of credit is scheduled to expire on January 30, 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act) was enacted, implementing numerous changes to tax law including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, and the creation of certain refundable employee retention credits. There has been no impact to the Company’s income taxes due to this legislation.

At ~~March 31,~~June 30, 2021 and December 31, 2020, we had 00no unrecognized tax benefits, ~~00no~~no accrued interest and penalties, and no significant uncertain tax positions. No00No interest and penalties were recognized during the three or six month periods ended ~~March 31,~~June 30, 2021 or 2020.

At ~~March 31,~~June 30, 2021 and December 31, 2020, the Company, other than Battle Creek and Westminster, had no income tax related carryovers for net operating losses, alternative minimum tax credits, or capital losses.

Battle Creek, which files its income tax returns on a stand-alone basis, had net operating loss carryovers of $3,390 at December 31, 2020. The net operating loss carryforwards expire beginning in 2021 through 2030 due to limitations on the use of these net operating loss carryforwards.

Westminster, which became part of the Company’s consolidated federal income tax return beginning in 2020, had net operating loss carryovers of $2,559 at December 31, 2020. The net operating loss carryforwards expire beginning in 2021 through 2023 due to limitations on the use of these net operating loss carryforwards.

Our Primero subsidiary leases a facility in Spearfish, South Dakota under a non-cancellable operating lease expiring in ~~2023.~~2023. Our Direct Auto subsidiary leases a facility in Chicago, Illinois under a non-cancellable operating lease expiring in ~~2029.~~2029. Our Nodak Insurance subsidiary leases a facility in Fargo, North Dakota under a non-cancellable operating lease expiring in 2024. There were expenses of ~~$61~~$63 and ~~$89~~$94 related to these leases during the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $124 and $183 related to these leases during the six months ended June 30, 2021 and 2020, respectively.

As of ~~March 31,~~June 30, 2021, we have minimum future commitments under non-cancellable leases for the next five years in the period ending December 31, 2025, and thereafter as follows:

We have been named as a defendant in various lawsuits relating to our insurance operations. Contingent liabilities arising from litigation, income taxes, and other matters are not considered to be material to our financial position.

Changes in the number of common stock shares outstanding ~~are~~were as follows:

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. During 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. During the year ended December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $7,238 under this new authorization. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, we completed the repurchase of ~~32,326~~118,531 shares of our common stock for ~~$596.~~$2,266.

The cost of this treasury stock is a reduction of shareholders’ equity within our Consolidated Balance Sheets.

At its 2020 Annual Shareholders’ Meeting, the NI Holdings, Inc. 2020 Stock and Incentive Plan (the “Plan”) was approved by shareholders. The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors, advisors, and non-employee directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business and to afford such persons an opportunity to acquire an ownership interest in the Company, thereby aligning the interests of such persons with the Company’s shareholders.

The Plan provides for the grant of nonqualified stock options, incentive stock options, restricted stock units (“RSUs”), stock appreciation rights, dividend equivalents, and performance share units (“PSUs”) to employees, officers, consultants, advisors, non-employee directors, and independent contractors designated by the Compensation Committee of the Board of Directors (the “Compensation Committee”). Awards made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the Company.

The total aggregate number of shares of common stock that awards may be issued under all awards made under the Plan shall not exceed 1,000,000 shares of common stock, subject to adjustments as provided in the Plan. No eligible participant may be granted any awards for more than 100,000 shares in the aggregate in any calendar year, subject to adjustment in accordance with the Plan. The aggregate amount payable pursuant to all performance awards denominated in cash to any eligible person in any calendar year is limited to $1,000 in value. Directors who are not also employees of the Company may not be granted awards denominated in shares that exceed $150 in any calendar year.

The Compensation Committee has awarded RSUs to non-employee directors and select executives. RSUs are promises to issue actual shares of common stock at the end of a vesting period. The RSUs granted to executives under the Plan were based on salary and vest 20% per year over a five-year period, while RSUs granted to non-employee directors vest 100% on the date of the next

annual meeting of shareholders following the grant date. Dividend equivalents on RSUs are accrued during the vesting period and paid in cash at the end of the vesting period, but are subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to RSUs.

The Company recognizes stock-based compensation costs based on the grant date fair value. The compensation costs are normally expensed over the vesting periods to each vesting date; however, the cost of RSUs granted to executives are expensed immediately if the executive has met certain retirement criteria and the RSUs become non-forfeitable. Estimated forfeitures are included in the determination of compensation costs. No forfeitures are currently estimated.

A summary of the Company’s outstanding and unearned restricted stock units is presented below:

The following table shows the impact of RSU activity to the Company’s financial results:

At ~~March 31,~~June 30, 2021, there was ~~$1,097~~$1,166 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of ~~2.44~~2.08 years.

The Compensation Committee has awarded PSUs to select executives. PSUs are promises to issue actual shares of common stock at the end of a vesting period, if certain performance conditions are met. The PSUs granted to employees under the Plan were based on salary and include a three-year book value cumulative growth target with threshold and stretch goals. They will vest on the third anniversary of the grant date, subject to the participant’s continuous employment through the vesting date and the level of performance achieved. Dividend equivalents on PSUs are accrued and paid in cash at the end of the performance period in accordance with the level of performance achieved, but are subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to PSUs.

The Company recognizes stock-based compensation costs based on the grant date fair value over the performance period of the awards. Estimated forfeitures are included in the determination of compensation costs. The current cost estimate assumes that the cumulative growth targets will be achieved or exceeded.

A summary of the Company’s outstanding performance share units is presented below:

⁽¹⁾ Represents the change in PSUs issued based upon the attainment of performance goals established by the Company.

The following table shows the impact of PSU activity to the Company’s financial results:

The PSU grants above represent initial target awards and do not reflect potential increases or decreases resulting from financial performance objectives to be determined at the end of the performance period. The actual number of shares to be issued at the end of the performance period will range from 0% to 150% of the initial target awards.

At ~~March 31,~~June 30, 2021, there was ~~$2,011~~$1,724 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of ~~2.23~~2.06 years.

We have five primary reportable operating segments, which consist of private passenger auto insurance, non-standard auto insurance, home and farm insurance, crop insurance, and commercial insurance. A sixth segment captures all other insurance coverages we sell, including our assumed reinsurance lines of business. We operate only in the United States, and no single customer or agent provides 10 percent or more of our revenues. The following tables provide available information of these segments for the three and six month periods ended ~~March 31,~~June 30, 2021 and 2020. For presentation in these tables, “LAE” refers to loss adjustment expenses.

The ratios presented in these tables are non-GAAP financial measures under ~~Securities and Exchange Commission~~SEC rules and regulations. While these ratios are used widely in the property and casualty insurance industry, such non-GAAP ratios may not be comparable to similarly-named measures reported by other companies.

The loss and LAE ratio equals losses and loss adjustment expenses divided by net premiums earned. The expense ratio equals amortization of deferred policy acquisition costs and other underwriting and general expenses, divided by net premiums earned. The combined ratio equals losses and loss adjustment expenses, amortization of deferred policy acquisition costs, and other underwriting and general expenses, divided by net premiums earned.

Three Months Ended March 31, 2021
Private
Passenger
Auto
Non-Standard
Auto
Home and
Farm
Crop
Commercial
All Other
Total
Direct premiums earned
$
18,688
$
13,581
$
20,583
$
(16
)
$
14,722
$
1,185
$
68,743
Assumed premiums earned
0-
0-
0-
0-
0-
1,448
1,448
Ceded premiums earned
(1,190
)
(323
)
(3,129
)
63
(2,384
)
(93
)
(7,056
)
Net premiums earned
17,498
13,258
17,454
47
12,338
2,540
63,135

Direct losses and LAE
12,559
4,800
7,888
572
11,464
295
37,578
Assumed losses and LAE
0-
0-
0-
0-
0-
948
948
Ceded losses and LAE
(305
)
0-
(256
)
(11
)
(1,065
)
0-
(1,637
)
Net losses and LAE
12,254
4,800
7,632
561
10,399
1,243
36,889

Gross margin
5,244
8,458
9,822
(514
)
1,939
1,297
26,246

Underwriting and general expenses
5,359
4,414
5,611
536
4,615
703
21,238
Underwriting gain (loss)
(115
)
4,044
4,211
(1,050
)
(2,676
)
594
5,008

Fee and other income
332
317

4,376
Net investment income
1,536
Net capital gain on investments
5,811
Income before income taxes
12,672
Income tax expense
2,890
Net income
9,782
Net income attributable to non-controlling interest
113
Net income attributable to NI Holdings, Inc.
9,669

Non-GAAP Ratios:
Loss and LAE ratio
70.0%
36.2%
43.7%
n/a
84.3%
48.9%
58.4%
Expense ratio
30.6%
33.3%
32.1%
n/a
37.4%
27.7%
33.6%
Combined ratio
100.7%
69.5%
75.9%
n/a
121.7%
76.6%
92.1%

Balances at March 31, 2021:
Premiums and agents’ balances receivable
$
19,028
$
8,568
$
9,102
$
0-
$
11,964
$
663
$
49,325
Deferred policy acquisition costs
5,934
6,099
8,170
0-
5,883
489
26,575
Reinsurance recoverables
717
0-
588
9
5,741
2,215
9,270
Receivable from Federal Crop Insurance Corporation
0-
0-
0-
5,182
0-
0-
5,182
Goodwill and other intangibles
0-
2,848
0-
0-
15,228
0-
18,076

Unpaid losses and LAE
22,503
40,289
12,657
96
25,447
10,530
111,522
Unearned premiums
28,912
19,218
40,706
0-
31,639
2,983
123,458

Three Months Ended March 31, 2020
Private
Passenger
Auto
Non-Standard
Auto
Home and
Farm
Crop
Commercial
All Other
Total
Direct premiums earned
$
18,397
$
13,194
$
20,158
$
(5
)
$
9,505
$
1,144
$
62,393
Assumed premiums earned
0-
0-
0-
0-
0-
1,600
1,600
Ceded premiums earned
(1,098
)
(43
)
(2,537
)
184
(1,652
)
(75
)
(5,221
)
Net premiums earned
17,299
13,151
17,621
179
7,853
2,669
58,772

Direct losses and LAE
11,129
5,940
7,668
2,811
5,919
425
33,892
Assumed losses and LAE
0-
0-
0-
0-
0-
308
308
Ceded losses and LAE
0-
0-
(1,130
)
(444
)
(2,204
)
0-
(3,778
)
Net losses and LAE
11,129
5,940
6,538
2,367
3,715
733
30,422

Gross margin
6,170
7,211
11,083
(2,188
)
4,138
1,936
28,350

Underwriting and general expenses
4,810
5,197
4,889
702
3,929
632
20,159
Underwriting gain (loss)
1,360
2,014
6,194
(2,890
)
209
1,304
8,191

Fee and other income
329
362

2,343
Net investment income
1,971
Net capital loss on investments
(14,919
)
Loss before income taxes
(4,395
)
Income tax benefit
(840
)
Net loss
(3,555
)
Net income attributable to non-controlling interest
32
Net loss attributable to NI Holdings, Inc.
$
(3,587
)

Non-GAAP Ratios:
Loss and LAE ratio
64.3%
45.2%
37.1%
0n/a
47.3%
27.5%
51.8%
Expense ratio
27.8%
39.5%
27.7%
0n/a
50.0%
23.7%
34.3%
Combined ratio
92.1%
84.7%
64.8%
0n/a
97.3%
51.1%
86.1%

Balances at March 31, 2020:
Premiums and agents’ balances receivable
$
18,657
$
10,557
$
9,204
$
0-
$
9,254
$
611
$
48,283
Deferred policy acquisition costs
5,175
4,952
7,124
0-
1,504
409
19,164
Reinsurance recoverables
500
0-
2,060
600
3,434
1,473
8,067
Receivable from Federal Crop Insurance Corporation
0-
0-
0-
5,240
0-
0-
5,240
Goodwill and other intangibles
0-
2,897
0-
0-
18,354
0-
21,251

Unpaid losses and LAE
19,952
42,000
10,401
3,945
12,248
8,854
97,400
Unearned premiums
28,426
17,260
39,542
0-
18,444
2,738
106,410

For purposes of evaluating profitability of the non-standard auto segment, management combines the policy fees paid by the insured with the underwriting gain or loss as its primary measure. As a result, these fees are allocated to the non-standard auto segment (included in fee and other income) in the ~~above tables.~~tables below. The remaining fee and other income amounts are not allocated to any segment.

We do not assign or allocate all Consolidated Statement of Operations or Consolidated Balance Sheet line items to our operating segments. Those line items include investment income, net capital gain (loss) on investments, other income excluding non-standard auto insurance fees, and income taxes within the Consolidated Statement of Operations. For the Consolidated Balance Sheet, those items include cash and investments, property and equipment, other assets, accrued expenses, income taxes recoverable or payable, and shareholders’ equity.

