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 ~~September 30, 2020~~March 31, 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~~

(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 ~~October 31, 2020~~April 30, 2021 was ~~21,306,582.~~21,337,959. No preferred shares are issued or outstanding.

TABLE OF CONTENTS


Part ~~I.-~~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	87
Notes to Unaudited Consolidated Financial Statements	98
Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations	4238
Item 3. - Quantitative and Qualitative Disclosures about Market Risk	6961
Item 4. - Controls and Procedures	6961
Part ~~II.-~~II. - OTHER INFORMATION	7062
Item 1. - Legal Proceedings	7062
Item 1A. - Risk Factors	7062
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds	7163
Item 3. - Defaults upon Senior Securities	7264
Item 4. - Mine Safety Disclosures	7264
Item 5. - Other Information	7264
Item 6. - Exhibits	7264
Signatures	7365

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 ~~Insurance Company~~Stock prior to the conversion;

•

“Nodak Insurance” refers to Nodak Stock or Nodak Mutual 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 ~~is not a subsidiary of~~became affiliated with Nodak Insurance ~~but all of its insurance policies are reinsured by~~in 2011, and Nodak Insurance ~~through a 100% quota-share reinsurance agreement.~~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. Battle Creek~~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 ~~region of the United States;~~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

Table of Contents

•

estimates of future costs, benefits, and results.

~~Table of Contents~~

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 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)

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Assets:
Cash and cash equivalents	$	71,305		$	62,132		$	52,683		$	101,077
Fixed income securities, at fair value		322,429			295,945			361,330			320,410
Equity securities, at fair value		65,786			59,932			79,363			69,952
Other investments		2,907			1,914			2,089			2,924
Total cash and investments		462,427			419,923			495,465			494,363

Premiums and agents' balances receivable		84,868			36,691			49,325			48,523
Deferred policy acquisition costs		23,885			15,399			26,575			23,968
Reinsurance premiums receivable								0-			93
Reinsurance recoverables on losses		13,556			4,045			9,270			8,710
Income tax recoverables		543			-
Accrued investment income		2,094			2,089			2,281			2,141
Property and equipment		10,008			7,694			9,843			9,899
Receivable from Federal Crop Insurance Corporation		9,519			14,230			5,182			6,646
Goodwill and other intangibles		18,637			2,912			18,076			18,194
Other assets		4,499			5,176			5,368			5,066
Total assets	$	630,036		$	508,159		$	621,385		$	617,603

Liabilities:
Unpaid losses and loss adjustment expenses	$	134,803		$	93,250		$	111,522		$	105,750
Unearned premiums		125,966			89,276			123,458			119,363
Reinsurance premiums payable		1,173			170			700			0-
Income tax payable		-			1,645			1,917			754
Deferred income taxes, net		7,401			4,590
Deferred income taxes								7,851			8,757
Westminster consideration payable								12,720			19,287
Accrued expenses and other liabilities		35,180			9,425			10,627			14,820
Commitments and contingencies		-			-
Total liabilities		304,523			198,356			268,795			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: 2020 – 21,346,079 shares, 2019 – 22,119,380 shares		230			230
Preferred stock, without par value, authorized 5,000,000 shares, 0 shares issued or outstanding		-			-
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
Preferred stock, without par value, authorized 5,000,000 shares, 0 shares issued or outstanding								0-			0-
Additional paid-in capital		97,146			95,961			96,511			97,911
Unearned employee stock ownership plan shares		(1,671	)		(1,671	)		(1,427	)		(1,427	)
Retained earnings		237,162			218,480			268,444			258,741
Accumulated other comprehensive income, net of income taxes		12,064			5,612			7,417			12,840
Treasury stock, at cost, 2020 – 1,486,866 shares, 2019 – 713,565 shares		(23,097	)		(12,308	)
Treasury stock, at cost, 2021 – 1,484,488 shares, 2020 – 1,538,622 shares								(23,012	)		(23,968	)
Non-controlling interest		3,679			3,499			4,427			4,545
Total shareholders’ equity		325,513			309,803			352,590			348,872

Total liabilities and shareholders’ equity	$	630,036		$	508,159		$	621,385		$	617,603

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

	Three Months Ended					Nine Months Ended				Three Months Ended
	September 30,					September 30,				March 31,
	2020		2019			2020		2019		2021		2020
Revenues:
Net premiums earned	$	73,342	$	67,116		$	214,120	$	182,736	$	63,135	$	58,772
Fee and other income		524		527			1,332		1,637		317		362
Net investment income		1,886		1,983			5,875		5,504		1,536		1,971
Net capital gain on investments		5,102		622			1,380		9,591
Net capital gain (loss) on investments											5,811		(14,919	)
Total revenues		80,854		70,248			222,707		199,468		70,799		46,186

Expenses:
Losses and loss adjustment expenses		53,836		61,558			136,622		135,985		36,889		30,422
Amortization of deferred policy acquisition costs		15,061		11,309			39,277		36,682		13,587		9,387
Other underwriting and general expenses		7,083		5,982			22,651		14,243		7,651		10,772
Total expenses		75,980		78,849			198,550		186,910		58,127		50,581

Income (loss) before income taxes		4,874		(8,601	)		24,157		12,558		12,672		(4,395	)
Income tax expense (benefit)		1,188		(1,642	)		5,259		3,206		2,890		(840	)
Net income (loss)		3,686		(6,959	)		18,898		9,352		9,782		(3,555	)
Net income attributable to non-controlling interest		22		20			88		80		113		32
Net income (loss) attributable to NI Holdings, Inc.	$	3,664	$	(6,979	)	$	18,810	$	9,272	$	9,669	$	(3,587	)

Earnings (loss) per common share:
Basic										$	0.45	$	(0.16	)
Diluted										$	0.45	$	(0.16	)

Basic earnings (loss) per common share	$	0.17	$	(0.32	)	$	0.86	$	0.42
Diluted earnings (loss) per common share	$	0.17	$	(0.31	)	$	0.85	$	0.42
Share data:
Weighted average common shares outstanding used in basic per common share calculations											21,462,641		22,218,073
Plus: Dilutive securities											236,358		0-
Weighted average common shares used in diluted per common share calculations											21,698,999		22,218,073

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

Three Months Ended September 30, 2020
Nine Months Ended September 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
$
3,664
$
22
$
3,686
$
18,810
$
88
$
18,898

Other comprehensive income, before income taxes:
Holding gains on investments
2,038
11
2,049
8,851
119
8,970
Reclassification adjustment for net realized capital (gain) loss included in net income
(539
)
8
(531
)
(684
)
(2
)
(686
)
Other comprehensive income, before income taxes
1,499
19
1,518
8,167
117
8,284
Income tax expense related to items of other comprehensive income
(315
)
(4
)
(319
)
(1,715
)
(25
)
(1,740
)
Other comprehensive income, net of income taxes
1,184
15
1,199
6,452
92
6,544

Comprehensive income
$
4,848
$
37
$
4,885
$
25,262
$
180
$
25,442

Three Months Ended September 30, 2019
Nine Months Ended September 30, 2019
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)

$
(6,979
)

$
20

$
(6,959
)

$
9,272

$
80

$
9,352

Other comprehensive income, before income taxes:

Holding gains on investments

2,018

36

2,054

9,876

172

10,048

Reclassification adjustment for net realized capital (gain) loss included in net income

(12
)

-

(12
)

22

(3
)

19

Other comprehensive income, before income taxes

2,006

36

2,042

9,898

169

10,067

Income tax expense related to items of other comprehensive income

(422
)

(7
)

(429
)

(2,079
)

(35
)

(2,114
)
Other comprehensive income, net of income taxes

1,584

29

1,613

7,819

134

7,953

Comprehensive income (loss)

$
(5,395
)

$
49

$
(5,346
)

$
17,091

$
214

$
17,305

	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	)

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

Three Months Ended September 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, July 1, 2020
$
230
$
96,661
$
(1,671
)
$
233,498
$
10,880
$
(18,517
)
$
3,642
$
324,723

Net income
-
-
-
3,664
-
-
22
3,686
Other comprehensive income, net of income taxes
-
-
-
-
1,184
-
15
1,199
Purchase of treasury stock
-
-
-
-
-
(4,580
)
-
(4,580)
Share-based compensation
-
485
-
-
-
-
-
485
Balance, September 30, 2020
$
230
$
97,146
$
(1,671
)
$
237,162
$
12,064
$
(23,097
)
$
3,679
$
325,513

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

Nine Months Ended September 30, 2020
Three Months Ended March 31, 2020																						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				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			$	230	$	95,961		$	(1,671	)	$	218,480		$	5,612		$	(12,308	)	$	3,499		$	309,803

Net income		-		-			-			18,810			-		-			88		18,898
Other comprehensive income, net of income taxes		-		-			-			-			6,452		-			92		6,544
Net income (loss)																								-		-			-			(3,587	)		-			-			32			(3,555	)
Other comprehensive loss, net of income taxes																								-		-			-			-			(3,565	)		-			(72	)		(3,637	)
Purchase of treasury stock		-		-			-			-			-		(11,363	)		-		(11,363	)			-		-			-			-			-			(1,502	)		-			(1,502	)
Share-based compensation		-		1,662			-			-			-		-			-		1,662				-		713			-			-			-			-			-			713
Issuance of vested award shares		-		(477	)		-			(128	)		-		574			-		(31	)			-		(300	)		-			(82	)		-			351			-			(31	)
Balance, September 30, 2020	$	230	$	97,146		$	(1,671	)	$	237,162		$	12,064	$	(23,097	)	$	3,679	$	325,513
Balance, March 31, 2020																							$	230	$	96,374		$	(1,671	)	$	214,811		$	2,047		$	(13,459	)	$	3,459		$	301,791

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

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

Nine Months Ended September 30, 2019

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 Equity

Balance, January 1, 2019
$
230
$
94,486
$
(1,914
)
$
183,946
$
6,376
$
(10,634
)
$
3,263
$
275,753

Cumulative effect of change in accounting for equity securities
-
-
-
8,184
(8,184
)
-
-
-
Net income
-
-
-
9,272
-
-
80
9,352
Other comprehensive income, net of income taxes
-
-
-
-
7,819

-
-

7,953

Purchase of treasury stock
-
-
-
-
-
(2,006
)
-
(2,006
)
Share-based compensation
-
1,274
-
-
-
-
-
1,274
Issuance of vested award shares
-
(300
)
-
(51
)
-
332
-
(19
)
Balance, September 30, 2019
$
230
$
95.460
$
(1,914
)
$
201,351
$
6,011
$
(12,308
)
$
3,477
$
292,307

	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

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

Nine Months Ended
September 30,
2020
2019
Cash flows from operating activities:
Net income
$
18,898
$
9,352
Adjustments to reconcile net income to net cash flows from operating activities:

Net capital gain on investments
(1,380
)
(9,591
)
Deferred income tax (benefit) expense
(511
)
569
Depreciation of property and equipment
545
374
Amortization of intangibles
4,781
1,695
Share-based compensation
1,662
1,274
Amortization of deferred policy acquisition costs
39,277
36,682
Deferral of policy acquisition costs
(47,763
)
(39,620
)
Net amortization of premiums and discounts on investments
1,031
827
Loss on sale of property and equipment
7
11
Changes in operating assets and liabilities:
Premiums and agents’ balances receivable
(39,670
)
(42,739
)
Reinsurance premiums receivable / payable
438

4,277
Reinsurance recoverables on losses
(8,748
)
(3,521
)
Accrued investment income
64

(133
)
Receivable from Federal Crop Insurance Corporation
4,711
(8,022
)
Income tax recoverable / payable
(2,050
)
(1,454
)
Other assets
753
1,208
Unpaid losses and loss adjustment expenses
32,985
30,252
Unearned premiums
20,079
16,650
Accrued expenses and other liabilities
5,835
412
Net cash flows from operating activities
30,944
(1,497
)

Cash flows from investing activities:
Proceeds from maturities and sales of fixed income securities
67,029
36,924
Proceeds from sales of equity securities
13,176
12,373
Purchases of fixed income securities
(73,502
)
(71,828
)
Purchases of equity securities
(15,630
)
(16,708
)
Purchases of property and equipment, net
(489
)
(1,009
)
Acquisition of Westminster American Insurance Company (cash consideration paid net of cash and cash equivalents acquired)
(703
)
-
Other
(258
)
62
Net cash flows from investing activities
(10,377
)
(40,186
)

Cash flows from financing activities:
Purchases of treasury stock
(11,363
)
(2,006
)
Issuance of restricted stock awards
(31
)
(19
)
Net cash flows from financing activities
(11,394
)
(2,025
)

Net increase (decrease) in cash and cash equivalents
9,173
(43,708
)

Cash and cash equivalents at beginning of period
62,132
68,950

Cash and cash equivalents at end of period
$
71,305
$
25,242

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

Income taxes paid
$
7,819
$
3,955

~~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~~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, 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 and 100% quota-share agreement.~~note. The terms of the surplus note ~~and quota-share agreement~~ 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 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.

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~~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 and footnotes required by GAAP for complete financial statements. 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 ~~periods~~period ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021. 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.