	Three Months Ended June 30, 2021
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			Commercial			All Other				Total
Direct premiums earned	$	19,012		$	15,263		$	20,808		$	14,574		$	16,195		$	1,207		$	87,059
Assumed premiums earned		0-			0-			0-			2,084			0-			1,432			3,516
Ceded premiums earned		(944	)		(365	)		(2,435	)		(8,305	)		(2,175	)		(70	)		(14,294	)
Net premiums earned		18,068			14,898			18,373			8,353			14,020			2,569			76,281

Direct losses and LAE		15,094			11,490			19,436			21,803			8,494			282			76,599
Assumed losses and LAE		0-			0-			0-			523			0-			1,437			1,960
Ceded losses and LAE		(189	)		0-			(1,228	)		(12,994	)		(1,230	)		0-			(15,641	)
Net losses and LAE		14,905			11,490			18,208			9,332			7,264			1,719			62,918

Gross margin		3,163			3,408			165			(979	)		6,756			850			13,363

Underwriting and general expenses		4,767			6,525			5,073			1,431			5,177			616			23,589
Underwriting gain (loss)		(1,604	)		(3,117	)		(4,908	)		(2,410	)		1,579			234			(10,226	)

Fee and other income					361															520
					(2,756	)
Net investment income																				1,710
Net capital gain on investments																				4,701
Loss before income taxes																				(3,295	)
Income tax benefit																				(561	)
Net loss																				(2,734	)
Net loss attributable to non-controlling interest																				(90	)
Net loss attributable to NI Holdings, Inc.																			$	(2,644	)

Non-GAAP Ratios:
Loss and LAE ratio		82.5%			77.1%			99.1%			111.7%			51.8%			66.9%			82.5%
Expense ratio		26.4%			43.8%			27.6%			17.1%			36.9%			24.0%			30.9%
Combined ratio		108.9%			120.9%			126.7%			128.9%			88.7%			90.9%			113.4%


Balances at June 30, 2021:
Premiums and agents’ balances receivable	$	20,100		$	9,408		$	9,739		$	30,438		$	14,048		$	730		$	84,463
Deferred policy acquisition costs		6,548			6,368			9,069			358			6,763			551			29,657
Reinsurance recoverables		905			0-			1,600			13,918			5,934			2,217			24,574
Receivable from Federal Crop Insurance Corporation		0-			0-			0-			17,191			0-			0-			17,191
Goodwill and other intangibles		0-			2,835			0-			0-			15,123			0-			17,958

Unpaid losses and LAE		26,161			43,727			20,839			23,638			26,812			11,163			152,340
Unearned premiums		30,518			19,968			43,229			27,615			37,047			3,215			161,592

	Three Months Ended June 30, 2020
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			Commercial			All Other				Total
Direct premiums earned	$	18,501		$	13,177		$	20,215		$	19,254		$	10,153		$	1,152		$	82,452
Assumed premiums earned		0-			0-			0-			1,935			0-			748			2,683
Ceded premiums earned		(1,115	)		(43	)		(2,447	)		2,363			(1,812	)		(75	)		(3,129	)
Net premiums earned		17,386			13,134			17,768			23,552			8,341			1,825			82,006

Direct losses and LAE		8,624			8,195			11,080			20,247			10,994			235			59,375
Assumed losses and LAE		165			0-			0-			223			0-			406			794
Ceded losses and LAE		(165	)		0-			(220	)		(1,363	)		(5,757	)		(300	)		(7,805	)
Net losses and LAE		8,624			8,195			10,860			19,107			5,237			341			52,364

Gross margin		8,762			4,939			6,908			4,445			3,104			1,484			29,642

Underwriting and general expenses		4,335			5,146			4,705			1,299			3,624			516			19,625
Underwriting gain (loss)		4,427			(207	)		2,203			3,146			(520	)		968			10,017

Fee and other income					328															446
					121
Net investment income																				2,018
Net capital gain on investments																				11,197
Income before income taxes																				23,678
Income tax expense																				4,911
Net income																				18,767
Net income attributable to non-controlling interest																				34
Net income attributable to NI Holdings, Inc.																			$	18,733

Non-GAAP Ratios:
Loss and LAE ratio		49.6%			62.4%			61.1%			81.1%			62.8%			18.7%			63.9%
Expense ratio		24.9%			39.2%			26.5%			5.5%			43.4%			28.3%			23.9%
Combined ratio		74.5%			101.6%			87.6%			86.6%			106.2%			47.0%			87.8%


Balances at June 30, 2020:
Premiums and agents’ balances receivable	$	19,825		$	7,643		$	10,293		$	37,864		$	12,006		$	705		$	88,336
Deferred policy acquisition costs		5,804			4,968			8,062			1,295			3,607			468			24,204
Reinsurance recoverables		351			0-			1,803			1,384			3,999			1,474			9,011
Receivable from Federal Crop Insurance Corporation		0-			0-			0-			12,294			0-			0-			12,294
Goodwill and other intangibles		0-			2,885			0-			0-			16,600			0-			19,485

Unpaid losses and LAE		19,370			42,830			11,217			20,159			13,710			8,728			116,014
Unearned premiums		30,150			17,317			42,636			19,714			24,465			2,930			137,212

	Six Months Ended June 30, 2021
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			Commercial			All Other				Total
Direct premiums earned	$	37,700		$	28,844		$	41,391		$	14,558		$	30,917		$	2,392		$	155,802
Assumed premiums earned		0-			0-			0-			2,084			0-			2,880			4,964
Ceded premiums earned		(2,134	)		(688	)		(5,564	)		(8,242	)		(4,559	)		(163	)		(21,350	)
Net premiums earned		35,566			28,156			35,827			8,400			26,358			5,109			139,416

Direct losses and LAE		27,653			16,290			27,324			22,375			19,958			577			114,177
Assumed losses and LAE		0-			0-			0-			523			0-			2,385			2,908
Ceded losses and LAE		(494	)		0-			(1,484	)		(13,005	)		(2,295	)		0-			(17,278	)
Net losses and LAE		27,159			16,290			25,840			9,893			17,663			2,962			99,807

Gross margin		8,407			11,866			9,987			(1,493	)		8,695			2,147			39,609

Underwriting and general expenses		10,126			10,939			10,684			1,967			9,792			1,319			44,827
Underwriting gain (loss)		(1,719	)		927			(697	)		(3,460	)		(1,097	)		828			(5,218	)

Fee and other income					693															837
					1,620
Net investment income																				3,246
Net capital gain on investments																				10,512
Income before income taxes																				9,377
Income tax expense																				2,329
Net income																				7,048
Net income attributable to non-controlling interest																				23
Net income attributable to NI Holdings, Inc.																			$	7,025

Non-GAAP Ratios:
Loss and LAE ratio		76.4%			57.9%			72.1%			117.8%			67.0%			58.0%			71.6%
Expense ratio		28.5%			38.9%			29.8%			23.4%			37.2%			25.8%			32.2%
Combined ratio		104.8%			96.7%			101.9%			141.2%			104.2%			83.8%			103.7%

	Six Months Ended June 30, 2020
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			Commercial			All Other				Total
Direct premiums earned	$	36,897		$	26,371		$	40,374		$	19,249		$	19,658		$	2,296		$	144,845
Assumed premiums earned		0-			0-			0-			1,935			0-			2,348			4,283
Ceded premiums earned		(2,212	)		(86	)		(4,985	)		2,547			(3,464	)		(150	)		(8,350	)
Net premiums earned		34,685			26,285			35,389			23,731			16,194			4,494			140,778

Direct losses and LAE		19,753			14,135			18,748			23,058			16,913			660			93,267
Assumed losses and LAE		165			0-			0-			223			0-			714			1,102
Ceded losses and LAE		(165	)		0-			(1,350	)		(1,807	)		(7,961	)		(300	)		(11,583	)
Net losses and LAE		19,753			14,135			17,398			21,474			8,952			1,074			82,786

Gross margin		14,932			12,150			17,991			2,257			7,242			3,420			57,992

Underwriting and general expenses		9,145			10,343			9,594			2,001			7,553			1,148			39,784
Underwriting gain (loss)		5,787			1,807			8,397			256			(311	)		2,272			18,208

Fee and other income					657															808
					2,464
Net investment income																				3,989
Net capital loss on investments																				(3,722	)
Income before income taxes																				19,283
Income tax expense																				4,071
Net income																				15,212
Net income attributable to non-controlling interest																				66
Net income attributable to NI Holdings, Inc.																			$	15,146

Non-GAAP Ratios:
Loss and LAE ratio		56.9%			53.8%			49.2%			90.5%			55.3%			23.9%			58.8%
Expense ratio		26.4%			39.3%			27.1%			8.4%			46.6%			25.5%			28.3%
Combined ratio		83.3%			93.1%			76.3%			98.9%			101.9%			49.4%			87.1%

Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to provide a more comprehensive review of the Company’s operating results and financial condition than can be obtained from reading the Unaudited Consolidated Financial Statements alone. This discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in “Part I. Item 1. Financial Statements.” Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q constitutes forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” and “Part II. Item 1A. Risk Factors” included elsewhere in this Quarterly Report. You should also review “Risk Factors” included in the Company’s 2020 Annual Report ~~on Form 10-K~~ for a discussion of important factors that could cause actual results to differ materially from the results described, or implied by, the forward-looking statements contained herein.

NI Holdings is a North Dakota business corporation that is the stock holding company of Nodak Insurance and became such in connection with the conversion of Nodak Mutual from a mutual to stock form of organization and the creation of a mutual holding company. The conversion was consummated on March 13, 2017. Immediately following the conversion, all of the outstanding shares of common stock of Nodak Insurance were issued to Nodak Mutual Group, which then contributed the shares to NI Holdings in exchange for 55% of the outstanding shares of common stock of NI Holdings. Nodak Insurance then became a wholly-owned stock subsidiary of NI Holdings. Prior to completion of the conversion, NI Holdings conducted no business and had no assets or liabilities. As a result of the conversion, NI Holdings became the holding company for Nodak Insurance and its existing subsidiaries.

These ~~consolidated financial statements~~Consolidated Financial Statements of NI Holdings include the financial position and results of operations of NI Holdings and seven other entities:

Battle Creek is managed by Nodak Insurance under the terms of a surplus note issued by Battle Creek to Nodak Insurance.

On August 31, 2018, NI Holdings completed the acquisition of 100% of the common stock of Direct Auto from private shareholders and Direct Auto became a consolidated subsidiary of the Company. The results of Direct Auto are included as part of the Company’s non-standard auto business segment following the closing date.

On January 1, 2020, NI Holdings completed the acquisition of 100% of the common stock of Westminster from the private shareholder of Westminster and Westminster became a consolidated subsidiary of the Company. The results of Westminster are included as part of the Company’s commercial business segment following the closing date.

Nodak Insurance offers property and casualty insurance, crop hail, and multi-peril crop insurance to members of the North Dakota Farm Bureau ~~Federation~~ through captive agents in North Dakota. American West and Battle Creek offer similar insurance coverage through independent agents in South Dakota and Minnesota, and Nebraska, respectively. Primero offers ~~limited~~ nonstandard auto insurance coverage in Arizona, Nevada, North Dakota, and South Dakota. Direct Auto offers ~~limited~~ nonstandard auto insurance coverage in Illinois. Westminster offers commercial multi-peril insurance in the Mid-Atlantic region of the United States. All of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by A.M. Best, which is the third highest out of a possible 15 ratings.

NI HOLDINGS, INC.

ORGANIZATIONAL CHART

Nodak Mutual Group, Inc.

≥ 55%

ownership

NI Holdings, Inc.

100%

ownership

Direct Auto Insurance

Company

Nodak Insurance Company

Westminster American Insurance Company

100%

ownership

Affiliation

ownership

Nodak Agency, Inc.

American West Insurance Company

Battle Creek Mutual

Insurance Company

Tri-State, Ltd

100%

ownership

Primero Insurance Company

The following tables provide selected amounts from the Company’s Unaudited Consolidated Statements of Operations and Balance Sheets. Additional information can be found later in this section.

Beginning in March 2020 and continuing throughout the year, the global pandemic associated with the novel coronavirus COVID-19 and related economic conditions impacted the Company’s results of operations. Decreased economic activity limited revenue growth in our personal lines of business during 2020. This was partially offset by reduced loss frequency in our private passenger and non-standard auto segments, primarily during the second and third quarters of 2020.

Vaccinations for COVID-19 are being rolled out at an increasing pace in the United States. The levels of case counts, hospitalizations, and deaths have decreased from 2020, resulting in fewer state health mandates and accelerating economic recovery in many sectors. Congress passed a $1.9 trillion stimulus bill in March 2021, which will result in the receipt of stimulus checks for millions of recipients. This represents the third check for many citizens in the last year. The Federal Reserve remains committed to its current monetary policy, which balances holding the federal funds rate near zero while monitoring increasing expectations around inflation rates. However, the travel and entertainment industries continue to be impacted, and the related economic challenges in the Las Vegas area have adversely impacted our non-standard auto segment by limiting our ability to effectively grow this business. Despite improved overall economic conditions in the United States, we expect to face continued risks associated with the pandemic over the remainder of the year, including unemployment and financial market volatility.

The property and casualty insurance industry is affected by recurring industry cycles known as “hard” and “soft” markets. A soft cycle is characterized by intense competition resulting in lower pricing in order to compete for business. A hard market, generally considered a beneficial industry trend, is characterized by reduced competition that results in higher pricing.

We monitor the marketplace both on a geographic and line of business basis. The private passenger marketplace continues to be a very competitive and challenging pricing environment, as a result of recent favorable results and increased competitive pressure in the market. The non-standard auto market also remains competitive with companies seeking to grow this line of business. Two large acquisitions took place in the non-standard auto segment during 2020, indicating that others in the marketplace are recognizing profitable opportunities associated with this segment. As opposed to most personal lines, the commercial multi-peril market in which we participate continues to harden, with accelerating positive rate changes in both liability and especially property during 2020 and into 2021.

Unlike property and casualty insurance, the total crop insurance premiums written each year vary mainly based on prevailing commodity prices for the type of crops insured, because the aggregate number of acres planted usually does not vary much from year to year. Because the premiums that are charged for crop insurance are established by the Risk Management Agency (“RMA”), which is a division of the United States Department of Agriculture, and the policy forms and terms are also established by the RMA, insurers do not compete on price or policy terms and conditions. Moreover, because participation in other federal farm programs by a farmer is conditioned upon participation in the federal crop insurance program, most farmers obtain crop insurance on their plantings each year.

The Company derives its revenue primarily from net premiums earned, net investment income, and net capital gain (loss) on investments.

Gross premiums written is equal to direct premiums written and assumed premiums before the effect of ceded reinsurance. Gross premiums written are recognized upon sale of new insurance contracts or renewal of existing contracts. Net premiums written is equal to gross premiums written less premiums ceded or paid to reinsurers (ceded premiums written).

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. Insurance premiums on property and casualty policies are recognized in proportion to the underlying risk insured and are earned ratably over the duration of the policies or, in the case of crop insurance, over the period of risk to the Company. At the end of each accounting period, the portion of the premiums that is not yet earned is included in unearned premiums and is realized as revenue in subsequent periods over the remaining term of the policy or period of risk. ~~NI Holdings’~~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. For example, for an annual policy that is written on July 1, ~~2020,~~2021, one-half of the premiums would be earned in ~~2020~~2021 and the other half would be earned in ~~2021.~~2022.

Due to the nature of the crop planting and harvesting cycle and the deadlines for filing and processing claims under the federal crop insurance program, insurance premiums for crop insurance are recognized and earned during the period of risk, which usually begins in spring and ends with harvest in the fall. In the case of prevented planting claims, the period of risk is shortened to the date a valid prevented planting claim is filed, as the Company believes the period of risk has ended. Under the federal crop insurance program, farmers must purchase crop insurance with respect to spring planted crops by March 15. By July 15, the farmer must report the number of acres he has planted in each crop. On September 1, the insurer bills the farmer for the insurance premium, which is due and payable by the farmer by October 1. If the farmer does not pay the premium by such date, the insurer must essentially provide a loan to the farmer in an amount equal to the premium at an annual interest rate of 15% because the insurer is required to pay the farmer’s portion of the premium to the Federal Crop Insurance Corporation (“FCIC”) by November 15, regardless of whether the farmer pays the premium to the insurer. Except for claims occurring in the spring (primarily for prevented planting and required replanting claims), claims are required to be filed with the FCIC by December 15. A different cycle exists for crops planted in the fall, such as winter wheat, but the vast majority of crop insurance written by NI Holdings covers crops planted in the spring.

~~NI Holdings~~The Company invests its surplus and the funds supporting its insurance liabilities (including unearned premiums and unpaid losses and loss adjustment expenses) in cash, cash equivalents, equity securities, and fixed income securities. Investment income includes interest and dividends earned on invested assets, and is reported net of investment-related expenses. Net capital gains and losses on investments are reported separately from net investment income. ~~NI Holdings~~The Company recognizes realized capital gains when investments are sold for an amount greater than their cost or amortized cost (in the case of fixed income securities) and recognizes realized capital losses when investments are written down as a result of an other-than-temporary impairment or sold for an amount less than their cost or amortized cost, as applicable. The Company recognizes changes in unrealized gains and losses on the Company’s investments in equity securities in net income as part of net capital gains and losses on investments. These gains and losses may be significant given the size of the equity securities holdings and the inherent volatility in equity securities prices.

The changes in unrealized gains and losses on fixed income securities are recorded in other comprehensive income (loss), net of income taxes.

~~NI Holdings’~~The portfolio of investments for NI Holdings and its insurance subsidiaries is managed by Conning, Inc., Disciplined Growth Investors, and CIBC Personal Wealth Management. These investment managers have discretion to buy and sell securities in accordance with the investment policy approved by our Board of Directors.

~~NI Holdings’~~The Company’s expenses consist primarily of losses and loss adjustment expenses (“LAE”), amortization of deferred policy acquisition costs, other underwriting and general expenses, and income taxes.

Losses and LAE represent the largest expense item and include (1) claim payments made, (2) estimates for future claim payments and changes in those estimates from prior periods, and (3) costs associated with investigating, defending, and adjusting claims, including legal fees.

Amortization of deferred policy acquisition costs and other underwriting and general expenses

Expenses incurred to underwrite risks are referred to as policy acquisition costs. Policy acquisition costs consist of commission expenses, state premium taxes, and certain other underwriting expenses that vary with and are primarily related to the writing and acquisition of new and renewal business. These policy acquisition costs are deferred and amortized over the effective period of the related insurance policies. Other underwriting and general expenses consist of salaries, professional fees, office supplies, depreciation, and all other operating expenses not otherwise classified separately.

Current income taxes represent amounts paid or payable to the federal government and certain states whose payment is based upon net income (subject to regulatory adjustments) generated by the Company. As noted above, it does not include state premium taxes that are based purely on the collection of policyholder premiums.

NI Holdings uses the asset and liability method of accounting for deferred income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the income tax bases of its assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion of the deferred income tax asset will not be realized. The effect of a change in tax rates is recognized in the period of the enactment date. Total income taxes reflect both current income taxes and the change in the net deferred income tax asset or liability, excluding amounts attributed to accumulated other comprehensive income.

NI Holdings evaluates its insurance operations in the way it believes will be most meaningful and representative of its business results. Some of these measurements are “non-GAAP financial measures” under ~~Securities and Exchange Commission~~SEC rules and regulations. GAAP is the acronym for “accounting principles generally accepted in the United States of America”. While used widely in the property and casualty insurance industry, the non-GAAP financial measures that NI Holdings presents may not be comparable to similarly-named measures reported by other companies. The non-GAAP financial measures described in this section are the expense ratio, loss and LAE ratio, combined ratio, written premiums, ratio of net written premiums to statutory surplus, underwriting gain, and return on average equity.

NI Holdings measures growth by monitoring changes in gross premiums written and net premiums written. The Company measures underwriting profitability by examining its loss and LAE ratio, expense ratio, and combined ratio. It also measures profitability by examining underwriting gain (loss), net income (loss), and return on average equity.

The loss and LAE ratio is the ratio (expressed as a percentage) of losses and LAE incurred to premiums earned. NI Holdings measures the loss and LAE ratio on an accident year and calendar year loss basis to measure underwriting profitability. An accident year loss ratio measures losses and LAE for insured events occurring in a particular year, regardless of when they are reported, as a percentage of premiums earned during that year. A calendar year loss ratio measures losses and LAE for insured events occurring during a particular year and the change in loss reserves from prior policy years as a percentage of premiums earned during that year.

The expense ratio is the ratio (expressed as a percentage) of amortization of deferred policy acquisition costs and other underwriting and general expenses (attributable to insurance operations) to premiums earned, and measures our operational efficiency in producing, underwriting, and administering the Company’s insurance business.

The Company’s combined ratio is the ratio (expressed as a percentage) of the sum of losses and LAE incurred and expenses to premiums earned, and measures its overall underwriting profit. Generally, if the combined ratio is below 100%, ~~NI Holdings~~the Company is making an underwriting profit. If the combined ratio is above 100%, it is not profitable without investment income and may not be profitable if investment income is insufficient.

Premiums written represent a measure of business volume most relevant on an annual basis for the Company’s business model. This measure includes the amount of premium purchased by policyholders as of the policy’s effective date, whereas premiums earned as presented in the Consolidated Statement of Operations matches the amount of premium to the period of risk for those insurance policies. The Company’s insurance policies are sold with a variety of effective periods, including annual, semi-annual, and monthly.

The net premiums written to statutory surplus ratio represents the ratio of net premiums written to statutory surplus. This ratio is designed to measure the ability of the Company to absorb above-average losses and the Company’s financial strength. In general, a low premium to surplus ratio is considered a sign of financial strength because the Company has an adequate provision for adverse development of loss reserves within the Company’s current book of business and provides a capacity to write more business. Statutory surplus is determined using accounting principles prescribed or permitted by the insurance subsidiaries’ state of domicile and differs from GAAP equity.

Underwriting gain (loss) measures the pre-tax profitability of insurance operations. It is derived by subtracting losses and LAE, amortization of deferred policy acquisition costs, and other underwriting and general expenses from net premiums earned. Each of these items is presented as a caption in NI Holdings’ Consolidated Statements of Operations.

NI Holdings uses net income (loss) to measure its profit and uses return on average equity to measure its effectiveness in utilizing shareholders’ equity to generate net income. In determining return on average equity for a given period, net income (loss) is divided by the average of the beginning and ending shareholders’ equity for that period.

The preparation of financial statements in accordance with GAAP requires both the use of estimates and judgment relative to the application of appropriate accounting policies. NI Holdings is required to make estimates and assumptions in certain circumstances that affect amounts reported in its Consolidated Financial Statements and related footnotes. NI Holdings evaluates these estimates and assumptions on an ongoing basis based on historical developments, market conditions, industry trends, and other information that it believes to be reasonable under the circumstances. There can be no assurance that actual results will conform to its estimates and assumptions and that reported results of operations will not be materially adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. The Company believes the following policies are the most sensitive to estimates and judgments.

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 (LAE). The Company’s liability for unpaid losses and LAE consists of (1) case reserves, which are reserves for claims that have been reported to it, and (2) reserves for claims that have been incurred but have not yet been reported and for the future development of case reserves (“IBNR”).

LAE consist of two components – allocated loss adjustment expenses (“ALAE”) and unallocated loss adjustment expenses (“ULAE”). ALAE are defense and cost containment expenses, including legal fees, court costs, and investigation fees, which are linked to the settlement of specific individual claims or losses. ULAE are expenses that generally cannot be associated with a specific claim, including internal costs such as salaries and other overhead costs, and also represent estimates of future costs to administer claims.

When a claim is reported to ~~NI Holdings,~~one of the insurance companies, its claims personnel establish a case reserve for the estimated amount of the ultimate payment to the extent it can be determined or estimated. The amount of the loss reserve for the reported claim is based primarily upon an evaluation of coverage, liability, damages suffered, and any other information considered pertinent to estimating the exposure presented by the claim. Each claim is contested or settled individually based upon its merits, and some property and casualty claims may take years to resolve, especially in the unusual situation that legal action is involved. Case reserves are reviewed on a regular basis and are updated as new information becomes available.

When a catastrophe occurs, which in the Company’s case usually involves the weather perils of wind and hail, ~~NI Holdings~~the Company utilizes mapping technology through geographic coding of its property risks to overlay the path of the storm. This enables the Company to establish estimated damage amounts based on the wind speed and size of the hail for case or per claim loss amounts. This process allows the Company to determine within a reasonable time (5 – 7 days) an estimated number of claims and estimated losses from the storm. If the Company estimates the damages to be in excess of its 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.

In addition to case reserves, ~~NI Holdings~~the Company maintains estimates of reserves for losses and LAE incurred but not reported. These reserves include estimates for the future development of case reserves. Some claims may not be reported for several years. As a result, the liability for unpaid losses and LAE includes significant estimates for IBNR.

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.

~~NI Holdings~~The Company utilizes an independent actuary to assist with the estimation of its liability for unpaid losses and LAE. This actuary prepares estimates by first deriving an actuarially based estimate of the ultimate cost of total losses and LAE incurred as of the financial statement date based on established actuarial methods described below. The Company then reduces the estimated ultimate loss and LAE by loss and LAE 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 or uses a weighted average of these results. The specific method used to estimate the ultimate losses varies depending on the judgment of the actuary as to what is the most appropriate method for the property and casualty business. The Company’s management reviews these estimates and supplements the actuarial analysis with information not fully incorporated into the actuarially based estimate, such as changes in the external business environment and internal company processes. ~~NI Holdings~~The Company may adjust the actuarial estimates based on this supplemental information in order to arrive at the amount recorded in the Consolidated Financial Statements.