Our ~~consolidated financial statements~~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.

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 ~~100% quota-share reinsurance agreement between Nodak Insurance and Battle Creek, as well as~~surplus note which provides us with the ability to ~~control a majority~~appoint two-thirds of the Board of Directors of Battle Creek. ~~Through~~Under the ~~effects of the 100% quota-share~~quota share reinsurance agreement ~~with Battle Creek, we are considered the primary beneficiary of~~that existed through December 31, 2019, Battle Creek’s operating results ~~excluding~~included only net investment income, bad

debt expense, and income taxes. ~~Therefore,~~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, ~~and on equity securities prior to January 1, 2019,~~ net of income taxes, are reported in accumulated other comprehensive income. ~~Effective January 1, 2019, in accordance with a change in accounting principle, changes~~Changes in unrealized gains and losses on equity securities are reported as a component of net capital gain ~~(loss)~~ 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 after January 1, 2019.~~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.~~basis, which is not materially different from fair value. All other invested assets have been assessed for impairment. ~~The carrying value of these other invested assets was $2,907 at September 30, 2020 and $1,914 at December 31, 2019.~~

Effective in the first quarter of 2020, the Company’s results are being reported in our Consolidated Financial Statements in the following five primary operating segments – private passenger auto insurance, non-standard auto insurance, home and farm insurance, crop insurance, and commercial insurance. A sixth “all other” segment captures all other insurance business, including our assumed reinsurance lines of business.

~~Commercial insurance was previously reported within the all other segment. All prior periods presented have been reclassified to conform to this presentation.~~

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

The period of risk for our crop insurance program, which ~~comprise~~is comprised primarily of spring-planted crops, typically runs from ~~April1~~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 ~~expense.~~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 ~~taxes.~~tax expense (benefit).

The Company ~~reports~~does not have any material uncertain tax positions. The Company’s policy is to recognize tax-related interest and penalties ~~if any,~~accrued related to unrecognized benefits as ~~part~~a component of income tax expense ~~in the year such amounts are determinable.~~(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.

~~Accounting guidance requires that companies~~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. ~~The guidance~~We also ~~requires~~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 ~~$250.~~$ 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.

~~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 ~~or nine~~ month periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~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, ~~asset,~~ 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 ~~the current president of Westminster~~ continues to ~~manage the Westminster insurance operations along with the staff~~be led by its president and other key management ~~team~~ 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. During the three months ended June 30, 2020, the Company made minor adjustments to property and equipment, the value of business acquired intangible asset, and deferred income taxes. During the three months ended September 30, 2020, the Company made minor adjustments to fixed income securities, deferred income taxes, and goodwill.

The ~~acquired Westminster business contributed revenues of $10,294 and net income of $1,763 to the Company~~measurement period for the ~~three months~~Westminster acquisition ended ~~September 30, 2020, and revenues of $24,085 and net income of $1,080 for the nine months ended September 30,~~December 31, 2020. ~~The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2019:~~

~~The Company did not reflect any material, nonrecurring pro forma adjustments directly attributable to the business combination in the above pro forma revenue and earnings.~~

These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Westminster to reflect the deferral and amortization of policy acquisition costs and the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from January 1, 2019, with the related income tax effects.

The Company incurred acquisition-related costs of $828 ~~during the nine months ended September 30, 2020,~~ and $83 during the ~~year~~years ended December 31, ~~2019. These expenses were reclassified to occur in first quarter~~2020, and 2019, ~~in the pro forma amounts presented above.~~

The Company paid $20,000 in cash consideration to the private shareholder of Westminster as of the closing date, ~~and will pay~~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:

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

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

Goodwill		$	6,756			$	6,756

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 ~~are~~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 ofwere $6,700, $1,800, $500, and $4,750, ~~respectively, are provisional pending final valuation for those assets.~~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.

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 2019, the Company adopted amended guidance from the Financial Accounting Standards Board (“FASB”) that generally requires entities to measure equity securities at fair value and recognize changes in fair value in their results of operations. The FASB issued other impairment, disclosure, and presentation improvements related to financial instruments within the guidance. Effective January 1, 2019, we applied this guidance, which resulted in a cumulative-effect reclassification of after-tax unrealized net capital gains aggregating $8,184, from accumulated other comprehensive income to retained earnings. This reclassification had no

impact to the Company’s results of operations at the date of adoption. The after-tax change in accounting for equity securities did not affect the Company’s total shareholders’ equity; however, the unrealized net capital gains reclassified at the transition date to retained earnings will never be recognized in net income. Prior year financial statements were not restated. Going forward, the accounting used for equity securities will record the market fluctuations attributed to equity securities through our results of operations rather than as a component of other comprehensive income (loss), which will add a level of volatility to our net income.

In December 2019, the Company adopted guidance from the FASB that establishes the manner in which an entity recognizes the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. While the guidance replaces most existing GAAP revenue recognition guidance, the scope of the guidance excludes insurance contracts. The Company has reviewed its sources of revenues, and has determined that no material revenues are derived from non-insurance contracts and thus subject to the new revenue recognition guidance. As a result, there was no impact to the Company’s financial position, results of operations, or cash flows.

~~In December 2019,~~2020, the Company adopted amended guidance from the FASB that ~~addressed diversity in how~~shortened the amortization period of premiums on certain ~~cash receipts and cash payments are presented and classified in~~fixed income securities held at a premium to the ~~Consolidated Statement~~earliest call date rather than through the maturity date of ~~Cash Flows, and~~ the ~~presentation~~callable security. The adoption of restricted cash in the Consolidated Statement of Cash Flows. The amendments provided clarity on the treatment of eight specifically defined types of cash inflows and outflows, and requires entities to explain the changes during a reporting period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. There was nothis guidance did not materially impact to 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, ~~2019~~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.In~~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. ~~We are evaluating the impact~~Based on our evaluation, adoption of this new ~~guidance~~standard will not have ~~on our financial position, results of operations, and cash flows.~~

In March 2017, the FASB issued amended guidance to shorten the amortization period of premiums on certain purchased callable fixed income securities to the earliest call date. The amended guidance is effective for fiscal years beginning after December 15, 2018, 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, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments on a ~~modified retrospective basis through a cumulative-effect adjustment~~

~~directly to retained earnings as of the beginning of the period of adoption. We are evaluating the requirements of this guidance and the potential~~significant impact toon 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.

The amortized cost and estimated fair value of ~~investment~~fixed income securities as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, were as follows:

September 30, 2020
Cost or Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Fixed income securities:
U.S. Government and agencies
$
16,110
$
1,324
$
(1
)
$
17,433
Obligations of states and political subdivisions
62,975
3,044
(150
)
65,869
Corporate securities
120,955
8,137
(434
)
128,658
Residential mortgage-backed securities
36,384
1,612
(4
)
37,992
Commercial mortgage-backed securities
24,574
1,705
(29
)
26,250
Asset-backed securities
45,906
509
(188
)
46,227
Total fixed income securities
306,904
16,331
(806
)
322,429

Equity securities:
Basic materials
1,259
289
(69
)
1,479
Communications
4,304
2,563
(507
)
6,360
Consumer, cyclical
5,903
3,139
(596
)
8,446
Consumer, non-cyclical
10,456
6,092
(758
)
15,790
Energy
1,931
18
(532
)
1,417
Financial
5,879
520
(491
)
5,908
Industrial
6,857
4,240
(132
)
10,965
Technology
7,905
7,570
(90
)
15,385
Utility
37
-
(1
)
36
Total equity securities
44,531
24,431
(3,176
)
65,786
Total investments
$
351,435
$
40,762
$
(3,982
)
$
388,215

	March 31, 2021
	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
Obligations of states and political subdivisions		65,635		2,594		(269	)		67,960
Corporate securities		152,649		5,730		(1,437	)		156,942
Residential mortgage-backed securities		41,001		1,299		(206	)		42,094
Commercial mortgage-backed securities		27,031		1,064		(106	)		27,989
Asset-backed securities		50,471		332		(188	)		50,615
Total fixed income securities	$	351,982	$	11,699	$	(2,351	)	$	361,330

December 31, 2019
Cost or Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Value
Fixed income securities:
U.S. Government and agencies
$
17,078
$
472
$
(4
)
$
17,546
Obligations of states and political subdivisions
55,232
1,511
(91
)
56,652
Corporate securities
109,457
3,772
(16
)
113,213
Residential mortgage-backed securities
50,458
1,050
(22
)
51,486
Commercial mortgage-backed securities
26,450
658
(51
)
27,057
Asset-backed securities
30,029
132
(170
)
29,991
Total fixed income securities
288,704
7,595
(354
)
295,945

Equity securities:
Basic materials
1,062
155
(7
)
1,210
Communications
4,823
2,342
(169
)
6,996
Consumer, cyclical
5,477
4,207
(72
)
9,612
Consumer, non-cyclical
7,483
5,255
(171
)
12,567
Energy
2,817
124
(485
)
2,456
Financial
5,059
905
(35
)
5,929
Industrial
5,293
4,023
(17
)
9,299
Technology
6,022
5,867
(26
)
11,863
Total equity securities
38,036
22,878
(982
)
59,932
Total investments
$
326,740
$
30,473
$
(1,336
)
$
355,877

	December 31, 2020
	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
Obligations of states and political subdivisions		61,001		3,278		(35	)		64,244
Corporate securities		119,826		8,755		(147	)		128,434
Residential mortgage-backed securities		35,017		1,478		(1	)		36,494
Commercial mortgage-backed securities		23,976		1,700		(21	)		25,655
Asset-backed securities		50,751		535		(86	)		51,200
Total fixed income securities	$	303,905	$	16,801	$	(296	)	$	320,410

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.

	September 30, 2020				March 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due to mature:
One year or less	$	16,413	$	16,659	$	22,846	$	23,071
After one year through five years		90,477		95,182		87,767		91,773
After five years through ten years		59,812		64,928		85,183		86,921
After ten years		33,338		35,191		37,683		38,867
Mortgage / asset-backed securities		106,864		110,469		118,503		120,698
Total fixed income securities	$	306,904	$	322,429	$	351,982	$	361,330

	December 31, 2019				December 31, 2020
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due to mature:
One year or less	$	19,567	$	19,663	$	17,722	$	17,933
After one year through five years		84,937		87,134		86,709		91,457
After five years through ten years		55,927		58,466		59,408		64,987
After ten years		21,336		22,148		30,322		32,684
Mortgage / asset-backed securities		106,937		108,534		109,744		113,349
Total fixed income securities	$	288,704	$	295,945	$	303,905	$	320,410

Fixed income securities with a fair value of $6,164 at September 30, 2020 and $5,585 at December 31, 2019, were deposited with various state regulatory agencies as required by law. The Company has not pledged any assets to secure any obligations.

Fixed income securities with a fair value of $7,852 at March 31, 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 ~~and equity securities~~ were as follows:

September 30, 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
$
203
$
(1
)
$
-
$
-
$
203
$
(1
)
Obligations of states and political subdivisions
4,578
(150
)

-
-
4,578
(150
)
Corporate securities
8,763
(420
)
693
(14
)
9,456
(434
)
Residential mortgage-backed securities
397
(4
)
-
-
397
(4
)
Commercial mortgage-backed securities
1,511
(29
)
-
-
1,511
(29
)
Asset-backed securities
10,324
(80
)
4,393
(108
)
14,717
(188
)
Total fixed income securities
25,776
(684
)
5,086
(122
)
30,862
(806
)

Equity securities:
Basic materials
345
(69
)
-
-
345
(69
)
Communications
1,272
(507
)
-
-
1,272
(507
)
Consumer, cyclical
1,184
(528
)
211
(68
)
1,395
(596
)
Consumer, non-cyclical
2,456
(758
)
-
-
2,456
(758
)
Energy
47
(33
)
442
(499
)
489
(532
)
Financial
2,750
(491
)
-
-
2,750
(491
)
Industrial
1,139
(132
)
-
-
1,139
(132
)
Technology
1,379
(90
)
-
-
1,379
(90
)
Utility
37
(1
)
-
-
37
(1
)
Total equity securities
10,609
(2,609
)
653
(567
)
11,262
(3,176
)
Total investments

$
36,385
$
(3,293
)

$
5,739
$
(689
)

$
42,124
$
(3,982
)

	March 31, 2021
	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	$	3,177	$	(145	)	$	0-	$	0-		$	3,177	$	(145	)
Obligations of states and political subdivisions		8,498		(269	)		0-		0-			8,498		(269	)
Corporate securities		38,660		(1,341	)		1,481		(96	)		40,141		(1,437	)
Residential mortgage-backed securities		14,466		(206	)		0-		0-			14,466		(206	)
Commercial mortgage-backed securities		4,575		(106	)		0-		0-			4,575		(106	)
Asset-backed securities		14,237		(177	)		1,486		(11	)		15,723		(188	)
Total fixed income securities	$	83,613	$	(2,244	)	$	2,967	$	(107	)	$	86,580	$	(2,351	)

December 31, 2019
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
$
494
$
(4
)
$
-
$
-
$
494
$
(4
)
Obligations of states and political subdivisions
8,018
(91
)
-
-
8,018
(91
)
Corporate securities
2,066
(15
)
650
(1
)
2,716
(16
)
Residential mortgage-backed securities
2,911
(9
)
2,583
(13
)
5,494
(22
)
Commercial mortgage-backed securities
4,841
(35
)
653
(16
)
5,494
(51
)
Asset-backed securities
8,511
(96
)
7,686
(74
)
16,197
(170
)
Total fixed income securities
26,841
(250
)
11,572
(104
)
38,413
(354
)

Equity securities:
Basic materials
258
(7
)
-
-
258
(7
)
Communications
506
(-
)
658
(169
)
1,164
(169
)
Consumer, cyclical
595
(30
)
146
(42
)
741
(72
)
Consumer, non-cyclical
1,033
(171
)
-
-
1,033
(171
)
Energy
823
(432
)
6
(53
)
829
(485
)
Financial
393
(35
)
-
-
393
(35
)
Industrial
620
(17
)
-
-
620
(17
)
Technology
575
(26
)
-
-
575
(26
)
Total equity securities
4,803
(718
)
810
(264
)
5,613
(982
)
Total investments
$
31,644
$
(968
)
$
12,382
$
(368
)
$
44,026
$
(1,336
)

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 of the securities is written down to fair value and the previously unrealized loss is therefore reflected as a realized capital loss on investment.