~~NI Holdings~~The Company accrues its ultimate liability for unpaid losses and LAE by using the following actuarial methodologies:

Bornhuetter-Ferguson Method — The Bornhuetter-Ferguson Method is a blended method that explicitly takes into account both actual loss development to date and expected future loss emergence. This method is applied on both a paid loss basis and an incurred loss basis. This method uses selected loss development patterns to calculate the expected percentage of losses unpaid (or unreported). The expected future loss component of the method is calculated by multiplying earned premium for the given exposure period by a selected a priori (i.e. deductive) loss ratio. The resulting dollars are then multiplied by the expected percentage of unpaid (or unreported) losses described above. This provides an estimate of future paid (or reported) losses that is then added to actual paid (or incurred) loss data to produce the estimated ultimate loss.

Paid and Case Incurred Loss Development Method — The Paid and Case Incurred Loss Development Method utilizes ratios of cumulative paid or case incurred losses or LAE at each age of development as a percent of the preceding development age. Selected ratios are then multiplied together to produce a set of loss development factors which when applied to the most current data value, by accident year, develop the estimated ultimate losses or LAE. Ultimate losses or LAE are then selected for each accident year from the various methods employed.

Ratio of Paid ALAE to Paid Loss Method — The Ratio of Paid ALAE to Paid Loss Method utilizes the ratio of paid ALAE to paid losses and is similar to the Paid and Case Incurred Method described above, except that the data projected are the ratios of paid ALAE to paid losses. The projected ultimate ratio is then multiplied by the selected ultimate losses, by accident year, to yield ultimate ALAE. ALAE reserves are calculated by subtracting paid losses from ultimate ALAE.

The process of estimating loss reserves involves a high degree of judgment and is subject to a number of variables. These variables can be affected by both internal and external events, such as changes in claims handling procedures, inflation, legal trends, increases in the state-dictated minimum liability limits in the recent ~~case~~cases of nonstandard auto insurance, and legislative changes, among others. The impact of many of these items on ultimate costs for claims and claim adjustment expenses is difficult to estimate. Loss reserve estimation is also affected by the volume of claims, the potential severity of individual claims, the determination of occurrence date for a claim, and reporting lags (the time between the occurrence of the policyholder event and when it is actually reported to the insurer). Informed judgment is applied throughout the process, including the application of various individual experiences and expertise to multiple sets of data and analyses. NI Holdings continually refines its estimates of unpaid losses and LAE in a regular ongoing process as historical loss experience develops and additional claims are reported and settled. NI Holdings considers all significant facts and circumstances known at the time the liabilities for unpaid losses and LAE are established.

There is an inherent amount of uncertainty in the establishment of liabilities for unpaid losses and LAE. This uncertainty is greatest in the current and most recent accident years due to the relative newness of the claims being reported and the relatively small percentage of these claims that have been reported, investigated, and adjusted by the Company’s claims staff. 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.

Other factors that have or can have an impact on the Company’s case and IBNR reserves include but are not limited to those described below.

Laws governing liability claims and judicial interpretations thereof can change over time, which can expand the scope of coverage anticipated by insurers when initially establishing reserves for claims. In addition, public attitudes regarding damage awards can result in judges and juries granting higher recoveries for damages than expected by claims personnel when claims are presented. In addition, these changes can result in both increased claim frequency and severity as both plaintiffs and their legal counsel perceive the opportunity for higher damage awards. Reserves established for claims that occurred in prior years would not have anticipated these legal changes and, therefore, could prove to be inadequate for the ultimate losses paid by the Company, causing the Company to experience adverse development and higher loss payments in future years.

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. One actuary’s reserve opinion may differ slightly from another actuary’s opinion. This is the primary reason why the IBNR reserve estimate is customarily reported as a range by a company’s actuary, which provides a company with an acceptable “range” to use in establishing its best estimate for IBNR reserves.

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. If the time to settle the claim extends over a period of years, the initial reserve may not anticipate an economic inflation rate that is significantly higher than the current inflation rate. This can also apply to IBNR reserves. Should the economic inflation rate increase significantly, it is likely that 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.

Factors exist that can drive the cost to settle claims for reasons other than standard inflation. For example, demand surge caused by a very large catastrophe (as in the case of Hurricane Katrina) has an impact on not only the availability and cost of building materials such as roofing and other materials, but also on the availability and cost of labor. Other factors such as increased vehicle traffic in an area not designed to handle the increased congestion and increased speed limits on busy roads are examples of changes that could cause claim severity to increase beyond what the Company’s historic reserves would reflect. In addition, unexpected increases in the labor costs and healthcare costs that underlie insured risks, changes in costs of building materials, or changes in commodity prices for insured crops may cause fluctuations in the ultimate development of the case reserves. During 2018, the state of Nevada mandated the incorporation of higher minimum liabilities for nonstandard auto insurance policies written in the state. Similar mandates became effective in July 2020 in the state of Arizona. While it is certain that these actions increase the average claim cost experienced in the state, the actual amount is subject to judgement until further claim experience is obtained.

When establishing IBNR reserves, the Company’s actuary takes into account many of the factors discussed above. One of the more important factors that is considered when setting reserves is the past or historical claim settlement experience. Our actuary considers 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. 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.

As discussed above, ~~NI Holdings~~the Company and its actuary utilize historical patterns to provide an accurate estimate of what will take place in the future. Should we experience an unexpected delay in reporting time (claims are slower to be reported than in the past), our actuary or we may underestimate the anticipated number of future claims, which could cause the ultimate loss we may experience to be underestimated. A lag in reporting may be caused by changes in how claims are reported (online vs. through company personnel), the type of business or lines of business the Company is writing, the Company’s distribution system (direct writer, independent agent, or captive agent), and the geographic area where the Company chooses to insure risk.

Due to the inherent uncertainty underlying loss reserve estimates, final resolution of the estimated liability for unpaid losses and LAE may be higher or lower than the related loss reserves at the reporting date. Therefore, actual paid losses, as claims are settled in the future, may be materially higher or lower in amount than current loss reserves. The Company reflects adjustments to the liability for unpaid losses and LAE in the results of operations during the period in which the estimates are changed.

The following table provides case and IBNR reserves for unpaid losses and LAE by segment.

Sensitivity of Major Assumptions Underlying the Liabilities for Unpaid Losses and Loss Adjustment Expenses

Management has identified the impact on earnings of various factors used in establishing loss reserves so that users of the Company’s financial statements can better understand how development on prior years’ reserves might impact the Company’s results of operations.

As of ~~March 31,~~June 30, 2021, the impact of a 1% change in our estimate for unpaid losses and LAE, net of reinsurance recoverables, on our net income, after federal income taxes of 21%, would be approximately ~~$808.~~$1,009.

Inflation is not explicitly selected in the loss reserve analysis. However, historical inflation is embedded in the estimated loss development factors. The following table displays the impact on 2020 net income, after federal income taxes of 21%, resulting from various changes from the inflation factor implicitly embedded in the estimated payment pattern in place as of December 31, ~~2020, which is deemed consistent with March 31, 2021.~~2020. A change in inflation may or may not fully impact loss payments in the future because some of the underlying expenses have already been paid. The table below assumes that any change in inflation will be fully reflected in future loss payments. This variance in future IBNR emergence could occur in one year or over multiple years, depending when the change is recognized.

Inflation includes actual inflation as well as social inflation which includes future emergence of new classes of losses or types of losses, change in judicial awards, and any other changes beyond assumed levels that impact the cost of claims.

When a claim is reported, claims personnel establish a case reserve for the estimated amount of the ultimate payment to the extent it can be determined or estimated. It is possible that the level of adequacy in the case reserve may differ from historical levels and/or the claims reporting pattern may change. The following table displays the impact on 2020 net income, after federal income taxes of 21%, resulting from various changes to the level of case reserves as of December 31, ~~2020, which is deemed consistent with March 31, 2021.~~2020. This variance in future IBNR emergence could occur in one year or over multiple years, depending when the change is recognized.

NI Holdings’ 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 pricing service at the reporting date for those or similar investments. Changes in unrealized investment gains or losses on the fixed income securities, net of applicable income taxes, are reflected directly in shareholders’ equity as a component of other comprehensive income (loss) and, accordingly, have no effect on net income (loss). Changes in unrealized investment gains or losses on equity securities are recorded in net income (loss). Investment income is recognized when earned, and realized capital gains and losses on investments are recognized when investments are sold, or an other-than-temporary impairment (“OTTI”) is recognized.

NI Holdings evaluates fixed income securities for OTTI at least on a quarterly basis. NI Holdings assesses whether OTTI is present when the fair value of a security is less than its amortized cost. OTTI is considered to have occurred with respect to fixed income securities if (1) an entity intends to sell the security, (2) it is more likely than not an entity will be required to sell the security before recovery of its amortized cost basis, or (3) the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis. When assessing whether the cost or amortized cost basis of the security will be recovered, the Company compares the present value of the expected cash flows likely to be collected, based on an evaluation of all available information

relevant to the collectability of the security, to the cost or amortized cost basis of the security. The shortfall of the present value of the cash flows expected to be collected in relation to the cost of amortized cost basis is referred to as the “credit loss”. If there is a credit loss, the impairment is considered to be other-than-temporary. If NI Holdings identifies that an OTTI loss has occurred, it then determines whether it intends to sell the security, or if it is more likely than not that the Company will be required to sell the security prior to recovering the cost or amortized cost basis less any current-period credit losses. If NI Holdings determines that it does not intend to sell, and it is not more likely than not that it will be required to sell the security, the amount of the impairment loss related to the credit loss will be recorded in earnings, and the remaining portion of the OTTI loss will be recognized in other comprehensive income (loss), net of income taxes. If NI Holdings determines that it intends to sell the security, or that it is more likely than not that it will be required to sell the security prior to recovering its cost or amortized cost basis less any current-period credit losses, the full amount of the OTTI will be recognized in earnings.

Fair values of interest rate sensitive instruments may be affected by increases and decreases in prevailing interest rates that generally translate, respectively, into decreases and increases in fair values of fixed income securities. The fair values of interest rate sensitive instruments also may be affected by the credit worthiness of the issuer, prepayment options, relative values of other investments, the liquidity of the instrument, and other general market conditions.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, NI Holdings’ investment portfolio experienced a decrease in net unrealized gains of ~~$5,248.~~$587.

~~The~~Net unrealized gains in the fixed income ~~portion~~portfolio decreased $4,322 during the six months ended June 30, 2021, in comparison with a decrease of $7,157 at the end of the first quarter. U.S Treasury yields declined in the second quarter, with the 10-year yield falling from 1.74% to 1.47%, driving up overall valuations across the portfolio in contrast with the steepening yield curve and increasing yields experienced ~~a decrease in~~during the first quarter. The net unrealized gains of ~~$7,157 during the three months ended March 31, 2021. This decrease was primarily the result~~$12,183 as of a steepening yield curve, with 10-year and 30-year U.S. Treasury yields increasing during the quarter. Rates on the short end of the yield curve remain anchored by expectations for a continued accommodative monetary policy stance by the Fed, with 2-year U.S. Treasury yields increasing only slightly during the quarter. The net decrease is reflected directly in shareholders’ equityJune 30, 2021 are reported as ~~a component of~~ accumulated other comprehensive ~~income.~~income within shareholders’ equity on the Company’s Consolidated Balance Sheets.

~~The equity portion of the portfolio experienced an increase in net~~Net unrealized gains ~~of $1,909 during the three months ended March 31, 2021, which is attributed to the continuing recovery~~ in the equity ~~markets. Equity market results show expectations of~~portfolio increased $3,735 during the six months ended June 30, 2021, driven by the continued strong performance for U.S. equities across most sectors with the S&P 500 reaching a ~~return to normalcy as travel and leisure sectors have recently risen while stocks benefitting from work-from-home have declined.~~new all-time high in late June. The net increase is included in net capital ~~gains (losses)~~gain (loss) on investments on the Company’s Consolidated Statements of Operations.

NI Holdings has evaluated each security and taken into account the severity and duration of any impairment, the current rating on the security (if any), and the outlook for the issuer according to independent analysts. The Company’s fixed income portfolio is managed by Conning Asset Management, who specializes in the handling of insurance company investment portfolios and participates in this evaluation.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, NI Holdings did not recognize any OTTIs of its investment securities. For the year ended December 31, 2020, NI Holdings did not recognize any OTTIs of its investment securities. Adverse investment market conditions, in addition to poor operating results of underlying investments, could result in impairment charges in the future.

For more information on the Company’s investments, see Note 64 to the Unaudited Consolidated Financial Statements, included elsewhere in this Form 10-Q.

NI Holdings uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Investment securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, NI Holdings may be required to record other assets at fair value ~~other assets~~ on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets. Accounting guidance on fair

value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows:

Level I:Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level II:Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level II includes fixed income securities with quoted prices that are traded less frequently than exchange traded instruments. Valuation techniques include matrix pricing which is a mathematical technique used widely in the industry to value fixed income securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Level III:Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

NI Holdings bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets where there exists limited or no observable market data and, therefore, are based primarily upon the estimates of NI Holdings or other third-parties, and are often calculated based on the characteristics of the asset, the economic and competitive environment, and other such factors. Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts which NI Holdings could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective period-end and have not been re-evaluated or updated for purposes of our financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end. Additionally, changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future valuations.

NI Holdings uses quoted values and other data provided by an independent pricing service in its process for determining fair values of its investments. The evaluations of such pricing services represent an exit price and a good faith opinion as to what a buyer in the marketplace would pay for a security in a current sale. This pricing service provides NI Holdings with one quote per instrument. For fixed income securities that have quoted prices in active markets, market quotations are provided. For fixed income securities that do not trade on a daily basis, the independent pricing service prepares estimates of fair value using a wide array of observable inputs including relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. The observable market inputs that the Company’s independent pricing service utilizes may include (listed in order of priority for use) benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers, and other reference data on markets, industry, and the economy. Additionally, the independent pricing service uses an option-adjusted spread model to develop prepayment and interest rate scenarios. The pricing service did not use broker quotes in determining any fair values of the Company’s investments at ~~March 31,~~June 30, 2021 or December 31, 2020.

Should the independent pricing service be unable to provide a fair value estimate, NI Holdings would attempt to obtain a non-binding fair value estimate from a number of broker-dealers and would review this estimate in conjunction with a fair value estimate reported by an independent business news service or other sources. In instances where only one broker-dealer provides a fair value for a fixed income security, NI Holdings would use that estimate. In instances where NI Holdings would be able to obtain fair value estimates from more than one broker-dealer, the Company would review the range of estimates and select the most appropriate value based on the facts and circumstances. Should neither the independent pricing service nor a broker-dealer provide a fair value estimate, NI Holdings would develop a fair value estimate based on cash flow analyses and other valuation techniques that utilize certain unobservable inputs. Accordingly, NI Holdings classifies such a security as a Level III investment.

The fair value estimates of NI Holdings’ investments provided by the independent pricing service at each period-end were utilized, among other resources, in reaching a conclusion as to the fair value of its investments.

Management reviews the reasonableness of the pricing provided by the independent pricing service by employing various analytical procedures. Management reviews all securities to identify recent downgrades, significant changes in pricing, and pricing anomalies on individual securities relative to other similar securities. This will include looking for relative consistency across securities in common sectors, durations, and credit ratings. This review will also include all fixed income securities rated lower than “A” by Moody’s or Standard & Poor’s. If, after this review, management does not believe the pricing for any security is a reasonable estimate of fair value, then it will seek to resolve the discrepancy through discussions with the pricing service. In its review, management did not identify any such discrepancies, and no adjustments were made to the estimates provided by the pricing service,

for the ~~three~~six month period ended ~~March 31,~~June 30, 2021, or the year ended December 31, 2020. The classification within the fair value hierarchy is then confirmed based on the final conclusions from the pricing review.

For more information on the Company’s fair value measurements, see Note 75 to the Unaudited Consolidated Financial Statements, included elsewhere in this Form 10-Q.

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.

As in the case of previous acquisitions, no deferred policy acquisition costs (“DAC”) were recorded in the acquisition of Westminster in accordance with purchase accounting guidance. Rather, a separate intangible asset representing the value of business acquired (“VOBA”) was valued at $4,750 and established at the closing date. This VOBA intangible asset was amortized into expense as the acquired unearned premiums are reported into income, in the same way as DAC, and was fully amortized at December 31, 2020. Policy acquisition costs relating to new business written by Westminster were deferred following the closing date. The release of the VOBA asset and the establishment of new DAC generally offset each other over the twelve months following the acquisition of Westminster.

At ~~March 31,~~June 30, 2021 and December 31, 2020, deferred policy acquisition costs and the related liability for unearned premiums were as follows:

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 LAE, and certain other costs expected to be incurred as the premium is earned. Future changes in estimates, the most significant of which is expected losses and LAE, may require adjustments to DAC. If the estimation of net realizable value indicates that DAC are not recoverable, they would be written off or a premium deficiency reserve would be established.

Current income taxes represent amounts paid to the federal government and certain states whose payment is based upon net income (subject to regulatory adjustments) generated by the Company. NI Holdings uses the asset and liability method of accounting for deferred income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the income tax bases of our assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion of the deferred income tax asset will not be realized. Total income taxes reflect both current income taxes and the change in the net deferred income tax asset or liability, excluding amounts attributed to accumulated other comprehensive income.

NI Holdings had gross deferred income tax assets of ~~$8,842~~$10,146 at ~~March 31,~~June 30, 2021 and $8,603 at December 31, 2020, arising primarily from unearned premiums, loss reserve discounting, and net operating loss carryforwards. 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 $931 was maintained at ~~March 31,~~June 30, 2021 and December 31, 2020.

NI Holdings had gross deferred income tax liabilities of ~~$15,762~~$17,261 at ~~March 31,~~June 30, 2021 and $16,429 at December 31, 2020, arising primarily from deferred policy acquisition costs, net unrealized capital gains on investments, and other intangible assets.

NI Holdings exercises significant judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments require NI Holdings to make projections of future taxable income. The judgments and estimates the Company makes in determining its deferred income tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require the Company to record a valuation allowance against its deferred income tax assets.

As of ~~March 31,~~June 30, 2021, NI Holdings had no material unrecognized income tax benefits or accrued interest and penalties. Federal income tax years ~~2014~~2017 through 2019 are open for examination.

NI Holdings’ results of operations are influenced by factors affecting the property and casualty insurance and crop insurance industries in general. The operating results of the United States property and casualty industry and crop insurance industry are subject to significant variations due to competition, weather, catastrophic events, changes in regulation, general economic conditions, rising medical expenses, judicial trends, fluctuations in interest rates, and other changes in the investment environment.

NI Holdings premium levels and underwriting results have been, and continue to be, influenced by market conditions. Pricing in the property and casualty insurance industry historically has been cyclical. During a soft market cycle, price competition is more significant than during a hard market cycle and makes it difficult to attract and retain properly priced business. During a hard market cycle, it is more likely that insurers will be able to increase their rates or profit margins. A hard market typically has a positive effect on premium growth. The markets that NI Holdings serve are diversified, which requires management to regularly monitor the Company’s performance and competitive position by line of business and geographic market to schedule appropriate rate actions.

Premiums in the multi-peril crop insurance business are primarily influenced by the number of acres, commodity prices, and types of crops insured because the rates are established by the RMA rather than individual insurance carriers. The expected loss experience of the ~~MPCI~~multi-peril crop insurance business for the calendar year may also significantly affect the reported net earned premiums and losses due to the risk-sharing arrangement with the federal government. Multi-peril crop insurance premiums are generally written in the second quarter, and earned ratably over the period of risk, which extends into the fourth quarter. However, as was the case in 2020, if the Company experiences a higher than average number of claims early in the risk period, recognition of earned premiums may be accelerated due to the shortened risk period.

Premiums in the crop hail insurance business are also generally written in the second quarter, but earned over a shorter period of risk than multi-peril crop insurance.

Premiums in the personal lines of business (private passenger auto and home and farm) are generally written and earned throughout the year based on their coverage periods. Losses on this business are also incurred throughout the year, but usually are more frequent and/or severe during periods of weather-related ~~activity in the second and third quarters.~~activity.

Premiums in the commercial lines of business are generally written and earned throughout the year. Losses on this business are also incurred throughout the ~~year, but generally are more frequent during the first and second quarters.~~year.

For more information on the Company’s results of operations by segment, see Note 2119 to the Unaudited Consolidated Financial Statements, included elsewhere in this Form 10-Q.

The consolidated net income for NI Holdings was $9,782 for the three months ended March 31, 2021, compared to net loss of $3,555 for the three months ended March 31, 2020. The major components of NI Holdings’ operating revenues and net income for the two periods were as follows:

Beginning in March 2020, the global pandemic associated with COVID-19 and related economic conditions began to impact the Company’s results. The immediate financial impact to the Company was volatility in our investment portfolio and significant declines in fair value on the Company’s equity investments, attributable to the disruption in global financial markets. The Company’s underwriting results, especially in the private passenger auto and non-standard auto ~~segment,~~segments, were impacted during the second and third quarters of 2020 as a result of ~~reduced economic activity.~~

~~Vaccinations for COVID-19 are~~fewer miles being rolled out at an increasing pace in the United States. The levels of case counts, hospitalizations, and deaths decreased from 2020, resulting in fewer state health mandates and accelerating economic recovery in many sectors. Congress passed a $1.9 trillion stimulus bill in March 2021, which will result in the receipt of stimulus checks for millions of recipients. This represents the third check for many citizens in the last year. The Federal Reserve remains committed to its current monetary policy, which balances holding the federal funds rate near zero while monitoring increasing expectations around inflation rates. However, the travel and entertainment industries continue to be impacted,driven and the ~~related economic challenges~~increased unemployment rate in ~~the~~our Chicago and Las Vegas ~~area~~markets.

During the first six months of 2021, we have ~~adversely impacted~~continued to see a reduced impact from COVID-19 as economic activity has returned to near pre-pandemic levels. However, a possible resurgence of COVID-19 could impact our non-standard auto business by limiting our ability to effectively grow this business. Despite improved overall economic conditions in the United States, we expect to face continued risks associated with the pandemic over the remainder of the year, including unemployment and financial market volatility.results.

The consolidated net loss for NI Holdings was $2,734 for the three months ended June 30, 2021, compared to net income of $18,767 for the three months ended June 30, 2020. The consolidated net income for NI Holdings was $7,048 for the six months ended June 30, 2021, compared to net income of $15,212 for the six months ended June 30, 2020.

The major components of NI Holdings’ operating revenues and net income (loss) for the two periods were as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Revenues:
Net premiums earned	$	76,281		$	82,006	$	139,416		$	140,778
Fee and other income		520			446		837			808
Net investment income		1,710			2,018		3,246			3,989
Net capital gain (loss) on investments		4,701			11,197		10,512			(3,722	)
Total revenues		83,212			95,667		154,011			141,853

Components of net income:
Net premiums earned		76,281			82,006		139,416			140,778
Losses and loss adjustment expenses		62,918			52,364		99,807			82,786
Amortization of deferred policy acquisition costs and other underwriting and general expenses		23,589			19,625		44,827			39,784
Underwriting gain (loss)		(10,226	)		10,017		(5,218	)		18,208

Fee and other income		520			446		837			808
Net investment income		1,710			2,018		3,246			3,989
Net capital gain (loss) on investments		4,701			11,197		10,512			(3,722	)
Income (loss) before income taxes		(3,295	)		23,678		9,377			19,283
Income tax expense (benefit)		(561	)		4,911		2,329			4,071
Net income (loss)	$	(2,734	)	$	18,767	$	7,048		$	15,212

NI Holdings’ net premiums earned for the three months ended ~~March 31,~~June 30, 2021 ~~increased $4,363,~~decreased $5,725, or ~~7.4%~~7.0%, compared to the three months ended ~~March 31,~~June 30, 2020. Net premiums earned for the six months ended June 30, 2021 decreased $1,362, or 1.0%, compared to the six months ended June 30, 2020.

Direct premiums earned for the ~~first~~second quarter of 2021 increased ~~$6,350,~~$4,607, or ~~10.2%~~5.6%, from the second quarter of 2020. Direct premiums earned for the first half of 2021 increased $10,957, or 7.6%, from the first ~~quarter~~half of 2020. ~~This~~The increase in both periods was primarily driven by growth in our Westminster commercial ~~business.~~business, and to a lesser extent our non-standard auto business, and partially offset by less earned premium recognized in multi-peril crop compared to a year ago. The growth in our Westminster commercial business was driven primarily by a continuation of favorable market conditions, the positive impact of Westminster’s financial size category, and the A.M. Best rating upgrade. Our non-standard auto business has benefited from the improved economic environment, especially in the Chicago market where our non-standard auto business is concentrated. The decrease in multi-peril crop was a result of accelerated earning of premium during 2020 from prevented planting claims, whereas premiums earned during 2021 are being recognized over the normal period of risk.

Assumed premiums earned ~~which represents~~increased modestly related to our participation in the assumed domestic and international business in our all other ~~segment, decreased slightly.~~segment. Ceded premiums earned increased ~~$1,835, reflecting~~$11,165 in the second quarter of 2021 from the second quarter of 2020, and increased $13,000 in the first half of 2021 from the first half of 2020. The increase in both periods was primarily due to the anticipated loss experience of our multi-peril crop business, an increase in our overall reinsurance coverage limits, and the growth in our business. The increase in ceded premiums related to our multi-peril crop business was the result of losses expected from this year’s extreme drought conditions across North and South Dakota, as we anticipate that crop yields will be significantly impacted. We placed a higher number of multi-peril crop policies in the assigned risk fund of the Standard Reinsurance Agreement for 2021, resulting in higher levels of premiums and losses being ceded to the federal government.