The Company did not record any other-than-temporary impairments during the three ~~or nine~~ month periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

As of ~~September 30, 2020,~~March 31, 2021, we held 83167 fixed income securities with unrealized losses. As of December 31, ~~2019,~~2020, we held 8867 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.

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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~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 ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~

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

	September 30, 2020								March 31, 2021
	Total		Level I		Level II		Level III		Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	17,433	$	-	$	17,433	$	-	$	15,730	$	0-	$	15,730	$	0-
Obligations of states and political subdivisions		65,869		-		65,869		-		67,960		0-		67,960		0-
Corporate securities		128,658		-		128,658		-		156,942		0-		156,942		0-
Residential mortgage-backed securities		37,992		-		37,992		-		42,094		0-		42,094		0-
Commercial mortgage-backed securities		26,250		-		26,250		-		27,989		0-		27,989		0-
Asset-backed securities		46,227		-		46,227		-		50,615		0-		50,615		0-
Total fixed income securities		322,429		-		322,429		-		361,330		0-		361,330		0-

Equity securities:
Basic materials		1,479		1,479		-		-		1,607		1,607		0-		0-
Communications		6,360		6,360		-		-		8,757		8,757		0-		0-
Consumer, cyclical		8,446		8,446		-		-		11,125		11,125		0-		0-
Consumer, non-cyclical		15,790		15,790		-		-		16,045		16,045		0-		0-
Energy		1,417		1,417		-		-		2,015		2,015		0-		0-
Financial		5,908		5,908		-		-		6,737		6,737		0-		0-
Industrial		10,965		10,965		-		-		15,002		15,002		0-		0-
Technology		15,385		15,385						17,742		17,742		0-		0-
Utility		36		36		-		-		333		333				-
Total equity securities		65,786		65,786		-		-		79,363		79,363		0-		0-

Cash and cash equivalents		71,305		71,305		-		-		52,683		37,694		14,989		0-
Total assets at fair value	$	459,520	$	137,091	$	322,429	$	-	$	493,376	$	117,057	$	376,319	$	0-

December 31, 2019
Total
Level I
Level II
Level III
Fixed income securities:
U.S. Government and agencies
$
17,546
$
-
$
17,546
$
-
Obligations of states and political subdivisions
56,652
-
56,652
-
Corporate securities
113,213
-
113,213
-
Residential mortgage-backed securities
51,486
-
51,486
-
Commercial mortgage-backed securities
27,057
-
27,057
-
Asset-backed securities
29,991
-
29,991
-
Total fixed income securities
295,945
-
295,945
-

Equity securities:
Basic materials
1,210
1,210
-
-
Communications
6,996
6,996
-
-
Consumer, cyclical
9,612
9,612
-
-
Consumer, non-cyclical
12,567
12,567
-
-
Energy
2,456
2,456
-
-
Financial
5,929
5,929
-
-
Industrial
9,299
9,299
-
-
Technology
11,863
11,863
-
-
Total equity securities
59,932
59,932
-
-

Cash and cash equivalents
62,132
62,132
-
-
Total assets at fair value
$
418,009
$
122,064
$
295,945
$
-

~~There were no liabilities measured at fair value on a recurring basis at September 30, 2020 or December 31, 2019.~~

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

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

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

There were no liabilities measured at fair value on a recurring basis at March 31, 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 ~~nine~~three month period ended ~~September 30,~~March 31, 2021, the Company retained the first $ 10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $ 117,000 in excess of its $ 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. During the year ended December 31, 2019, the Company retained the first $10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $78,600 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 ~~largest~~ reinsurance recoverables on paid and unpaid losses were due from reinsurance companies with A.M. Best ratings of ~~“A-”~~“A” or higher.

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

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020						Three Months Ended March 31, 2021
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	68,322		$	79,455		$	244,053		$	224,300		$	72,420		$	68,743
Assumed premium		1,426			1,372			5,728			5,655			1,450			1,448
Ceded premium		(7,596	)		(7,485	)		(15,497	)		(15,835	)		(7,114	)		(7,056	)
Net premiums	$	62,152		$	73,342		$	234,284		$	214,120		$	66,756		$	63,135

Percentage of assumed earned premium to direct earned premium					1.7%						2.5%						2.1	%

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019						Three Months Ended March 31, 2020
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	49,984		$	70,481		$	208,880		$	192,233		$	62,972		$	62,393
Assumed premium		1,203			1,234			5,235			5,233			1,600			1,600
Ceded premium		(4,599	)		(4,599	)		(14,730	)		(14,730	)		(5,170	)		(5,221	)
Net premiums	$	46,588		$	67,116		$	199,385		$	182,736		$	59,402		$	58,772

Percentage of assumed earned premium to direct earned premium					1.8%						2.7%						2.6%

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

	Three Months Ended March 31,
Direct losses and loss adjustment expenses	$	37,578		$	33,892
Assumed losses and loss adjustment expenses		948			308
Ceded losses and loss adjustment expenses		(1,637	)		(3,778	)
Net losses and loss adjustment expenses	$	36,889		$	30,422

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

If 100% of our ceded reinsurance was cancelled as of ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019,~~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.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Balance, beginning of period	$	24,204		$	16,721		$	15,399		$	12,866		$	23,968		$	15,399
Deferral of policy acquisition costs		14,742			10,392			47,763			39,620			16,194			13,152
Amortization of deferred policy acquisition costs		(15,061	)		(11,309	)		(39,277	)		(36,682	)		(13,587	)		(9,387	)
Balance, end of period	$	23,885		$	15,804		$	23,885		$	15,804		$	26,575		$	19,164

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

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021		2020
Balance at beginning of period:
Liability for unpaid losses and loss adjustment expenses	$	93,250		$	87,121		$	105,750	$	93,250
Reinsurance recoverables on losses		4,045			2,232			8,710		4,045
Net balance at beginning of period		89,205			84,889			97,040		89,205

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

Incurred related to:
Current year		140,890			142,428			34,366		29,912
Prior years		(4,268	)		(6,443	)		2,523		510
Total incurred		136,622			135,985			36,889		30,422

Paid related to:
Current year		65,234			73,974			13,415		12,532
Prior years		47,914			35,280			18,262		26,330
Total paid		113,148			109,254			31,677		38,862

Balance at end of period:
Liability for unpaid losses and loss adjustment expenses		134,803			117,373			111,522		97,400
Reinsurance recoverables on losses		13,556			5,753			9,270		8,067
Net balance at end of period	$	121,247		$	111,620		$	102,252	$	89,333

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company’s reported incurred losses and LAE included ~~$4,268~~$2,523 of net ~~favorable~~unfavorable development on prior accident years, compared to ~~$6,443~~$510 of net ~~favorable~~unfavorable development on prior accident years during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 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 and $187 for the three months ended March 31, 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 for the three months ended March 31, 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, 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 months ended March 31, 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	%

additional information becomes known regarding individual claims, original estimates are increased or decreased accordingly. The net favorable development reported for the nine months ended September 30, 2020 was primarily attributable to our Direct Auto non-standard auto business and North Dakota ~~personal lines of business, partially offset by unfavorable development from our 2019 multi-peril crop business.~~

~~Depreciation expense was $180 and $129 for the three months ended September 30, 2020 and 2019, respectively, and $545 and $374 for the nine months ended September 30, 2020 and 2019, 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 $1,070 and $108 for the three months ended September 30, 2020 and 2019, respectively, and $4,781 and $1,695 for the nine months ended September 30, 2020 and 2019, respectively.

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 ~~$386~~$337 and ~~$384~~$336 during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $1,115 and $1,104 during the nine months ended September 30, 2020 and 2019,~~ respectively. Royalty amounts payable of ~~$23~~$125 and ~~$115~~$113 were accrued as a liability to the NDFB at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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, ~~2019~~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 ~~2020~~2021 without the prior approval of the North Dakota Insurance Department is ~~$18,984~~$21,628 based upon the policyholders’ surplus of Nodak Insurance at December 31, ~~2019.~~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. ~~The Board of Directors of Nodak Insurance declared a $6,000 dividend during the nine months ended September 30, 2020, to be paid to NI Holdings in the fourth quarter of 2020.~~ No dividends were declared or paid by Nodak Insurance during the three months ended March 31, 2021. The Board of Directors of Nodak Insurance declared and paid a $6,000 dividend to NI Holdings during the year ended December 31, ~~2019.~~2020.

The amount available for payment of dividends from Direct Auto to NI Holdings during ~~2020~~2021 without the prior approval of the Illinois Department of Insurance is ~~$6,881~~$3,582 based upon the ~~statutory net income~~policyholders’ surplus of Direct Auto ~~for the year ended~~at December 31, ~~2019.~~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 ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 or the year ended December 31, ~~2019.~~2020.

The amount available for payment of dividends from Westminster to NI Holdings during ~~2020~~2021 without the prior approval of the Maryland Insurance Administration is ~~$636~~$505 based upon the statutory net investment income of Westminster for the year ended December 31, ~~2019~~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 ~~nine~~three months ended ~~September 30,~~March 31, 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:

~~The following table illustrates the impact of including Battle Creek in our Consolidated Balance Sheets prior to intercompany eliminations:~~

Total statutory revenues of Battle Creek, after intercompany eliminations, which is limited to net investment income and other income, were $27 and $26, respectively, during the three months ended September 30, 2020 and 2019, respectively.

Total statutory revenues of Battle Creek, after intercompany eliminations, which is limited to net investment income and other income, were $112 and $103, respectively, during the nine months ended September 30, 2020 and 2019, respectively.

~~There were no statutory-basis expenses reported, after intercompany eliminations, during the three or nine months ended September 30, 2020 and 2019.~~

The Company sponsors a money purchase plan that covers all ~~Nodak Insurance~~ eligible employees. Plan costs are funded annually as they are earned. The Company reported expenses related to the money purchase plan totaling ~~$97~~$269 and ~~$95~~$201 during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $500 and $493 during the nine months ended September 30, 2020 and 2019,~~ respectively.

The Company 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 ~~$164~~$172 and ~~$139~~$163 during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $489 and $417 during the nine months ended September 30, 2020 and 2019,~~ respectively. All fees associated with ~~all~~both 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 ~~$15~~$418 and $14 during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $43 and $41 during the nine months ended September 30, 2020 and 2019,~~ 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. ~~The shares held in the ESOP’s suspense account are not considered outstanding for earnings per share purposes.~~ 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 ~~current~~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 $98 and $104 during the three months ended September 30, 2020 and 2019, respectively, related to the ESOP, and $270 and $301 during the nine months ended September 30, 2020 and 2019, respectively.

Through September 30, 2020 and December 31, 2019, the Company had released and allocated 72,945 ESOP shares to participants, with a remainder of 167,055 ESOP shares in suspense at September 30, 2020 and December 31, 2019. Using the Company’s quarter-end market price of $16.89 per share, the fair value of the unearned ESOP shares was $2,822 at September 30, 2020.

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, 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, 2021 and December 31, 2020. Using the Company’s quarter-end market price of $18.48 per share, the fair value of the unearned ESOP shares was $2,638 at March 31, 2021.

Nodak Insurance has a $5,000 line of credit with Wells Fargo Bank, N.A., The terms of ~~which there~~the line of credit include a floating interest rate with a floor rate of 3.25%. There were no outstanding amounts during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, or the year ended December 31, ~~2019.~~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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had no00no unrecognized tax benefits, no00no accrued interest and penalties, and no significant uncertain tax positions. No interest and penalties were recognized during the three ~~or nine~~ month periods ended ~~September 30, 2020~~March 31, 2021 or ~~2019.~~2020.

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~$4,652 of~~ net operating loss ~~carryover~~carryovers of $3,390 at December 31, ~~2019.~~2020. The net operating loss ~~carryforward expires~~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 ~~$2,559 of~~ net operating loss ~~carryover~~carryovers of $2,559 at December 31, ~~2019. This~~2020. The net operating loss ~~carryforward expires~~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 ~~$94~~$61 and ~~$76~~$89 related to these leases during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and expenses of $277 and $227 related to these leases during the nine months ended September 30, 2020 and 2019,~~ respectively.

As of ~~September 30, 2020,~~March 31, 2021, we have minimum future commitments under non-cancellable leases as follows:

Year ending December 31,	Estimated Future Minimum Commitments		Estimated Future Minimum Commitments
2020	$	94
2021		249	$	188
2022		319		319
2023		358		358
2024		320		320
2025				286
Thereafter		1,353		1,066

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.

~~The Company does not have any unrecorded or potential contingent liabilities or material commitments requiring the use of assets as of September 30, 2020 or December 31, 2019.~~

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Shares outstanding, beginning of period		22,119,380			22,192,894			21,318,638			22,119,380
Treasury shares repurchased through stock repurchase authorization		(804,743	)		(116,034	)		(32,326	)		(123,264	)
Issuance of treasury shares for vesting of restricted stock units		31,442			18,205			86,460			19,042
Shares outstanding, end of period		21,346,079			22,095,065			21,372,772			22,015,158

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 ~~nine~~six months ended ~~September~~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 ~~nine months~~year ended ~~September 30,~~December 31, 2020, we completed the repurchase of ~~402,687~~454,443 shares of our common stock for ~~$6,367~~$7,238 under this new authorization. During the three months ended March 31, 2021, we completed the repurchase of 32,326 shares of our common stock for $596.

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

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
RSU compensation expense	$	211		$	165		$	824		$	627		$	388		$	420
Income tax benefit		(44	)		(35	)		(173	)		(132	)		(81	)		(88	)
RSU compensation expense, net of income taxes	$	167		$	130		$	651		$	495		$	307		$	332

At ~~September 30, 2020,~~March 31, 2021, there was ~~$892~~$1,097 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of ~~1.93~~2.44 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. ~~No forfeitures are currently estimated.~~ The current cost estimate assumes that the cumulative growth ~~target~~targets will be ~~achieved.~~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:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
PSU compensation expense	$	274		$	175		$	838		$	647		$	284		$	293
Income tax benefit		(58	)		(37	)		(176	)		(136	)		(60	)		(62	)
PSU compensation expense, net of income taxes	$	216		$	138		$	662		$	511		$	224		$	231

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 ~~September 30, 2020,~~March 31, 2021, there was ~~$1,288~~$2,011 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of ~~1.73~~2.23 years.

As described in Note 1, the conversion of the mutual company to a stock company resulted in the issuance of NI Holdings common shares on March 13, 2017. 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. The weighted average number of common shares outstanding was 21,565,962 and 22,136,885 during the three months ended September 30, 2020 and 2019, respectively, and 21,889,138 and 22,194,102 during the nine months ended September 30, 2020 and 2019, respectively.

Unearned ESOP shares are not considered outstanding until they are released and allocated to plan participants. Unearned RSU and PSU shares are not considered outstanding until they are earned by award participants.

~~The following table presents a reconciliation of the numerators and denominators we used in the basic and diluted per share computations for our common stock:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Basic earnings (loss) per common share:

Numerator:

Net income (loss) attributable to NI Holdings, Inc.

$
3,664

$
(6,979
)

$
18,810

$
9,272

Denominator:

Weighted average shares outstanding

21,565,962

22,136,885

21,889,138

22,194,102

Basic earnings (loss) per common share

$
0.17

$
(0.32
)

$
0.86

$
0.42

Diluted earnings (loss) per common share:

Numerator:

Net income (loss) attributable to NI Holdings, Inc.

$
3,664

$
(6,979
)

$
18,810

$
9,272

Denominator:

Number of shares used in basic computation

21,565,962

22,136,885

21,889,138

22,194,102

Weighted average effect of dilutive securities

Add: RSUs and PSUs

189,266

95,189

149,748

75,398

Number of shares used in diluted computation

21,755,228

22,232,074

22,038,886

22,269,500

Diluted earnings (loss) per common share

$
0.17

$
(0.31
)

$
0.85

$
0.42

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 nine~~ month periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~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 rules and regulations. ~~The~~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 September 30, 2020
Private
Passenger
Auto
Non-
Standard
Auto
Home and
Farm
Crop
Commercial
All Other
Total
Direct premiums earned
$
19,002
$
13,882
$
20,688
$
12,189
$
12,516
$
1,178
$
79,455
Assumed premiums earned
-
-
-
(33
)
-
1,405
1,372
Ceded premiums earned
(1,055
)
(43
)
(2,140
)
(2,437
)
(1,743
)
(67
)
(7,485
)
Net premiums earned
17,947
13,839
18,548
9,719
10,773
2,516
73,342

Direct losses and LAE
13,570
9,425
13,912
12,154
9,257
1,618
59,936
Assumed losses and LAE
(165
)
-
-
617
-
1,984
2,436
Ceded losses and LAE
165
-
(475
)
(3,546
)
(3,680
)
(1,000
)
(8,536
)
Net losses and LAE
13,570
9,425
13,437
9,225
5,577
2,602
53,836

Gross margin
4,377
4,414
5,111
494
5,196
(86
)
19,506

Underwriting and general expenses
5,103
5,140
5,507
1,542
4,289
563
22,144
Underwriting gain (loss)
(726
)
(726
)
(396
)
(1,048
)
907
(649
)
(2,638
)

Fee and other income
336
524

(390
)
Net investment income
1,886
Net capital gain on investments
5,102
Income before income taxes
4,874
Income taxes
1,118
Net income
3,686
Net income attributable to non-controlling interest
22
Net income attributable to NI Holdings, Inc.
$
3,664

Non-GAAP Ratios:
Loss and LAE ratio
75.6%
68.1%
72.4%
94.9%
51.8%
103.4%
73.4%
Expense ratio
28.4%
37.1%
29.7%
15.9%
39.8%
22.4%
30.2%
Combined ratio
104.0%
105.2%
102.1%
110.8%
91.6%
125.8%
103.6%

Balances at September 30, 2020:
Premiums and agents’ balances receivable
$
19,269
$
7,358
$
9,323
$
39,182
$
9,071
$
665
$
84,868
Deferred policy acquisition costs
5,629
4,931
7,900
409
4,564
452
23,885
Reinsurance recoverables
341
-
1,984
3,675
5,082
2,474
13,556
Receivable from Federal Crop Insurance Corporation
-
-
-
9,519
-
-
9,519
Goodwill and other intangibles
-
2,872
-
-
15,765
-
18,637

Unpaid losses and LAE
20,399
44,526
12,361
29,723
16,602
11,192
134,803
Unearned premiums
29,203
17,147
41,724
8,730
26,247
2,915
125,966

Three Months Ended September 30, 2019

Private
Passenger
Auto

Non-
Standard
Auto

Home and
Farm

Crop

Commercial
All Other

Total

Direct premiums earned

$
18,256

$
14,167

$
19,844

$
15,943

$
1,144
$
2,271

$
70,481

Assumed premiums earned

(7
)

-

8

(10
)

-

1,243

1,234

Ceded premiums earned

(933
)

(123
)

(1,944
)

(1,416
)

(126
)

(57)

(4,599
)
Net premiums earned

17,316

14,044

17,908

14,517

1,018

3,331

67,116

Direct losses and LAE

19,120

8,440

18,639

13,977

1,356

2,072

62,248

Assumed losses and LAE

94

-

-

1,316

-

607

2,017

Ceded losses and LAE

(498
)

-

41

(2,151
)

(16
)

(17
)

(2,707
)
Net losses and LAE

18,716

8,440

18,598

13,142

1,340

2,662

61,558

Gross margin

(1,400
)

5,604

(690
)

1,375

(322
)

669

5,558

Underwriting and general expenses

4,438

5,207

4,892

1,983

286

771

17,291

Underwriting gain (loss)

(5,838
)

397

(5,582
)

(608
)

(608
)

(102
)

(11,733
)

Fee and other income

363

527

760

Net investment income

1,983

Net capital gain on investments

622

Income before income taxes

(8,601
)
Income taxes

(1,642
)
Net income

(6,959
)
Net income attributable to non-controlling interest

20

Net income attributable to NI Holdings, Inc.

$
(6,979
)

Non-GAAP Ratios:

Loss and LAE ratio

108.1%

60.1%

103.9%

90.5%

131.6%

79.9%

91.7%

Expense ratio

25.6%

37.1%

27.3%

13.7%

28.1%

23.1%

25.8%

Combined ratio

133.7%

97.2%

131.2%

104.2%

159.7%

103.1%

117.5%

Balances at June 30, 2019:

Premiums and agents’ balances receivable

$
18,776

$
8,186

$
9,238

$
39,275

$
945
$
1,551

$
77,026

Deferred policy acquisition costs

4,143

4,794

5,945

281

316

641

15,804

Reinsurance recoverables

377

-

1,330

2,855

(29
)

1,191

5,753

Receivable from Federal Crop Insurance Corporation

-

-

-

24,191

-

-

24,191

Goodwill and other intangibles

-

2,928

-

-

-

-

2,928

Unpaid losses and LAE

21,447

47,672

14,574

23,738

1,233

9,942

117,373

Unearned premiums

28,312

16,723

40,114

11,233

2,706

5,035

101,417

	Nine Months Ended September 30, 2020																					Three Months Ended March 31, 2021
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			Commercial			All Other				Total		Private Passenger Auto			Non-Standard Auto			Home and Farm			Crop			Commercial			All Other			Total
Direct premiums earned	$	55,899		$	40,253		$	61,062		$	31,438		$	32,173		$	3,475		$	224,300		$	18,688		$	13,581		$	20,583		$	(16	)	$	14,722		$	1,185		$	68,743
Assumed premiums earned		-			-			-			1,903			-			3,752			5,655			0-			0-			0-			0-			0-			1,448			1,448
Ceded premiums earned		(3,267	)		(129	)		(61,062	)		109			(5,206	)		(217	)		(15,835	)		(1,190	)		(323	)		(3,129	)		63			(2,384	)		(93	)		(7,056	)
Net premiums earned		52,632			40,124			53,937			33,450			26,967			7,010			214,120			17,498			13,258			17,454			47			12,338			2,540			63,135

Direct losses and LAE		33,324			23,560			32,661			35,212			26,169			2,277			153,203			12,559			4,800			7,888			572			11,464			295			37,578
Assumed losses and LAE		-			-			-			839			-			2,699			3,538			0-			0-			0-			0-			0-			948			948
Ceded losses and LAE		(1	)		-			(1,826	)		(5,352	)		(11,640	)		(1,300	)		(20,119	)		(305	)		0-			(256	)		(11	)		(1,065	)		0-			(1,637	)
Net losses and LAE		33,323			23,560			30,835			30,699			14,529			3,676			136,622			12,254			4,800			7,632			561			10,399			1,243			36,889

Gross margin		19,309			16,564			23,102			2,751			12,438			3,334			77,498			5,244			8,458			9,822			(514	)		1,939			1,297			26,246

Underwriting and general expenses		14,248			15,482			15,102			3,542			11,842			1,712			61,928			5,359			4,414			5,611			536			4,615			703			21,238
Underwriting gain (loss)		5,061			1,082			8,000			(791	)		596			1,622			15,570			(115	)		4,044			4,211			(1,050	)		(2,676	)		594			5,008

Fee and other income					993															1,332						332															317
					2,075																					4,376
Net investment income																				5,875																					1,536
Net capital loss on investments																				1,380
Net capital gain on investments																																									5,811
Income before income taxes																				24,157																					12,672
Income taxes																				5,259
Income tax expense																																									2,890
Net income																				18,898																					9,782
Net income attributable to non-controlling interest																				88																					113
Net income attributable to NI Holdings, Inc.																			$	18,810																					9,669

Non-GAAP Ratios:
Loss and LAE ratio		63.3%			58.7%			57.2%			91.8%			53.9%			52.4%			63.8%			70.0%			36.2%			43.7%			n/a			84.3%			48.9%			58.4%
Expense ratio		27.1%			38.6%			28.0%			10.6%			43.9%			24.4%			28.9%			30.6%			33.3%			32.1%			n/a			37.4%			27.7%			33.6%
Combined ratio		90.4%			97.3%			85.2%			102.4%			97.8%			76.9%			92.7%			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

	Nine Months Ended September 30, 2019																					Three Months Ended March 31, 2020
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			Commercial			All Other			Total			Private Passenger Auto			Non-Standard Auto			Home and Farm			Crop			Commercial			All Other			Total
Direct premiums earned	$	52,792		$	44,029		$	57,592		$	31,159		$	3,379		$	3,282		$	192,233		$	18,397		$	13,194		$	20,158		$	(5	)	$	9,505		$	1,144		$	62,393
Assumed premiums earned		-			-			-			2,087			1			3,145			5,233			0-			0-			0-			0-			0-			1,600			1,600
Ceded premiums earned		(2,698	)		(123	)		(5,642	)		(5,718	)		(380	)		(169	)		(14,730	)		(1,098	)		(43	)		(2,537	)		184			(1,652	)		(75	)		(5,221	)
Net premiums earned		50,094			43,906			51,950			27,528			3,000			6,258			182,736			17,299			13,151			17,621			179			7,853			2,669			58,772