Direct premiums written for the three months ended ~~March 31,~~June 30, 2021 were ~~$72,420,~~$125,552, compared to ~~$62,972~~$112,759 a year ago. ~~This~~Direct premiums written for the first half of 2021 were $197,972, compared to $175,731 for the first half of 2020. The increase in both periods was driven by growth in ~~both~~ our Westminster commercial business, ~~and~~our non-standard auto ~~business. Personal lines~~business, and multi-peril crop insurance as a result of ~~business (private passenger auto, home and farm) also grew due to continued growth in South Dakota and modest growth in North Dakota, while premiums in Nebraska were flat.~~higher commodity prices. We anticipate that commercial written premium growth will remain strong over the remainder of 2021, while continued growth in the non-standard auto business is more unpredictable due to the factors associated with the ~~pandemic and related economic implications.~~current market conditions.

NI Holdings’ net losses and LAE for the three months ended ~~March 31,~~June 30, 2021 increased ~~$6,467,~~$10,554, or ~~21.3%~~20.2%, compared to the three months ended ~~March 31,~~June 30, 2020. ~~As a result, the Company’s loss~~Net losses and LAE ~~ratio also increased.~~for the six months ended June 30, 2021 increased $17,021, or 20.6%, compared to the six months ended June 30, 2020.

The Company’s year-to-date loss and LAE experience increased year-over-year across ~~most~~all segments of the Company.

Losses increased ~~modestly~~ year-over-year in our private passenger auto and non-standard auto segments. Loss experience in both lines of business was favorable during the second quarter of 2020 due to reduced miles driven by our insureds while pandemic-related restrictions were in place. Loss experience in private passenger auto ~~while non-standard auto reported better than normal loss experience.~~ during the second quarter of 2021 has been adversely impacted by an increased frequency of uninsured/underinsured motorist liability claims.

In home and farm, losses and LAE increased ~~modestly~~as weather-related losses returned to normal levels during June. Those losses included a large hail storm in North Dakota which is expected to exceed our catastrophe reinsurance limit. In our “all other” segment, loss experience from the assumed business increased after favorable experience during the second quarter of 2020.

Losses in the commercial segment increased from a year ago, but the loss ratio improved due to ~~more weather activity in 2021.~~

~~The commercial segment experienced~~ a higher ~~than expected first quarter 2021 loss ratio due to an elevated number~~level of ~~fires and slip-and-fall claims due to the winter weather on the east coast. Most of these losses fell beneath the reinsurance retention limit, resulting in a decrease in ceded losses and LAE.~~premiums earned.

~~The first quarter 2020 results for our crop business included unfavorable loss development of $2,367 on a net basis from the 2019 crop season. For the first quarter of 2021,~~In the crop segment, ~~includes $561~~we continue to monitor the impact of ~~net unfavorable loss development due primarily to late development within a moisture index component~~this year’s extreme drought conditions across North and South Dakota on our multi-peril crop business. We expect that crop yields will be significantly reduced and will have an adverse impact on our anticipated multi-peril crop losses. In anticipation of the dry weather, we placed a higher number of multi-peril crop policies in the assigned risk fund of the Standard Reinsurance Agreement for 2021, resulting in higher levels of premiums and losses being ceded to the federal ~~crop program.~~government. Even though we expect the direct loss ratio to be much greater than 100%, our net losses will be limited.

During the three months ended ~~March 31,~~June 30, 2021, reported losses and LAE included ~~$2,523~~$4,750 of net ~~unfavorable~~favorable development on prior accident years, compared to ~~$510~~$3,042 of net ~~unfavorable~~favorable development on prior accident years during the three months ended ~~March 31,~~June 30, 2020. During the six months ended June 30, 2021, reported losses and LAE included $2,197 of net favorable development on prior accident years, compared to $2,532 of net favorable development on prior accident years during the six months ended June 30, 2020. Net favorable development is the result of prior years’ claims settling for less than originally estimated, while net unfavorable development is the result of prior years’ claims settling for more than originally estimated. Adjustments to our original estimates resulting from claims are not made until the period in which there is reasonable evidence that an adjustment to the reserve is appropriate.

Amortization of Deferred Policy Acquisition Costs and Other Underwriting and General Expenses

Total underwriting and general expenses, including amortization of deferred policy acquisition costs, increased ~~$1,079,~~$7,167, or ~~5.4%~~36.5%, during the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020. These expenses increased $8,246, or 20.7%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Underlying expenses were ~~$79 lower~~$2,006 higher in the three months ended ~~March 31,~~June 30, 2021 compared to a year ago. Acquisition costs related to the increase in direct written premiums were partially offset by reduced amortization of other intangibles. Underlying expenses were $1,927 higher in the six months ended June 30, 2021 compared to a year ago. Acquisition costs related to the increase in direct written premiums were offset by reduced consulting fees and amortization of other intangibles.

Expense deferrals were ~~$3,042~~$3,099 higher in the three months ended ~~March 31,~~June 30, 2021 compared to 2020, while amortization of those costs was ~~$4,200~~$5,057 higher in 2021. ~~The increase~~Expense deferrals were $6,141 higher in ~~amortization is partly attributable to~~ the ~~increase in commercial business sold throughout 2020.~~

~~The expense ratio of 33.6% for the three~~six months ended ~~March 31,~~June 30, 2021 compared to 2020, while amortization of those costs was ~~0.7 percentage points lower~~$9,257 higher in 2021. These increases were primarily due to strong year-over-year growth in our commercial and non-standard auto segments which generally pay higher agent commissions than our other lines. As our mix of business has shifted and these premiums continue to be earned, the ~~expense ratio in the first quarter~~related deferral and amortization of ~~2020, as premium growth outpaced expenses.~~expenses have increased.

Underwriting gain (loss) measures the pretax profitability of a company’s insurance business. It is derived by subtracting losses and LAE, amortization of deferred policy acquisition costs, and other underwriting and general expenses from net premiums earned.

The ~~gain~~results from underwriting operations for the three months ended ~~March 31,~~June 30, 2021 decreased ~~$3,183~~$20,243 when compared to 2020. The results from underwriting operations for the six months ended June 30, 2021 decreased $23,426 when compared to 2020.

The combined ratio for the private passenger auto segment increased ~~8.6~~34.4 percentage points ~~year-over-year.~~for the three months ended June 30, 2021 compared to 2020. The combined ratio for the private passenger auto segment increased 21.5 percentage points for the six months ended June 30, 2021 compared to 2020. Losses and LAE experience increased due to a ~~higher~~return to average frequency of ~~losses.~~auto damage claims, a higher level of uninsured/underinsured motorist liability claims, and unfavorable loss reserve development. Non-standard auto’s combined ratio ~~decreased~~increased due to ~~improved~~a return to normal claims frequency and unfavorable loss ~~experience.~~reserve development.

The combined ratio for the home and farm segment deteriorated due to increased weather-related activity in 2021, including a large hail storm in June. The commercial segment combined ratio improved as ~~North Dakota’s~~a result of favorable loss experience ~~returned~~compared to ~~more normal levels after a very favorable winter in~~ 2020. ~~For the commercial segment, Westminster’s loss experience included an elevated number of fire losses as well as slip-and-fall claims due to ice and snow during the first quarter of 2021.~~

~~For~~In the crop segment, we continue to monitor the ~~underwriting results improved due to less unfavorable loss reserve development compared to~~impact of this year’s extreme drought conditions across North and South Dakota on our multi-peril crop business. We expect that crop yields will be significantly reduced and will have an adverse impact on our anticipated multi-peril crop losses. In anticipation of the dry weather, we placed a ~~year ago. The combined ratios are not meaningful for first quarter~~higher number of multi-peril crop policies in the ~~crop segment due~~assigned risk fund of the Standard Reinsurance Agreement for 2021, resulting in higher levels of premiums and losses being ceded to the ~~lack of earned premiums.~~federal government. Even though we expect the direct loss ratio to be much greater than 100%, our net losses will be limited.

NI Holdings had fee and other income of ~~$317~~$520 for the three months ended ~~March 31,~~June 30, 2021, compared to ~~$362~~$446 for the three months ended ~~March 31,~~June 30, 2020. Fee income attributable to the non-standard auto segment is a key component in measuring its profitability. Fee income on this business increased slightly to ~~$332~~$361 for the three months ended ~~March 31,~~June 30, 2021 from ~~$329~~$328 for the three months ended ~~March 31,~~June 30, 2020.

NI Holdings had fee and other income of $837 for the six months ended June 30, 2021, compared to $808 for the six months ended June 30, 2020. Fee income on the non-standard auto business increased slightly to $693 for the six months ended June 30, 2021 from $657 for the six months ended June 30, 2020.

The following table sets forth our average cash and invested assets, net investment income, and return on average cash and invested assets for the reported periods:

Investment income, net of investment expense, decreased ~~$435~~$308 for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020. ~~This decrease is attributable~~Investment income, net of investment expense, decreased $743 for the six months ended June 30, 2021 compared to the ~~temporary amount~~six months ended June 30, 2020. These decreases were primarily driven by the continued impact of invested assets placed in cash and short term equivalents during the current period, due to the movement of funds between insurance subsidiaries while implementing the intercompany reinsurance pooling agreement, as well as lower reinvestment ~~rates.~~ rates in the fixed income portfolio.

The ~~weighted average gross yield on invested assets decreased to 2.0% in 2021 from 2.7% in 2020.~~

~~As of March 31, 2021, our overall~~Company's fixed-income portfolio book yield ~~for our combined fixed income and equity portfolio~~declined 35 basis points year-over-year, from 2.82% at June 30, 2020 to 2.47% at June 30, 2021. This was ~~2.4%. The average duration was 4.2 years at March 31, 2021.~~

~~The decline in the Company’s investment yields is~~ driven by a combination of factors, including a persistent low reinvestment rate environment, ongoing maturities of existing holdings with ~~high~~higher embedded yields, and significant cash inflows to the investment portfolio from the ~~Company’s~~Company's business operations. The dividend yield of the ~~Company’s~~ equity portfolio also declined ~~given~~as the ongoing rally in U.S. equity ~~markets.~~markets has not resulted in corresponding changes to dividend payment patterns.

NI Holdings had realized capital gains on investment of ~~$3,902~~$2,875 and $6,777 for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to gains of ~~$1,015~~$370 and $1,385 for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively.

NI Holdings reported a net ~~gain~~gains of ~~$1,909~~$1,826 and $3,735 attributed to the change in unrealized appreciation of its equity securities for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to a net gain of $10,827 and a net loss of ~~$15,934~~$5,107 for the three and six months ended ~~March 31,~~June 30, 2020, respectively. The reduction in net gain compared to the prior year quarter was due to higher than normal unrealized gains in the equity portfolio in the second quarter of 2020 at the height of the post COVID-19 lockdown economic recovery following severe first quarter 2020 declines. From a year-to-date comparison perspective, the net gain increased in 2021 due to the continued strong performance in the U.S. equity markets which increased unrealized gains significantly in comparison with the first half of 2020.

NI Holdings has evaluated each fixed income security in a loss position and taken into account the severity and duration of any potential impairment, the current rating on the bond, and the outlook for the issuer according to independent analysts. The Company recorded no OTTIs in the three or six months ended ~~March 31,~~June 30, 2021 and 2020.

The Company’s fixed income securities and equity securities are classified as available for sale because we will, from time to time, make sales of securities that are not impaired, consistent with our investment goals and policies. At ~~March 31,~~June 30, 2021, the Company had net unrealized gains on fixed income securities of ~~$9,348~~$12,183 and net unrealized gains on equity securities of ~~$29,658.~~$31,484. At December 31, 2020, the Company had net unrealized gains on fixed income securities of $16,505 and net unrealized gains on equity securities of $27,749.

Strong U.S. retail sales and durable goods reports led to a sharp increase in first quarter Gross Domestic Product growth estimates. The steepening yield curve has received much attention during the first quarter. However, rates for two years and shorter remain anchored. Equity market results show expectations of a return to normalcy as travel and leisure sectors have recently risen while stocks benefitting from work-from-home have declined. Core inflation numbers are expected to move above 2% due to comparisons with weak prices during the initial lockdown in first quarter 2020. This is likely to be transitory as many believe there is too much slack in the economy to envision a scenario of substantially higher inflation this year.

For the three months ended ~~March 31,~~June 30, 2021, NI Holdings had pre-tax loss of $3,295 compared to pre-tax income of $23,678 for the three months ended June 30, 2020. The decrease in pre-tax results was largely attributable to reduced underwriting profitability.

For the six months ended June 30, 2021, NI Holdings had pre-tax income of ~~$12,672~~$9,377 compared to pre-tax ~~loss~~income of ~~$4,395~~$19,283 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. The ~~increase~~decrease in pre-tax results was largely attributable to ~~the $17,843 fluctuation in the change in net unrealized gains in our equity portfolio between the first quarter of 2021 and 2020,~~reduced underwriting profitability, partially offset by the ~~decrease~~increase in ~~first quarter 2021 underwriting results.~~net capital gain (loss) on investments.

NI Holdings recorded income tax ~~expense~~benefit of ~~$2,890~~$561 for the three months ended ~~March 31,~~June 30, 2021, compared to income tax ~~benefit~~expense of ~~$840~~$4,911 for the three months ended ~~March 31,~~June 30, 2020. Our effective tax rate for the second quarter of 2021 was 17.0% compared to an effective tax rate of 20.7% for the second quarter of 2020.