Direct losses and LAE		41,300			27,416			41,396			23,046			2,169			3,154			138,481			11,129			5,940			7,668			2,811			5,919			425			33,892
Assumed losses and LAE		173			-			-			1,394			-			1,433			3,000			0-			0-			0-			0-			0-			308			308
Ceded losses and LAE		(730	)		-			(1,329	)		(2,558	)		(29	)		(850	)		(5,496	)		0-			0-			(1,130	)		(444	)		(2,204	)		0-			(3,778	)
Net losses and LAE		40,743			27,416			40,067			21,882			2,140			3,737			135,985			11,129			5,940			6,538			2,367			3,715			733			30,422

Gross margin		9,351			16,490			11,883			5,646			860			2,521			46,751			6,170			7,211			11,083			(2,188	)		4,138			1,936			28,350

Underwriting and general expenses		14,097			15,845			15,327			3,091			995			1,570			50,925			4,810			5,197			4,889			702			3,929			632			20,159
Underwriting gain		(4,746	)		645			3,444			2,555			(135	)		951			(4,174	)
Underwriting gain (loss)																							1,360			2,014			6,194			(2,890	)		209			1,304			8,191

Fee and other income					1,339															1,637						329															362
					1,984																					2,343
Net investment income																				5,504																					1,971
Net capital gain on investments																				9,591
Income before income taxes																				12,558
Income taxes																				3,206
Net income																				9,352
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																				80																					32
Net income attributable to NI Holdings, Inc.																			$	9,272
Net loss attributable to NI Holdings, Inc.																																								$	(3,587	)

Non-GAAP Ratios:
Loss and LAE ratio		81.3%			62.4%			77.1%			79.5%			71.3%			59.7%			74.4%			64.3%			45.2%			37.1%			0n/a			47.3%			27.5%			51.8%
Expense ratio		28.1%			36.1%			29.5%			11.2%			33.2%			25.1%			27.9%			27.8%			39.5%			27.7%			0n/a			50.0%			23.7%			34.3%
Combined ratio		109.5%			98.5%			106.6%			90.7%			104.5%			84.8%			102.3%			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. 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.

~~We have evaluated subsequent events through November 4, 2020, the date these consolidated financial statements were available for issuance.~~

Beginning in March 2020, the global pandemic associated with novel coronavirus COVID-19 (“COVID-19”) and related economic conditions began to impact the Company’s results. For the nine month period ended September 30, 2020, the Company’s underwriting results were impacted by reduced net premiums earned in our non-standard auto segment. The Company also incurred net unrealized investment losses driven by the impact of changes in fair value on the Company’s equity investments, attributable to the disruption in global financial markets. The actual long-term impact of the pandemic on the property and casualty industry is highly uncertain and will not be known for some time. In the short-term, we expect decreased economic activity to pressure overall top-line growth while negatively impacting investment results, dependent on the extent and duration of the economic contraction.

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 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 ~~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~~ 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 ~~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.

These 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 ~~and Nodak Insurance reinsures 100%~~under the terms of ~~the risk on all insurance policies~~a surplus note issued by Battle ~~Creek.~~Creek to Nodak Insurance.

On August 31, 2018, NI Holdings completed the acquisition of 100% of the common stock of Direct Auto ~~Insurance Company (“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 ~~subsidiaries of NI Holdings~~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 ~~Unaudited Consolidated~~ Balance Sheets. Additional information can be found later in this section.

	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019			2020		2019		2021		2020
Direct premiums written	$	68,322	$	49,984		$	244,053	$	208,880	$	72,420	$	62,972
Net premiums earned		73,342		67,116			214,120		182,736		63,135		58,772
Net income (loss) before non-controlling interest		3,686		(6,959	)		18,898		9,352		9,782		(3,555	)

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Total assets	$	630,036	$	508,159	$	621,385	$	617,603
Shareholders’ equity		325,513		309,803		352,590		348,872

~~The~~Beginning in March 2020 and continuing throughout the year, the global pandemic associated with the novel coronavirus COVID-19 ~~continued to impact~~and related economic conditions impacted the Company’s results of ~~operations during the quarter, although to a much lesser degree than in previous quarters. Continued decreased~~operations. Decreased economic activity ~~has~~ limited revenue growth in our personal lines of ~~business.~~business during 2020. This ~~has been~~was partially offset by reduced loss frequency in our private passenger and non-standard auto segments, ~~though to a lesser degree~~primarily during the second and third ~~quarter compared~~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 ~~earlier quarters. Revenue growth from~~its current monetary policy, which balances holding the ~~commercial insurance~~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 ~~has been exceptional due~~by limiting our ability to ~~Westminster’s higher A.M. Best rating and its niche market position.~~

~~The actual long-term impact~~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 ~~pandemic on the property~~year, including unemployment and ~~casualty industry continues to be highly uncertain and will not be fully known for some time.~~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 ~~regional~~geographic and line of business basis. The private passenger marketplace continues to ~~soften which is creating~~be a very competitive and challenging pricing ~~environment. Rates for private passenger auto are~~environment, as a result of recent favorable results and increased competitive ~~across~~pressure in the ~~Upper Midwest.~~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 ~~the third quarter,~~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 ~~our other~~property and casualty insurance, ~~segments,~~the total crop insurance premiums written each year ~~fluctuate primarily~~vary mainly based on prevailing commodity prices for the type of crops insured, asbecause the aggregate number of acres ~~insured generally remains consistent~~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’ 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, one-half of the premiums would be earned in 2020 and the other half would be earned in 2021.

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 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 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.

~~Beginning in 2019, in accordance with a change in accounting principle,~~ The Company recognizes changes in unrealized gains and losses on the Company’s investments in equity securities ~~are included~~ 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. ~~Prior to 2019, the changes in unrealized gains and losses pertaining to such investments were recorded in other comprehensive income.~~

The changes in unrealized gains and losses on fixed income securities ~~continue to be~~are recorded in other comprehensive income, net of income taxes. ~~The new accounting treatment has no effect on total shareholders’ equity.~~

NI Holdings’ portfolio of investments is managed by Conning, Inc., Disciplined Growth Investors, and CIBC Personal ~~Wealth Management, and Morgan Stanley~~ 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’ 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.

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 rules and regulations. GAAP is the acronym for “accounting principles generally accepted in the United States of America”. ~~The~~While used widely in the property and casualty insurance industry, the non-GAAP financial measures that NI Holdings presents may not be ~~compatible~~comparable to similarly-named measures reported by other companies. The non-GAAP financial measures described in this section ~~are used widely in the property and casualty insurance industry, and~~ 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 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 ~~attributable to NI Holdings~~ 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 ~~(loss adjustment expenses, or “LAE”)~~(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, 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 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 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 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 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 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 — ~~This method~~The Ratio of Paid ALAE to Paid Loss Method utilizes the ratio of paid ~~allocated loss adjustment expense (“ALAE”)~~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 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(as in the case of ~~a hurricane,~~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 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.

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Case reserves	$	122,562	$	90,210	$	96,085	$	89,903
IBNR reserves		12,241		3,040		15,437		15,847
Liability for unpaid losses and LAE	$	134,803	$	93,250	$	111,522	$	105,750
Reinsurance recoverables on losses		13,556		4,045		9,270		8,710
Net unpaid losses and LAE	$	121,247	$	89,205	$	102,252	$	97,040

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

	September 30, 2020							March 31, 2021
	Case Reserves		IBNR Reserves			Total Reserves		Case Reserves		IBNR Reserves			Total Reserves
Private passenger auto	$	14,373	$	6,026		$	20,399	$	16,347	$	6,156		$	22,503
Non-standard auto		53,592		(9,066	)		44,526		49,854		(9,565	)		40,289
Home and farm		8,830		3,531			12,361		8,439		4,218			12,657
Crop		29,317		406			29,723		81		15			96
Commercial		11,576		5,026			16,602		16,457		8,990			25,447
All other		4,874		6,318			11,192		4,907		5,623			10,530
Liability for unpaid losses and LAE	$	122,562	$	12,241		$	134,803	$	96,085	$	15,437		$	111,522
Reinsurance recoverables on losses		10,978		2,578			13,556		5,762		3,508			9,270
Net unpaid losses and LAE	$	111,584	$	9,663		$	121,247	$	90,323	$	11,929		$	102,252

	December 31, 2019							December 31, 2020
	Case Reserves		IBNR Reserves			Total Reserves		Case Reserves		IBNR Reserves			Total Reserves
Private passenger auto	$	14,115	$	5,777		$	19,892	$	14,984	$	5,327		$	20,311
Non-standard auto		55,623		(11,645	)		43,978		50,702		(7,366	)		43,336
Home and farm		7,098		3,405			10,503		7,705		4,032			11,737
Crop		8,411		168			8,579		756		15			771
Commercial		731		345			1,076		10,749		8,340			19,089
All other		4,232		4,990			9,222		5,007		5,499			10,506
Liability for unpaid losses and LAE	$	90,210	$	3,040		$	93,250	$	89,903	$	15,847		$	105,750
Reinsurance recoverables on losses		2,867		1,178			4,045		5,102		3,608			8,710
Net unpaid losses and LAE	$	87,343	$	1,862		$	89,205	$	84,801	$	12,239		$	97,040

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 ~~September 30, 2020,~~March 31, 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 ~~$958.~~$808.

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 net income, after federal income taxes of 21%, resulting from various changes from the inflation factor implicitly embedded in the estimated payment pattern as of December 31, ~~2019,~~2020, which is deemed consistent with ~~September 30, 2020, excluding the addition of the Westminster liability for unpaid losses and LAE.~~March 31, 2021. 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.

Change in Inflation	Impact on After-Tax Earnings			Impact on After-Tax Earnings
-1%	$	(1,103	)	$	(1,392	)
1%		1,128			1,429
3%		3,463			4,402
5%		5,910			7,540

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 net income, after federal income taxes of 21% ~~that results~~, resulting from various changes to the level of case reserves as of December 31, ~~2019,~~2020, which is deemed consistent with ~~September 30, 2020, excluding the addition of the Westminster liability for unpaid losses and LAE.~~March 31, 2021. This variance in future IBNR emergence could occur in one year or over multiple years, depending when the change is recognized.

Change in Case Reserves	Impact on After-Tax Earnings			Impact on After-Tax Earnings
-10%	$	7,127		$	7,102
-5%		3,563			3,551
-2%		1,425			1,420
+2%		(1,425	)		(1,420	)
+5%		(3,563	)		(3,551	)
+10%		(7,127	)		(7,102	)

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, ~~and on equity securities through December 31, 2018,~~ 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). ~~Effective January 1, 2019, changes~~Changes in unrealized investment gains or losses on equity securities ~~will be~~are recorded in net ~~income (loss), rather than as a component of other comprehensive~~ 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 ~~other-than-temporary impairment (“OTTI”)~~OTTI at least on a quarterly basis. ~~For periods subsequent to December 31, 2018, this evaluation includes only fixed income securities. Prior to January 1, 2019, this evaluation included both fixed income and equity securities.~~ 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 ~~other-than-temporary impairment~~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 ~~other-than-temporary impairment~~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 ~~other-than-temporary impairment~~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 ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, NI Holdings’ investment portfolio experienced ~~an increase~~a decrease in net unrealized gains of ~~$7,643.~~$5,248.

	September 30, 2020			December 31, 2019			Change			March 31, 2021			December 31, 2020			Change
Fixed income securities:
Gross unrealized gains	$	16,331		$	7,595		$	8,736		$	11,699		$	16,801		$	(5,102	)
Gross unrealized losses		(806	)		(354	)		(452	)		(2,351	)		(296	)		(2,055	)
Net fixed income unrealized gains		15,525			7,241			8,284			9,348			16,505			(7,157	)

Equity securities:
Gross unrealized gains		24,431			22,878			1,553			30,566			29,139			1,427
Gross unrealized losses		(3,176	)		(982	)		(2,194	)		(908	)		(1,390	)		482
Net equity unrealized gains		21,255			21,896			(641	)		29,658			27,749			1,909

Net unrealized gains	$	36,780		$	29,137		$	7,643		$	39,006		$	44,254		$	(5,248	)

The fixed income portion of the portfolio experienced ~~an increase~~a decrease in net unrealized gains of ~~$8,284~~$7,157 during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. This decrease was primarily the result 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 ~~increase~~decrease is reflected directly in shareholders’ equity as a component of accumulated other comprehensive income.

Capital markets staged a strong rally during the third quarter of 2020, aided by significant fiscal and monetary support from world central banks to help the global economy. In the United States, the S&P 500 index performed well, helping offset negative returns from earlier in the year. Despite rising slightly from the second quarter, U.S. 10-year Treasury rates remain extremely depressed given the negative impact on economic growth from the current public health crisis and announcements from the U.S. Federal Reserve on its intention to maintain a near-zero interest rate policy for the foreseeable future.