NI Holdings recorded income tax expense of $2,329 for the six months ended June 30, 2021, compared to income tax expense of $4,071 for the six months ended June 30, 2020. Our effective tax rate for the first half of 2021 was 24.8% compared to an effective tax rate of 21.1% for the first half of 2020.

A portion of income taxes, and the effective tax rates, relates to state income taxes primarily for the state of Illinois. ~~Our effective tax rate for the first quarter of 2021 was 22.8% compared to an effective tax rate of 19.1% for the first quarter of 2020.~~

For the three months ended ~~March 31,~~June 30, 2021, NI Holdings had net loss before non-controlling interest of $2,734 compared to net income of $18,767 for the three months ended June 30, 2020. This decrease was primarily attributable to reduced underwriting profitability.

For the six months ended June 30, 2021, NI Holdings had net income before non-controlling interest of ~~$9,782~~$7,048 compared to net ~~loss~~income of ~~$3,555~~$15,212 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. This ~~increase~~decrease in net income was primarily attributable to ~~the fluctuation in the change in net unrealized gains in our equity portfolio between the first quarter of 2021 and 2020,~~reduced underwriting profitability, partially offset by the ~~decrease~~increase in ~~first quarter 2021 underwriting results.~~net capital gain (loss) on investments.

For the three months ended ~~March 31,~~June 30, 2021, NI Holdings had annualized return on average equity, after non-controlling interest, of ~~11.2%~~-3.0% compared to annualized return on average equity, after non-controlling interest, of ~~-4.7%~~24.2% for the three months ended ~~March 31,~~June 30, 2020.

For the six months ended June 30, 2021, NI Holdings had annualized return on average equity, after non-controlling interest, of 4.1% compared to annualized return on average equity, after non-controlling interest, of 9.7% for the six months ended June 30, 2020.

Average equity is calculated as the average between beginning and ending equity excluding non-controlling interest for the period.

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Assets:
Cash and investments	$	495,465	$	494,363	$	511,400	$	494,363
Premiums and agents’ balances receivable		49,325		48,523		84,463		48,523
Deferred policy acquisition costs		26,575		23,968		29,657		23,968
Reinsurance recoverables on losses						24,574		8,710
Receivable from Federal Crop Insurance Corporation		5,182		6,646		17,191		6,646
Property and equipment		9,843		9,899		9,971		9,899
Goodwill and other intangibles		18,076		18,194		17,958		18,194
Other assets		16,919		16,010		13,211		7,300
Total assets	$	621,385	$	617,603	$	708,425	$	617,603

Liabilities:
Unpaid losses and loss adjustment expenses	$	111,522	$	105,750	$	152,340	$	105,750
Unearned premiums		123,458		119,363		161,592		119,363
Deferred income taxes						8,046		8,757
Westminster consideration payable		12,720		19,287		12,820		19,287
Other liabilities		21,095		24,331		22,688		15,574
Total liabilities		268,795		268,731		357,486		268,731

Shareholders’ equity		352,590		348,872		350,939		348,872
Total liabilities and shareholders’ equity	$	621,385	$	617,603	$	708,425	$	617,603

At ~~March 31,~~June 30, 2021, NI Holdings’ total assets increased by ~~$3,782,~~$90,822, or ~~0.6%~~14.7%, from December 31, 2020. Cash and investments increased due to normal operations. Premiums and agents’ balances receivable increased due to the recognition of crop insurance written premiums. Reinsurance recoverables on losses and the receivable from the Federal Crop Insurance Corporation increased due to the anticipated ceding of multi-peril crop business losses to the federal government. Deferred policy acquisition costs increased due to the growth across all non-crop segments.

At ~~March 31,~~June 30, 2021, total liabilities increased by ~~$64~~$88,755, or 33.0%, from December 31, 2020. Unpaid losses and loss adjustment expenses increased due to higher loss experience during the first ~~quarter~~six months of ~~2021.~~2021, especially the multi-peril crop business. Unearned premiums increased due to an increase in direct written ~~premiums.~~premiums in all segments including the multi-peril crop business. The first installment of $6,667 was paid to the former shareholder of ~~Westminster.~~Westminster during the first quarter of 2021. Other liabilities ~~decreased~~increased due to ~~payment of employee~~commission and ~~agent bonuses.~~processing fee accruals.

Total shareholders’ equity increased by ~~$3,718, or 1.1%,~~$2,067 during the ~~three~~six months ended ~~March 31,~~June 30, 2021. The increase in shareholders’ equity reflects a consolidated net income of ~~$9,782~~$7,048 for the ~~three-month~~six-month period, share repurchases of ~~$596,~~$2,267, and ~~lower~~a decrease in the fair ~~values~~market value of our fixed income ~~securities.~~portfolio.

NI Holdings 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. The primary sources of funds are premium collections, investment earnings, and maturing investments. In 2017, we raised $93,145 in net proceeds from our initial public offering (“IPO”), which we planned to use for strategic acquisitions.

In 2018, we used $17,000 for the acquisition of Direct Auto. On January 1, 2020, we acquired Westminster for $40,000. We paid $20,000 at the time of closing. The terms of the acquisition agreement included payment of the remaining $20,000, subject to certain adjustments, in three equal installments on each of the first and second anniversaries of the closing, and on the first business day of the month preceding the third anniversary of the closing. The first installment was paid during the first quarter of 2021.

We currently anticipate that cash generated from our operations and available from our investment portfolio, along with the remaining IPO net proceeds, will be sufficient to fund our operations.

The Company’s philosophy is to provide sufficient cash flows from operations to meet its obligations in order to minimize the forced sales of investments. The Company maintains a portion of its investment portfolio in relatively short-term and highly liquid assets to ensure the availability of funds.

The change in cash and cash equivalents for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 were as follows:

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash provided by operating activities totaled ~~$10,794~~$21,708 compared to ~~$3,616~~$21,803 a year ago. ~~This increase was driven by consolidated~~Consolidated net income of ~~$9,782~~$7,048 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to consolidated net ~~loss~~income of ~~$3,555~~$15,212 for the same period a year ago. ~~An increase~~The decrease in ~~amortization of deferred acquisition costs~~consolidated net income, along with changes in net capital gain (loss) on investments, reinsurance recoverables on losses, and ~~an increase~~the receivable from the Federal Crop Insurance Corporation, were offset by the changes in unpaid losses and LAE ~~offset by a net decrease in unrealized gains on equity investments, also contributed to the increase when evaluating net cash from operating activities.~~and unearned premiums.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash used by investing activities totaled ~~$51,439~~$52,140 compared to ~~$7,578~~$9,263 a year ago. In the first ~~quarter~~half of 2021, the Company invested excess cash generated from operations and the implementation of the intercompany reinsurance pooling ~~reinsurance~~ agreement into longer term investments.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash used by financing activities totaled ~~$7,749~~$9,422 compared to ~~$1,533~~$6,814 a year ago. The Company paid the first installment of $6,667 of the additional consideration for Westminster during the first quarter of 2021. The Company repurchased shares of its own common stock for ~~$596~~$2,267 during the first ~~quarter~~half of 2021, compared to ~~$1,502~~$6,783 during 2020.

As a standalone entity, and outside of the net proceeds from the IPO, NI Holdings’ principal source of long-term liquidity will be dividend payments from its directly-owned subsidiaries.

Nodak Insurance is restricted by the insurance laws of North Dakota as to the amount of dividends or other distributions it may pay to NI Holdings. North Dakota law sets the maximum amount of dividends that may be paid by Nodak Insurance during any twelve-month period after notice to, but without prior approval of, the North Dakota Insurance Department. This amount cannot exceed the lesser of (i) 10% of the Company’s surplus as regards policyholders as of the preceding December 31, or (ii) the Company’s statutory net income for the preceding calendar year (excluding realized capital gains), less any prior dividends paid during such twelve-month period. In addition, any insurance company other than a life insurance company may carry forward net income from the preceding two calendar years, not including realized capital gains, less any dividends actually paid during those two calendar years. Dividends in excess of this amount are considered “extraordinary” and are subject to the approval of the North Dakota Insurance Department.

The amount available for payment of dividends from Nodak Insurance to us during 2021 without the prior approval of the North Dakota Insurance Department is approximately $21,628 based upon the ~~policyholders’~~ surplus of Nodak Insurance at December 31, 2020. Prior to its payment of any extraordinary dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has

the power to limit or prohibit dividend payments if an insurance company is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Nodak Insurance during the ~~three~~six months ended ~~March 31,~~June 30, 2021. The Nodak Insurance Board of Directors declared and paid a $6,000 dividend to NI Holdings during the year ended December 31, 2020.

Direct Auto is restricted by the insurance laws of Illinois as to the amount of dividends or other distributions it may pay to NI Holdings. Illinois law sets the maximum amount of dividends that may be paid by Direct Auto during any twelve-month period after notice to, but without prior approval of, the Illinois Department of Insurance. This amount cannot exceed the greater of (i) 10% of the Company’s surplus as regards policyholders as of the preceding December 31, or (ii) the Company’s statutory net income for the preceding calendar year (excluding realized capital gains). Dividends in excess of this amount are considered “extraordinary” and are subject to the approval of the Illinois Department of Insurance.

NI Holdings has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital reserves.

For a discussion of recent accounting pronouncements, see Note 52 to the Unaudited Consolidated Financial Statements, included elsewhere in this Form 10-Q.

The Company’s assessment of market risk as of ~~March 31,~~June 30, 2021 indicates there have been no material changes in the quantitative and qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-15(b)) as of ~~March 31,~~June 30, 2021. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~March 31,~~June 30, 2021, to which this report relates that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

We are party to litigation in the normal course of business. Based upon information presently available to us, we do not consider any litigation to be material. However, given the uncertainties attendant to litigation, we cannot assure you that our results of operations and financial condition will not be materially adversely affected by any litigation.

There have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

All dollar amounts included in Item 2 herein, except per share amounts, are in thousands.

The Company has not sold any unregistered securities within the past three years.

On January 17, 2017, the SEC declared effective our registration statement on Form S-1 registering our common stock. On March 13, 2017, the Company completed the IPO of 10,350,000 shares of common stock at a price of $10.00 per share. The Company received net proceeds of $93,145 from the offering, after deducting underwriting discounts and offering expenses. Griffin Financial Group, LLC acted as our placement agent in connection with the IPO.

Direct Auto was acquired on August 31, 2018 with $17,000 of the net proceeds from the IPO.

Westminster was acquired on January 1, 2020 for a purchase price of $40,000, subject to certain adjustments. The Company paid $20,000 from the net proceeds from the IPO at time of closing. The terms of the acquisition agreement included payment of the remaining $20,000, subject to certain adjustments, in three equal installments on each of the first and second anniversaries of the closing, and on the first business day of the month preceding the third anniversary of the closing. The first installment was paid during the first quarter of 2021. The Company anticipates using the net proceeds from the IPO to satisfy these obligations.

From time to time, the Company may also repurchase its own stock. These repurchases may be used to satisfy its obligations under the equity incentive plans or may be done for other reasons. To date, the Company has used the net proceeds from the IPO to fund these buyback programs.

There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on January 17, 2017.

On 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. During the year ended December 31, 2020, we completed the repurchase of 454,443 shares of our common stock for $7,238 under this new authorization. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, we repurchased an additional ~~32,326~~118,531 shares of our common stock for ~~$596.~~$2,266.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on ~~May 5,~~August 4, 2021.