The equity portion of the portfolio experienced ~~significant decreases~~an increase in net unrealized gains ~~and increases in unrealized losses~~of $1,909 during the three months ended March 31, ~~2020,~~2021, which ~~were~~is attributed to the ~~unfavorable conditions~~continuing recovery in the ~~stock~~equity markets. Equity market ~~brought about by the COVID-19 pandemic~~results show expectations of a return to normalcy as travel and a significant drop in oil prices. The stock market has mostly recovered over the second and third quarters, resulting in a much smaller decrease in net unrealized gains for the nine months ended September 30, 2020.leisure sectors have recently risen while stocks benefitting from work-from-home have declined. The net ~~decrease of $641~~increase is included in net capital gains (losses) on investments on the Company’s Consolidated Statements of ~~Operations for the nine months ended September 30, 2020.~~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, ~~which~~who specializes in ~~managing~~the handling of insurance company investment portfolios and participates in this evaluation.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, NI Holdings did not recognize any ~~other-than-temporary impairments~~OTTIs of its investment securities. For the year ended December 31, ~~2019,~~2020, NI Holdings did not recognize any ~~other-than-temporary impairments~~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 6 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 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 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 fair values of the Company’s investments at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~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 ~~nine~~three month period ended ~~September 30, 2020~~March 31, 2021 or the year ended December 31, ~~2019.~~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 7 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 ~~will be~~was amortized into expense as the acquired unearned premiums are reported into income, in the same way as ~~DAC.~~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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, DAC, the VOBA intangible asset,~~2020, deferred policy acquisition costs and the related liability for unearned premiums were as follows:

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Deferred policy acquisition costs	$	23,885	$	15,399	$	26,575	$	23,968
Value of business acquired intangible asset		325		—
Liability for unearned premiums		125,966		89,276		123,458		119,363

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 ~~$8,852~~$8,842 at ~~September 30, 2020~~March 31, 2021 and ~~$6,294~~$8,603 at December 31, ~~2019,~~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. ~~Valuation allowances~~A valuation allowance of ~~$948 and $594 were~~$931 was maintained at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively. The increase is attributable to the addition of net operating loss carryforwards from Westminster, a portion of which are not expected to be used.~~2020.

NI Holdings had gross deferred income tax liabilities of ~~$15,305~~$15,762 at ~~September 30, 2020~~March 31, 2021 and ~~$10,290~~$16,429 at December 31, ~~2019,~~2020, arising primarily from ~~DAC,~~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 ~~September 30, 2020,~~March 31, 2021, NI Holdings had no material unrecognized income tax benefits or accrued interest and penalties. Federal income tax years 2014 through ~~2018~~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 ~~pricing is set~~rates are established by the RMA rather than individual insurance carriers. The expected loss experience of ~~this~~the MPCI business for the calendar year may also significantly ~~impact~~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 ~~prevented planting~~ claims early in the ~~season, additional~~risk period, recognition of earned premiums may be ~~recognized in the second quarter~~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.~~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.

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.

For more information on the Company’s results of operations by segment, see Note 2221 to the Unaudited Consolidated Financial Statements, included elsewhere in this Form 10-Q.

The consolidated net income for NI Holdings was ~~$3,686~~$9,782 for the three months ended ~~September 30, 2020~~March 31, 2021, compared to net loss of ~~$6,959~~$3,555 for the three months ended ~~September 30, 2019.~~March 31, 2020. The major components of NI Holdings’ operating revenues and net income for the two periods were as follows:

	Three Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021		2020
Revenues:
Net premiums earned	$	73,342		$	67,116		$	63,135	$	58,772
Fee and other income		524			527			317		362
Net investment income		1,886			1,983			1,536		1,971
Net capital gain on investments		5,102			622
Net capital gain (loss) on investments								5,811		(14,919	)
Total revenues	$	80,854		$	70,248		$	70,799	$	46,186

Components of net income (loss):
Net premiums earned	$	73,342		$	67,116		$	63,135	$	58,772
Losses and loss adjustment expenses		53,836			61,558			36,889		30,422
Amortization of deferred policy acquisition costs and other underwriting and general expenses		22,144			17,291			21,238		20,159
Underwriting loss		(2,638	)		(11,733	)
Underwriting gain								5,008		8,191
Fee and other income		524			527			317		362
Net investment income		1,886			1,983			1,536		1,971
Net capital gain on investments		5,102			622
Net capital gain (loss) on investments								5,811		(14,919	)
Income (loss) before income taxes		4,874			(8,601	)		12,672		(4,395	)
Income taxes		1,188			(1,642	)		2,890		(840	)
Net income (loss)	$	3,686		$	(6,959	)	$	9,782	$	(3,555	)

Beginning in March 2020, the global pandemic associated with COVID-19 and related economic conditions began to impact the Company’s results. ~~For~~The immediate financial impact to the ~~three months ended September 30, 2020, the Company’s underwriting results were impacted by reduced net premiums earned~~Company was volatility in our ~~non-standard auto segment. The Company also experienced continued volatility in net unrealized~~ investment ~~gains~~portfolio and ~~losses driven by the impact of changes~~significant declines in fair value on the Company’s equity investments, attributable to the ~~recent~~ disruption in global financial markets. ~~For further discussion regarding~~The Company’s underwriting results, especially in the ~~potential impacts~~non-standard auto segment, were impacted during the second and third quarters of 2020 as a result of reduced economic activity.

Vaccinations for COVID-19 are 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, and the related economic challenges in the Las Vegas area have adversely impacted 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 ~~Company, see “Part II – Item 1A – Risk Factors”.~~year, including unemployment and financial market volatility.

NI Holdings’ net premiums earned for the three months ended ~~September 30, 2020~~March 31, 2021 increased ~~$6,226,~~$4,363, or ~~9.3%~~7.4%, compared to ~~a year ago.~~the three months ended March 31, 2020.

	Three Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2021		2020
Net premiums earned:
Private passenger auto	$	17,947	$	17,316	$	17,498	$	17,299
Non-standard auto		13,839		14,044		13,258		13,151
Home and farm		18,548		17,908		17,454		17,621
Crop		9,719		14,517		47		179
Commercial		10,773		0		12,338		7,853
All other		2,516		3,331		2,540		2,669
Total net premiums earned	$	73,342	$	67,116	$	63,135	$	58,772

Direct premiums earned for the ~~third~~first quarter of ~~2020~~2021 increased ~~$8,974,~~$6,350, or ~~12.7%~~10.2%, from the ~~third~~first quarter of ~~2019. The addition of the~~2020. This increase was primarily driven by growth in our Westminster commercial ~~business contributed $11,291 in direct~~business.

Assumed premiums earned, ~~during~~which represents our participation in the assumed domestic and international business in our all other segment, decreased slightly. Ceded premiums earned increased $1,835, reflecting an increase in our overall reinsurance coverage limits and the growth in our business.

Direct premiums written for the three months ended ~~September 30, 2020. Crop segment direct premiums earned decreased $3,754~~March 31, 2021 were $72,420, compared to ~~last~~$62,972 a year ~~related to the acceleration of premiums earned~~ago. This increase was driven by growth in ~~second quarter due to the high claim volume of prevented planting claims submitted for the current multi-peril crop season.~~

~~Assumed premiums earned increased $138, related to the assumed reinsurance business. Ceded premiums earned increased $2,886, due to ceding of the~~both our Westminster commercial business and ~~increasing our overall reinsurance coverage limits. Premiums ceded to the federal government under the multi-peril crop program also increased year-over-year.~~

~~Our personal~~non-standard auto business. Personal lines of business (private passenger auto, home and farm) also grew due to continued ~~to grow~~growth in South Dakota and modest growth in North Dakota, while premiums in Nebraska ~~albeit at a slower pace due to COVID-19 concerns and increased competition.~~

~~Our~~were flat. We anticipate that commercial written premium growth will remain strong over the remainder of 2021, while continued growth in the non-standard auto ~~net premiums earned decreased year-over-year~~business is more unpredictable due to the COVID-19 pandemic, which negatively impacted policy counts in this segment across all states. Direct premiums written in this segment increased slightly during the third quarter, both year-over-year and compared to second quarter. This increase reflects the positive impacts from rate actions in Nevada during 2019 and rate actions in Arizona during 2020, offset by the lower policy counts caused byfactors associated with the pandemic ~~throughout 2020. At this time, we are unsure what impact the pandemic will have on policy counts for the remainder~~and related economic implications.

NI Holdings’ net losses and LAE for the three months ended ~~September 30, 2020 decreased $7,722,~~March 31, 2021 increased $6,467, or ~~12.6%~~21.3%, compared to the three months ended March 31, 2020. As a ~~year ago, due primarily to improved~~result, the Company’s loss ~~experience in the private passenger auto~~ and ~~home and farm segments.~~ LAE ratio also increased.

~~The Company’s overall loss and LAE~~ experience ~~improved 18.3 percentage points year-over-year. The private passenger auto, home and farm, and commercial~~increased year-over-year across most segments ~~improved significantly, while~~of the ~~non-standard auto, crop, and all other segments reported increases in their loss and LAE ratios.~~Company.

Losses ~~were favorable~~increased modestly year-over-year in private passenger ~~and~~auto, while non-standard auto reported better than normal loss experience. In home and farm, losses and LAE increased modestly due to ~~fewer weather-related losses during the current quarter. In~~more weather activity in 2021.

The commercial ~~while overall losses increased~~segment experienced a higher than expected first quarter 2021 loss ratio due to ~~Westminster’s results being added~~an elevated number of fires and slip-and-fall claims due to the ~~segment,~~winter weather on the ~~year-over-year loss~~east coast. Most of these losses fell beneath the reinsurance retention limit, resulting in a decrease in ceded losses and ~~LAE ratio was significantly improved.~~LAE.

The ~~2019 multi-peril~~first quarter 2020 results for our crop ~~insurance~~ business ended the year with less than 50% of the corn in North Dakota harvested and we carried a significant number of open claims as of December 31, 2019. All of those claims have now been settled as of the end of September. This business experiencedincluded unfavorable loss development of ~~$217,~~$2,367 on a net basis ~~during the current quarter.~~

~~The issues arising~~ from the 2019 ~~multi-peril~~ crop ~~season have impacted~~season. For the ~~2020 season. A higher than normal number~~first quarter of ~~prevented planting claims were submitted~~2021, the crop segment includes $561 of net unfavorable loss development due primarily to ~~fields not harvested from~~late development within a moisture index component of the ~~prior year, resulting in a shortened risk period for these policies and an acceleration of multi-peril~~federal crop premiums earned during the second quarter. The net premiums earned and net losses reported for third quarter 2020, while less than third quarter 2019 due to this acceleration, reflect a higher expected loss and LAE ratio compared to a year ago.program.

During the three months ended ~~September 30, 2020,~~March 31, 2021, reported losses and LAE included ~~$1,736~~$2,523 of net ~~favorable~~unfavorable development on prior accident years, compared to ~~$1,227~~$510 of net unfavorable development on prior accident years during the three months ended September 30, 2019. 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. The net favorable development reported in the third quarter of 2020 is primarily related to the Direct Auto non-standard auto business.

~~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 $3,998, or 22.3%, during the three months ended September 30, 2020 compared to a year ago.

Underlying expenses were $5,451 higher in the three months ended September 30, 2020 compared to a year ago, driven primarily by the addition of Westminster’s $4,703 of underlying expenses, including $1,057 amortization of other intangibles. Consulting fees and stock compensation costs contributed to the increase.

~~Expense deferrals were $4,350 higher in the three months ended September 30, 2020 compared to 2019, while amortization of those costs was $3,752 higher in~~March 31, 2020. ~~The commercial business contributed $2,615 of new expense deferrals and $1,658 of amortization in the third quarter of 2020.~~

The expense ratio of 30.2% for the three months ended September 30, 2020 was 4.4 percentage points higher than the expense ratio in the third quarter of 2019 due primarily to the addition of Westminster and increased expense levels, while net premiums earned increased at a lesser rate in the current quarter.

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.

~~Overall underwriting profitability improved significantly year-over-year across all segments with the exception of crop and commercial.~~

The combined ratio for the private passenger auto segment improved 29.7 percentage points year-over-year. Loss experience during third quarter 2019 was elevated due to weather-related losses, as well as significant bodily injury and underinsured liability losses. During third quarter 2020, claims frequency has mostly returned to normal levels after benefitting from a reduction in miles driven during the earlier months of the COVID-19 pandemic.

For the non-standard auto segment, the combined ratio has deteriorated modestly during third quarter 2020. Similar to private passenger auto, claims frequency for this segment is returning to more normal levels as miles driven are increasing to more normal levels.

The combined ratio for the home and farm segment improved substantially as we experienced a lower amount of weather-related events in the third quarter. The favorable impact from weather-related losses combined with some modest rate adjustments helped continue the excellent results in 2020 for these lines of business.

For the commercial segment, the results of Westminster are now combined with the commercial business of Nodak Insurance. The third quarter 2019 results reflected high loss experience for the Nodak book. During third quarter 2020, the addition of Westminster decreased the loss and LAE ratio to more profitable levels. Underwriting expenses during the third quarter for Westminster continue to be impacted by amortization of their VOBA intangible asset. Regulatory actions related to commercial insurance policies taken by certain states within Westminster’s operating territory earlier during 2020 have had minimal impact on our results thus far, although it is possible that additional steps taken by federal, state, and local governments may have adverse impacts on our future results.

For the crop segment, the combined ratio is elevated due to the high percentage of unharvested corn that remained in the field from the 2019 season. As these fields were harvested, the losses were higher than anticipated, resulting in additional adverse development for this segment that continued into this quarter. The current year multi-peril crop loss ratio is also elevated due to the large number of prevented planting claims submitted this spring. The high combined ratio for multi-peril crop has been partially offset by improved loss experience for our crop hail business.

For the all other segment, the assumed domestic and international pools in which we participate had increased loss experience during the quarter. These losses were driven largely by severe hail storms in Canada, an active Atlantic hurricane season, and California wildfires.

NI Holdings had fee and other income of $524 for the three months ended September 30, 2020, compared to $527 for the three months ended September 30, 2019. Fee income attributable to the non-standard auto segment is a key component in measuring its profitability. Fee income on this business decreased to $336 for the three months ended September 30, 2020 from $363 for the three months ended September 30, 2019, as the amount of new inforce polices in Primero has dropped considerably. Primero also temporarily waived some of its policy maintenance fees as a response to the COVID-19 pandemic.

~~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 $97 for the three months ended September 30, 2020 compared to a year ago. This decrease is attributable to adjusted amortization of bond discounts on Westminster’s fixed income securities and additional investment expenses from Westminster. The weighted average gross yield on invested assets decreased to 2.2% in 2020 from 2.6% in 2019.

As of September 30, 2020, our overall book yield for our combined fixed income and equity portfolio was 2.6%, excluding Westminster’s standalone portfolio. The average duration of our fixed income securities was 3.7 years at September 30, 2020.

~~NI Holdings had realized capital gains on investment of $636 for the three months ended September 30, 2020, compared to realized capital gains of $1,006 a year ago.~~

Effective January 1, 2019, in accordance with a change in accounting principle, market fluctuations on our equity securities are reflected in the Company’s results of operations. NI Holdings reported a net gain of $4,466 attributed to the change in unrealized appreciation of its equity securities for the three months ended September 30, 2020, compared to a net loss of $384 for the three months ended September 30, 2019. Prior to January 1, 2019, such unrealized gains and losses were included in other comprehensive income. The significant gain in the current quarter was the result of a continued rebound from the extensive losses reported in first quarter due to the COVID-19 pandemic and the related economic implications on businesses and the stock market. We anticipate additional volatility throughout the remainder of the pandemic and economic recovery period.

~~The Company recorded no other-than-temporary impairments in the three months ended September 30, 2020 and 2019.~~

The Company’s fixed income securities and equity securities are classified as available for sale because it will, from time to time, make sales of securities that are not impaired, consistent with our investment goals and policies. At September 30, 2020, the Company had net unrealized gains on fixed income securities of $15,525 and net unrealized gains on equity securities of $21,255. At December 31, 2019, the Company had net unrealized gains on fixed income securities of $7,241 and net unrealized gains on equity securities of $21,896. The increase in the fair value of our fixed income securities was driven primarily by the U.S. Federal Reserve’s implementation of the unprecedented efforts it announced in March to support the economy, as well as its intention to maintain a near-zero interest rate policy for the foreseeable future.

NI Holdings has evaluated each security in a loss position and taken into account the severity and duration of the impairment, the current rating on the bond, and the outlook for the issuer according to independent analysts. NI Holdings will continue to monitor these securities throughout the remainder of the COVID-19 pandemic and economic recovery period.

For the three months ended September 30, 2020, NI Holdings had pre-tax income of $4,874 compared to pre-tax loss of $8,601 for the three months ended September 30, 2019. The increase in pre-tax results was largely attributable to the significant improvement in loss experience and the pre-tax $4,850 fluctuation in the change in net unrealized gains in our equity portfolio between the third quarter of 2020 and 2019.

NI Holdings recorded income tax expense of $1,188 for the three months ended September 30, 2020, compared to income tax benefit of $1,642 for the three months ended September 30, 2019. A portion of income tax expense relates to state income taxes primarily for the state of Illinois. Our effective tax rate for the third quarter of 2020 was 24.4% compared to an effective tax rate of 19.1% for the third quarter of 2019.

The valuation allowance against certain deferred income tax assets increased to $948 as of September 30, 2020, compared to $594 as of December 31, 2019. The acquisition of Westminster included $354 of valuation allowance related to net operating loss carryforwards.

For the three months ended September 30, 2020, NI Holdings had net income before non-controlling interest of $3,686 compared to net loss before non-controlling interest of $6,959 for the three months ended September 30, 2019. This increase in net income was largely attributable to the significant improvement in loss experience and the fluctuation in the change in net unrealized gains in our equity portfolio between the third quarter of 2020 and 2019.

For the three months ended September 30, 2020, NI Holdings had annualized return on average equity, after non-controlling interest, of 4.6% compared to annualized return on average equity, after non-controlling interest, of -9.6% for the three months ended September 30, 2019. Average equity is calculated as the average between beginning and ending equity excluding non-controlling interest for the period.

The consolidated net income for NI Holdings was $18,898 for the nine months ended September 30, 2020 compared to net income of $9,352 for the nine months ended September 30, 2019. The major components of NI Holdings’ operating revenues and net income for the two periods were as follows:

The global pandemic associated with the novel coronavirus COVID-19 continued to impact the Company’s results of operations during the nine months ended September 30, 2020. Decreased economic activity restricted top-line growth and volatile financial markets had a negative impact on the Company’s equity investments and overall investment returns. These top-line growth impacts were partially offset by reduced loss frequency in our private passenger and non-standard auto segments, due to decreased overall miles driven during the second quarter.

The actual long-term impact of the pandemic on the property and casualty industry continues to be highly uncertain and will not be fully known for some time. For further discussion regarding the potential impacts of COVID-19 and related economic conditions of the Company, see “Part II – Item 1A – Risk Factors”.

~~NI Holdings’ net premiums earned for the nine months ended September 30, 2020 increased $31,384, or 17.2%, compared to a year ago.~~

Direct premiums earned for the first nine months of 2020 increased $32,067, or 16.7%, from the same period of 2019. The addition of the Westminster commercial business contributed $28,606 in direct premiums earned during the nine months ended September 30, 2020. Private passenger auto and home and farm segments reported modest increases to direct premiums earned, while non-standard auto decreased due mainly to COVID-19 pandemic impacts.

Assumed premiums earned increased $422, primarily due to increasing our participation in the assumed domestic and international reinsurance pools in our all other segment. Ceded premiums earned increased $1,105, due to ceding of the Westminster commercial business and increasing our overall reinsurance coverage limits, and offset by gain-sharing amounts from the federal government for the multi-peril crop business.

~~Our personal lines of business (private passenger auto, home and farm) continued to grow in South Dakota and Nebraska. Our North Dakota business grew modestly.~~

Our non-standard auto premiums decreased year-over-year. Rate changes implemented to address unprofitable results and increased policy liability limits mandated by Nevada and Arizona led to a decrease in the number of vehicles insured. In addition, the COVID-19 pandemic has negatively impacted policy counts in this segment. During the third quarter, we have seen a modest increase in new business for the non-standard auto line of business compared to the second quarter.

NI Holdings’ net losses and LAE for the nine months ended September 30, 2020 increased $637, or 0.5%, compared to a year ago. The Company’s loss and LAE ratio decreased significantly due to improved loss experience in all segments except crop.

The Company’s overall loss and LAE experience improved 10.6 percentage points year-over-year, across most segments of the Company. Only the crop segment reported an increase in its loss and LAE ratio.

Losses were favorable year-over-year in private passenger and non-standard auto, due to less frequency of losses as insureds drove fewer miles, primarily during the second quarter of 2020. In private passenger auto and home and farm, losses and LAE decreased due to lower weather-related losses. Private passenger auto also experienced significant bodily injury and underinsured losses last year.

~~For the commercial business, while overall losses increased due to Westminster’s results being added to the segment, the year-over-year loss and LAE ratio significantly improved.~~

The 2019 multi-peril crop insurance business ended the year with less than 50% of the corn in North Dakota harvested and we carried a significant number of open claims as of December 31, 2019. All of those claims have been settled during the first nine months of the year. This business produced unfavorable loss development of $3,831 on a net basis as these claims were adjusted and settled in 2020.

The issues arising from the 2019 multi-peril crop season have impacted the 2020 season. A higher than normal number of prevented planting claims were submitted due to fields not harvested from the prior year, resulting in a shortened risk period for these policies and an acceleration of multi-peril crop premiums earned for the first nine months of 2020. The net losses reported through third quarter 2020 reflect a higher expected loss and LAE ratio compared to a year ago.

During the nine months ended September 30, 2020, reported losses and LAE included $4,268 of net favorable development on prior accident years, compared to $6,443 of net favorable development on prior accident years during the nine months ended September 30, 2019. 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 ~~$11,003,~~$1,079, or ~~21.6%~~5.4%, during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended March 31, 2020.

Underlying expenses were $79 lower in the three months ended March 31, 2021 compared to a year ago.

Underlying expenses were $16,551 higher in the nine months ended September 30, 2020 compared to a year ago. Westminster contributed $14,212 of underlying expenses to the current quarter, including $4,741 amortization of other intangibles. Underlying expenses were also elevated due to consulting fees, stock compensation costs, and Acquisition costs related to the ~~acquisition~~increase in direct written premiums were offset by reduced consulting fees and amortization of ~~Westminster.~~other intangibles.

Expense deferrals were ~~$8,143~~$3,042 higher in the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~2019,~~2020, while amortization of those costs was ~~$2,595~~$4,200 higher in ~~2020.~~2021. The increase in amortization is partly attributable to the increase in commercial ~~segment contributed $7,385 of new expense deferrals in 2020, and $3,137 of amortization expense.~~business sold throughout 2020.

The expense ratio of ~~28.9%~~33.6% for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 was ~~1.0~~0.7 percentage points ~~higher~~lower than the expense ratio in ~~2019 due primarily to~~ the ~~higher level~~first quarter of ~~expenses in Westminster.~~2020, as premium growth outpaced expenses.

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Underwriting gain (loss):
Private passenger auto	$	5,061		$	(4,746	)	$	(115	)	$	1,360
Non-standard auto		1,082			645			4,044			2,014
Home and farm		8,000			(3,444	)		4,211			6,194
Crop		(791	)		2,555			(1,050	)		(2,890	)
Commercial		596			(135	)		(2,676	)		209
All other		1,622			951			594			1,304
Total underwriting gain (loss)	$	15,570		$	(4,174	)
Total underwriting gain							$	5,008		$	8,191

	Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2021		2020
Combined ratio:
Private passenger auto		90.4%		109.5%		100.7%		92.1%
Non-standard auto		97.3%		98.5%		69.5%		84.7%
Home and farm		85.2%		106.6%		75.9%		64.8%
Crop		102.4%		90.7%		n/a		n/a
Commercial		97.8%		104.5%		121.7%		97.3%
All other		76.9%		84.8%		76.6%		51.1%
Total combined ratio		92.7%		102.3%		92.1%		86.1%

~~Overall~~The gain from underwriting ~~results improved significantly year-over-year, as combined ratios improved in all segments except crop.~~operations for the three months ended March 31, 2021 decreased $3,183 when compared to 2020.

The combined ratio for the private passenger auto segment ~~improved 19.1~~increased 8.6 percentage points year-over-year. ~~Elevated loss~~Losses and LAE experience ~~during third quarter 2019~~increased due to ~~weather-related losses and significant bodily injury and underinsured liability losses did not recur in 2020. During 2020,~~ a ~~reduction~~higher frequency of ~~miles driven~~losses. Non-standard auto’s combined ratio decreased due to ~~the COVID-19 pandemic primarily during the second quarter resulted in decreased claims frequency. During third quarter 2020, claims frequency has mostly returned to normal levels.~~improved loss experience.

For the non-standard auto segment, the combined ratio improved slightly year-over-year. Similar to private passenger auto, claims frequency for this segment is returning to more normal levels as miles driven are increasing again.

The combined ratio for the home and farm segment ~~improved substantially~~deteriorated as North ~~Dakota has experienced~~Dakota’s loss experience returned to more normal levels after a ~~lower number of weather-related events~~very favorable winter in 2020. ~~The favorable impact from fewer weather-related losses combined with modest rate adjustments has resulted in a profitable nine months of 2020.~~

For the commercial segment, ~~the results of Westminster are now combined with the commercial business of Nodak Insurance. The 2019 results reflected high~~Westminster’s loss experience ~~for~~included an elevated number of fire losses as well as slip-and-fall claims due to ice and snow during the ~~Nodak book. During 2020, the addition~~first quarter of Westminster decreased the loss and LAE ratio to more profitable levels. Underwriting expenses for Westminster are adversely impacted by amortization of their VOBA intangible asset for 2020. Regulatory actions related to commercial insurance policies taken by certain states within Westminster’s operating territory earlier during 2020 have had minimal impact on our results thus far, although it is possible that additional steps taken by federal, state, and local governments may have adverse impacts to our future results.2021.