	March 31, 2021				June 30, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due to mature:
One year or less	$	22,846	$	23,071	$	22,016	$	22,264
After one year through five years		87,767		91,773		79,331		83,012
After five years through ten years		85,183		86,921		91,414		94,945
After ten years		37,683		38,867		45,029		47,266
Mortgage / asset-backed securities		118,503		120,698		119,765		122,251
Total fixed income securities	$	351,982	$	361,330	$	357,555	$	369,738

	December 31, 2020
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	17,722	$	17,933
After one year through five years		86,709		91,457
After five years through ten years		59,408		64,987
After ten years		30,322		32,684
Mortgage / asset-backed securities		109,744		113,349
Total fixed income securities	$	303,905	$	320,410

	March 31, 2021			December 31, 2020			Estimated Useful Life	June 30, 2021			December 31, 2020			Estimated Useful Life
Cost:
Real estate	$	15,327		$	15,313		10-31 years	$	15,327		$	15,313		10-31 years
Electronic data processing equipment		1,289			1,271		5-7 years		1,547			1,271		5-7 years
Furniture and fixtures		2,867			2,867		5-7 years		2,908			2,867		5-7 years
Automobiles		1,271			1,275		2-3 years		1,271			1,275		2-3 years
Gross cost		20,754			20,726				21,053			20,726

Accumulated depreciation		(10,911	)		(10,827	)			(11,082	)		(10,827	)
Total property and equipment, net	$	9,843		$	9,899			$	9,971		$	9,899

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Non-standard auto from acquisition of Primero	$	2,628	$	2,628	$	2,628	$	2,628
Commercial from acquisition of Westminster		6,756		6,756		6,756		6,756
Total	$	9,384	$	9,384	$	9,384	$	9,384

	Three Months Ended March 31,						Six Months Ended June 30,
	2021			2020			2021			2020
Shares outstanding, beginning of period		21,318,638			22,119,380			21,318,638			22,119,380
Treasury shares repurchased through stock repurchase authorization		(32,326	)		(123,264	)		(118,531	)		(519,598	)
Issuance of treasury shares for vesting of restricted stock units		86,460			19,042			102,060			31,442
Shares outstanding, end of period		21,372,772			22,015,158			21,302,167			21,631,224

	Three Months Ended March 31, 2021									Three Months Ended March 31, 2020
	Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total			Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total
Net income (loss)	$	9,669		$	113		$	9,782		$	(3,587	)	$	32		$	(3,555	)

Other comprehensive loss, before income taxes:
Holding losses on investments		(6,763	)		(293	)		(7,056	)		(4,456	)		(86	)		(4,542	)
Reclassification adjustment for net realized capital gain included in net income (loss)		(101	)		0-			(101	)		(57	)		(5	)		(62	)
Other comprehensive loss, before income taxes		(6,864	)		(293	)		(7,157	)		(4,513	)		(91	)		(4,604	)
Income tax benefit related to items of other comprehensive loss		1,441			62			1,503			948			19			967
Other comprehensive loss, net of income taxes		(5,423	)		(231	)		(5,654	)		(3,565	)		(72	)		(3,637	)

Comprehensive income (loss)	$	4,246		$	(118	)	$	4,128		$	(7,152	)	$	(40	)	$	(7,192	)

Fair Value of Consideration:
Cash consideration transferred	$	20,000
Present value of future cash consideration		18,787
Total cash consideration	$	38,787

Fair Value of Identifiable Assets Acquired and Liabilities Assumed:
Identifiable net assets:
Cash and cash equivalents	$	19,297
Fixed income securities		12,073
Equity securities		2,705
Other investments		735
Premiums and agents' balances receivable		8,507
Reinsurance recoverables on losses		763
Accrued investment income		70
Property and equipment		2,376
Federal income tax recoverable		138
State insurance licenses (included in goodwill and other intangibles)		1,800
Distribution network (included in goodwill and other intangibles)		6,700
Trade name (included in goodwill and other intangibles)		500
Value of business acquired (included in goodwill and other intangibles)		4,750
Other assets		76
Unpaid losses and loss adjustment expenses		(8,568	)
Unearned premiums		(16,611	)
Deferred income taxes, net		(1,583	)
Reinsurance premiums payable		(565	)
Accrued expenses and other liabilities		(1,132	)
Total identifiable net assets	$	32,031

Goodwill	$	6,756

	March 31, 2021									June 30, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	15,195	$	680	$	(145	)	$	15,730	$	14,173	$	664	$	(80	)	$	14,757
Obligations of states and political subdivisions		65,635		2,594		(269	)		67,960		68,951		3,133		(122	)		71,962
Corporate securities		152,649		5,730		(1,437	)		156,942		154,666		6,543		(441	)		160,768
Residential mortgage-backed securities		41,001		1,299		(206	)		42,094		40,992		1,019		(107	)		41,904
Commercial mortgage-backed securities		27,031		1,064		(106	)		27,989		29,466		1,367		(14	)		30,819
Asset-backed securities		50,471		332		(188	)		50,615		49,307		352		(131	)		49,528
Total fixed income securities	$	351,982	$	11,699	$	(2,351	)	$	361,330	$	357,555	$	13,078	$	(895	)	$	369,738

	December 31, 2020									December 31, 2020
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	13,334	$	1,055	$	(6	)	$	14,383	$	13,334	$	1,055	$	(6	)	$	14,383
Obligations of states and political subdivisions		61,001		3,278		(35	)		64,244		61,001		3,278		(35	)		64,244
Corporate securities		119,826		8,755		(147	)		128,434		119,826		8,755		(147	)		128,434
Residential mortgage-backed securities		35,017		1,478		(1	)		36,494		35,017		1,478		(1	)		36,494
Commercial mortgage-backed securities		23,976		1,700		(21	)		25,655		23,976		1,700		(21	)		25,655
Asset-backed securities		50,751		535		(86	)		51,200		50,751		535		(86	)		51,200
Total fixed income securities	$	303,905	$	16,801	$	(296	)	$	320,410	$	303,905	$	16,801	$	(296	)	$	320,410

March 31, 2021	Gross Carrying Amount		Accumulated Amortization		Net
June 30, 2021							Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization:
Trade names	$	748	$	191	$	557	$	748	$	216	$	532
Distribution network		6,700		465		6,235		6,700		558		6,142
Total subject to amortization		7,448		656		6,792		7,448		774		6,674

Not subject to amortization – state insurance licenses		1,900		0-		1,900		1,900		0-		1,900
Total	$	9,348	$	656	$	8,692	$	9,348	$	774	$	8,574

Year ending December 31,	Amount		Amount
2021	$	354	$	236
2022		472		472
2023		455		455
2024		422		422
2025		422		422
Thereafter		4,667		4,667
Total other intangible assets with finite lives	$	6,792	$	6,674

	(1)	Amount fully eliminated in consolidation.
	(2)	Amount partly eliminated in consolidation.

Year ending December 31,	Estimated Future Minimum Commitments		Estimated Future Minimum Commitments
2021	$	188	$	125
2022		319		319
2023		358		358
2024		320		320
2025		286		286
Thereafter		1,066		1,066

	RSUs			Weighted-Average Grant-Date Fair Value Per Share		RSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding and unearned at January 1, 2020		96,540		$	16.47		96,540		$	16.47
RSUs granted during 2020		66,000			14.27		66,000			14.27
RSUs earned during 2020		(46,760	)		16.33		(46,760	)		16.33
Units outstanding and unearned at December 31, 2020		115,780		$	15.27		115,780		$	15.27

RSUs granted during 2021		43,100			18.64		58,700			18.76
RSUs earned during 2021		(37,320	)		16.64		(60,720	)		15.73
Units outstanding and unearned at March 31, 2021		121,560		$	16.05
Units outstanding and unearned at June 30, 2021							113,760		$	16.83

	PSUs			Weighted-Average Grant-Date Fair Value Per Share		PSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding at January 1, 2020		111,000		$	15.27		111,000		$	15.27
PSUs granted during 2020 (at target)		63,600			14.26		63,600			14.26
Units outstanding at December 31, 2020		174,600		$	15.15		174,600		$	15.15

PSUs granted during 2021 (at target)		64,600			18.64		64,600			18.64
PSUs earned during 2021		(70,363	)		16.25		(70,363	)		16.25
Performance adjustment ⁽¹⁾		24,300			16.25		24,300			16.25
Forfeitures		(2,537	)		16.25		(2,537	)		16.25
Units outstanding at March 31, 2021		190,600		$	16.06
Units outstanding at June 30, 2021							190,600		$	16.06

	Three Months Ended March 31, 2021
	Private Passenger Auto			Non-Standard Auto			Home and Farm			Crop			Commercial			All Other			Total
Direct premiums earned	$	18,688		$	13,581		$	20,583		$	(16	)	$	14,722		$	1,185		$	68,743
Assumed premiums earned		0-			0-			0-			0-			0-			1,448			1,448
Ceded premiums earned		(1,190	)		(323	)		(3,129	)		63			(2,384	)		(93	)		(7,056	)
Net premiums earned		17,498			13,258			17,454			47			12,338			2,540			63,135

Direct losses and LAE		12,559			4,800			7,888			572			11,464			295			37,578
Assumed losses and LAE		0-			0-			0-			0-			0-			948			948
Ceded losses and LAE		(305	)		0-			(256	)		(11	)		(1,065	)		0-			(1,637	)
Net losses and LAE		12,254			4,800			7,632			561			10,399			1,243			36,889

Gross margin		5,244			8,458			9,822			(514	)		1,939			1,297			26,246

Underwriting and general expenses		5,359			4,414			5,611			536			4,615			703			21,238
Underwriting gain (loss)		(115	)		4,044			4,211			(1,050	)		(2,676	)		594			5,008

Fee and other income					332															317
					4,376
Net investment income																				1,536
Net capital gain on investments																				5,811
Income before income taxes																				12,672
Income tax expense																				2,890
Net income																				9,782
Net income attributable to non-controlling interest																				113
Net income attributable to NI Holdings, Inc.																				9,669

Non-GAAP Ratios:
Loss and LAE ratio		70.0%			36.2%			43.7%			n/a			84.3%			48.9%			58.4%
Expense ratio		30.6%			33.3%			32.1%			n/a			37.4%			27.7%			33.6%
Combined ratio		100.7%			69.5%			75.9%			n/a			121.7%			76.6%			92.1%


Balances at March 31, 2021:
Premiums and agents’ balances receivable	$	19,028		$	8,568		$	9,102		$	0-		$	11,964		$	663		$	49,325
Deferred policy acquisition costs		5,934			6,099			8,170			0-			5,883			489			26,575
Reinsurance recoverables		717			0-			588			9			5,741			2,215			9,270
Receivable from Federal Crop Insurance Corporation		0-			0-			0-			5,182			0-			0-			5,182
Goodwill and other intangibles		0-			2,848			0-			0-			15,228			0-			18,076

Unpaid losses and LAE		22,503			40,289			12,657			96			25,447			10,530			111,522
Unearned premiums		28,912			19,218			40,706			0-			31,639			2,983			123,458

	March 31, 2021							June 30, 2021
	Case Reserves		IBNR Reserves			Total Reserves		Case Reserves		IBNR Reserves			Total Reserves
Private passenger auto	$	16,347	$	6,156		$	22,503	$	18,940	$	7,221		$	26,161
Non-standard auto		49,854		(9,565	)		40,289		51,709		(7,982	)		43,727
Home and farm		8,439		4,218			12,657		15,395		5,444			20,839
Crop		81		15			96		23,154		484			23,638
Commercial		16,457		8,990			25,447		16,764		10,048			26,812
All other		4,907		5,623			10,530		5,311		5,852			11,163
Liability for unpaid losses and LAE	$	96,085	$	15,437		$	111,522	$	131,273	$	21,067		$	152,340
Reinsurance recoverables on losses		5,762		3,508			9,270		20,883		3,691			24,574
Net unpaid losses and LAE	$	90,323	$	11,929		$	102,252	$	110,390	$	17,376		$	127,766

Change in Inflation	Impact on After-Tax Earnings
-1%	$	(1,392	)
1%		1,429
3%		4,402
5%		7,540

Change in Case Reserves	Impact on After-Tax Earnings
-10%	$	7,102
-5%		3,551
-2%		1,420
+2%		(1,420	)
+5%		(3,551	)
+10%		(7,102	)

	March 31, 2021			December 31, 2020			Change			June 30, 2021			December 31, 2020			Change
Fixed income securities:
Gross unrealized gains	$	11,699		$	16,801		$	(5,102	)	$	13,078		$	16,801		$	(3,723	)
Gross unrealized losses		(2,351	)		(296	)		(2,055	)		(895	)		(296	)		(599	)
Net fixed income unrealized gains		9,348			16,505			(7,157	)		12,183			16,505			(4,322	)

Equity securities:
Gross unrealized gains		30,566			29,139			1,427			32,177			29,139			3,038
Gross unrealized losses		(908	)		(1,390	)		482			(693	)		(1,390	)		697
Net equity unrealized gains		29,658			27,749			1,909			31,484			27,749			3,735

Net unrealized gains	$	39,006		$	44,254		$	(5,248	)	$	43,667		$	44,254		$	(587	)

Period in 2021	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 Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ⁽¹⁾ (in thousands)
January 1-31, 2021		10,879	$	16.82		10,879	$	2,579
February 1-28, 2021		1,140		17.02		1,140		2,559
March 1-31, 2021		20,307		19.35		20,307		2,166
Total		32,326	$	18.42		32,326	$	2,166


(1)	Shares purchased pursuant to the May 4, 2020 publicly announced share repurchase authorization of up to approximately $10,000 of the Company’s outstanding common stock.

Exhibit Number		Description
	~~10.1~~ 31.1	#	~~Form of Time-Based Restricted Stock Unit Agreement for Executives~~

	~~10.2~~	#	~~Form of NI Holdings, Inc. Growth in Book Value Per Share Performance Share Unit Agreement~~

	~~31.1~~		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

	101.SCH		Inline XBRL Taxonomy Extension Schema Linkbase Document

	101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

	101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

	101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

	101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

	104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

		#
		~~Management contract or compensatory plan or arrangement.~~

	NI HOLDINGS, INC.

	/s/ Michael J. Alexander
	Michael J. Alexander
	President and Chief Executive Officer (Principal Executive Officer)


	/s/ ~~Brian R. Doom~~Seth C. Daggett
	~~Brian R. Doom~~Seth C. Daggett
	Chief Financial Officer (Principal Financial ~~and~~Officer)


	/s/ Timothy J. Milius
	Timothy J. Milius
	Chief Accounting Officer (Principal Accounting Officer)