For the crop segment, the underwriting results improved due to less unfavorable loss reserve development compared to a year ago. The combined ~~ratio is elevated~~ratios are not meaningful for first quarter in the crop segment due to the ~~high percentage~~lack of unharvested corn that remained in the field from the 2019 season. As these fields were harvested, the losses were higher than anticipated, resulting in adverse development for this segment. The current multi-peril crop loss ratio is also elevated due to the large number of prevented planting claims submitted this spring. The high combined ratio for multi-peril crop has been partially offset by favorable loss experience in our crop hail business.earned premiums.

NI Holdings had fee and other income of ~~$1,332~~$317 for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$1,637~~$362 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Fee income attributable to the non-standard auto segment is a key component in measuring its profitability. Fee income on this business ~~decreased~~increased slightly to ~~$993~~$332 for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 from ~~$1,339~~$329 for the ~~nine~~three months ended ~~September 30, 2019, as the number of inforce polices in Primero has dropped considerably. Primero also temporarily waived some of its policy maintenance fees in response to the COVID-19 pandemic.~~March 31, 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:

	Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2021		2020
Average cash and invested assets	$	437,845	$	388,023	$	494,914	$	418,452

Gross investment income	$	8,025	$	7,194	$	2,433	$	2,800
Investment expenses		2,150		1,690		897		829
Net investment income	$	5,875	$	5,504	$	1,536	$	1,971

Gross return on average cash and invested assets		2.4%		2.5%		2.0%		2.7%
Net return on average cash and invested assets		1.8%		1.9%		1.2%		1.9%

Investment income, net of investment expense, ~~increased $371~~decreased $435 for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~a year ago.~~the three months ended March 31, 2020. This ~~increase~~decrease is attributable to the ~~increase in~~temporary amount of invested assets placed in cash and short term equivalents during the current period, due ~~primarily~~ to the ~~acquisition~~movement of ~~Westminster and increased year-to-date net cash from operating activities, partially offset by an increase in investment expenses primarily from Westminster.~~funds between insurance subsidiaries while implementing the intercompany reinsurance pooling agreement, as well as lower reinvestment rates. The weighted average gross yield on invested assets decreased to ~~2.4%~~2.0% in ~~2020~~2021 from ~~2.5%~~2.7% in ~~2019.~~2020.

As of ~~September 30, 2020,~~March 31, 2021, our overall book yield for our combined fixed income and equity portfolio was ~~2.6%, excluding Westminster’s standalone portfolio.~~2.4%. The average duration ~~for our fixed income securities~~ was ~~3.7~~4.2 years at ~~September 30, 2020.~~March 31, 2021.

NI Holdings had realized capital gains on investment of ~~$2,021~~$3,902 for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~realized capital~~ gains of ~~$1,338 a year ago.~~$1,015 for the three months ended March 31, 2020.

~~Effective January 1, 2019, in accordance with a change in accounting principle, market fluctuations on our equity securities are reflected in the Company’s results of operations.~~ NI Holdings reported a net ~~loss~~gain of ~~$641~~$1,909 attributed to the change in unrealized appreciation of its equity securities for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to a ~~higher than expected~~ net ~~gain~~loss of ~~$8,253~~$15,934 for the ~~nine~~three months ended ~~September 30, 2019. Prior to January 1, 2019, such unrealized gains~~March 31, 2020.

NI Holdings has evaluated each fixed income security in a loss position and ~~losses were included in other comprehensive income. The loss~~taken into account the severity and duration of any potential impairment, the current rating on the bond, and the outlook for the ~~current period was due~~issuer according to the COVID-19 pandemic and the related economic implications on businesses and the stock market. We anticipate additional volatility throughout the remainder of the pandemic and economic recovery period.

independent analysts. The Company recorded no ~~other-than-temporary impairments~~OTTIs in the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

The Company’s fixed income securities and equity securities are classified as available for sale because itwe will, from time to time, make sales of securities that are not impaired, consistent with our investment goals and policies. At ~~September 30,~~March 31, 2021, the Company had net unrealized gains on fixed income securities of $9,348 and net unrealized gains on equity securities of $29,658. At December 31, 2020, the Company had net unrealized gains on fixed income securities of ~~$15,525~~$16,505 and net unrealized gains on equity securities of ~~$21,255. At December 31, 2019, the Company had net unrealized gains on fixed income securities~~$27,749.

Strong U.S. retail sales and ~~net unrealized gains on equity securities of $21,896. The~~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 ~~fair value~~first quarter. However, rates for two years and shorter remain anchored. Equity market results show expectations of ~~our fixed income securities was driven primarily by~~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 ~~U.S. Federal Reserve’s implementation of the unprecedented efforts it announced~~initial lockdown in ~~March~~first quarter 2020. This is likely to ~~support~~be transitory as many believe there is too much slack in the economy ~~as well as its intention~~ to ~~maintain~~envision a ~~near-zero interest rate policy for the foreseeable future.~~

~~NI Holdings has evaluated each security in a loss position and taken into account the severity and duration~~scenario of the impairment, the current rating on the bond, and the outlook for the issuer according to independent analysts. NI Holdings will continue to monitor these securities throughout the remainder of the COVID-19 pandemic and economic recovery period.substantially higher inflation this year.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, NI Holdings had pre-tax income of ~~$24,157~~$12,672 compared to pre-tax ~~income~~loss of ~~$12,558~~$4,395 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The increase in pre-tax results was largely attributable to ~~improved loss experience in 2020, partially offset by~~ the ~~pre-tax $8,894~~$17,843 fluctuation in the change in net unrealized gains in our equity portfolio between the first ~~nine months~~quarter of 2021 and 2020, ~~and 2019.~~partially offset by the decrease in first quarter 2021 underwriting results.

NI Holdings recorded income tax expense of ~~$5,259~~$2,890 for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to income tax ~~expense~~benefit of ~~$3,206~~$840 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. A portion of income ~~tax expense~~taxes relates to state income taxes primarily for the state of Illinois. Our effective tax rate for the first ~~nine months~~quarter of ~~2020~~2021 was ~~21.8%~~22.8% compared to an effective tax rate of ~~25.5%~~19.1% for the ~~same period~~first quarter of ~~2019.~~

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, NI Holdings had net income before non-controlling interest of ~~$18,898~~$9,782 compared to net ~~income before non-controlling interest~~loss of ~~$9,352~~$3,555 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. This increase in net income was primarily attributable to ~~improved loss experience in 2020, partially offset by~~ the fluctuation in the change in net unrealized gains in our equity portfolio between the first quarter of 2021 and 2020, ~~and 2019.~~partially offset by the decrease in first quarter 2021 underwriting results.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, NI Holdings had annualized return on average equity, after non-controlling interest, of ~~8.0%~~11.2% compared to annualized return on average equity, after non-controlling interest, of ~~4.4%~~-4.7% for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Average equity is calculated as the average between beginning and ending equity excluding non-controlling interest for the period.

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Assets:
Cash and investments	$	462,427	$	419,923	$	495,465	$	494,363
Premiums and agents’ balances receivable		84,868		36,691		49,325		48,523
Deferred policy acquisition costs		23,885		15,399		26,575		23,968
Receivable from Federal Crop Insurance Corporation		9,519		14,230		5,182		6,646
Property and equipment		10,008		7,694		9,843		9,899
Goodwill and other intangibles		18,637		2,912		18,076		18,194
Other assets		20,692		11,310		16,919		16,010
Total assets	$	630,036	$	508,159	$	621,385	$	617,603

Liabilities:
Unpaid losses and loss adjustment expenses	$	134,803	$	93,250	$	111,522	$	105,750
Unearned premiums		125,966		89,276		123,458		119,363
Westminster consideration payable						12,720		19,287
Other liabilities		43,754		15,830		21,095		24,331
Total liabilities		304,523		198,356		268,795		268,731

Shareholders’ equity		325,513		309,803		352,590		348,872
Total liabilities and equity	$	630,036	$	508,159
Total liabilities and shareholders’ equity					$	621,385	$	617,603

At ~~September 30, 2020,~~March 31, 2021, NI Holdings’ total assets increased by ~~$121,877,~~$3,782, or ~~24.0%~~0.6%, from December 31, 2019. Cash and investments increased due to increased fair market values of our fixed income investments and the acquired Westminster assets. Premiums and agents’ balances receivable increased due to recognition of the year’s multi-peril crop premiums, in addition to the acquired Westminster receivables. DAC increased due partly to the Westminster commercial business and growth in other segments. The receivable from the Federal Crop Insurance Corporation decreased due to a partial collection of past year amounts, partially offset by 2020 activity. Goodwill and other intangibles recognized in the Westminster acquisition was $20,506, less amortization during the first nine months of 2020. ~~Other assets increased as a result of reinsurance recoverables from the Westminster commercial business.~~

At ~~September 30, 2020,~~March 31, 2021, total liabilities increased by ~~$106,167, or 53.5%,~~$64 from December 31, ~~2019.~~2020. Unpaid losses and loss adjustment expenses increased due to ~~Westminster commercial liabilities, multi-peril crop losses, and seasonably~~ higher ~~losses for our other segments.~~loss experience during the first quarter of 2021. Unearned premiums increased due to ~~Westminster acquired amounts~~an increase in direct written premiums. The first installment of ~~$16,611~~$6,667 was paid to the former shareholder of Westminster. Other liabilities decreased due to payment of employee and ~~the recognition of this year’s multi-peril crop premiums to be earned over the remainder of the year.~~agent bonuses.

Total shareholders’ equity increased by ~~$15,710,~~$3,718, or ~~5.1%~~1.1%, during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. The increase in ~~shareholders’~~ equity reflects a consolidated net income of ~~$18,898~~$9,782 for the ~~nine-month~~three-month period, share repurchases of ~~$11,363,~~$596, and ~~higher~~lower fair ~~market~~ values ~~across~~of our fixed income ~~investment portfolio.~~securities.

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 ~~hoped~~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. ~~We will pay~~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 ~~initial public offering~~IPO net proceeds, will be sufficient to fund our operations. The COVID-19 pandemic has resulted in volatility in the credit and financial markets, which has adversely affected our investment portfolio and could increase the cost of capital and/or our ability to access additional capital if the need arises.

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 ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Net cash flows from operating activities	$	30,944		$	(1,497	)	$	10,794		$	3,616
Net cash flows from investing activities		(10,377	)		(40,186	)		(51,439	)		(7,578	)
Net cash flows from financing activities		(11,394	)		(2,025	)		(7,749	)		(1,533	)
Net increase (decrease) in cash and cash equivalents	$	9,173		$	(43,708	)
Net decrease in cash and cash equivalents							$	(48,394	)	$	(5,495	)

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash provided by operating activities totaled ~~$30,944~~$10,794 compared to ~~a use of $1,497~~$3,616 a year ago. ~~The~~This increase was driven by consolidated net income of ~~$18,898~~$9,782 for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to consolidated net ~~income~~loss of ~~$9,352~~$3,555 for the same period a year ago. ~~The~~An increase in amortization of deferred acquisition costs and an increase 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 ~~flows~~ from operating activities also reflected the impact of the difference in the change in the market value of equity securities (a non-cash component of net income) between 2020 and 2019, differences in the activity between the Company and the Federal Crop Insurance Corporation during 2020 and 2019, the addition of the Westminster commercial business, and lower levels of loss and loss adjustment expenses.activities.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash used by investing activities totaled ~~$10,377~~$51,439 compared to ~~$40,186~~$7,578 a year ago. In ~~2020,~~ the ~~initial cash installment payment for Westminster was $703 more than~~first quarter of 2021, the ~~cash and cash equivalents received in the acquisition. Both the current and prior year reflect the impact of investing~~Company invested excess cash generated from operations and the implementation of the intercompany pooling reinsurance agreement into longer term ~~investments, partially offset by sales and maturities of fixed income securities.~~investments.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash used by financing activities totaled ~~$11,394~~$7,749 compared to ~~$2,025~~$1,533 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 ~~$11,363 and $2,006~~$596 during ~~2020 and 2019, respectively.~~the first quarter of 2021, compared to $1,502 during 2020.

As a standalone entity, and outside of the net proceeds from the ~~initial public offering,~~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 ~~2020~~2021 without the prior approval of the North Dakota Insurance Department is approximately ~~$18,984~~$21,628 based upon the policyholders’ surplus of Nodak Insurance at December 31, ~~2019.~~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. ~~The Nodak Insurance Board of Directors declared a $6,000 dividend during the nine months ended September 30, 2020, to be paid to NI Holdings in the fourth quarter of 2020.~~ No dividends were declared or paid by Nodak Insurance during the three months ended March 31, 2021. The Nodak Insurance Board of Directors declared and paid a $6,000 dividend to NI Holdings during the year ended December 31, ~~2019.~~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.

The amount available for payment of dividends from Direct Auto to NI Holdings during ~~2020~~2021 without the prior approval of the Illinois Department of Insurance is ~~$6,881~~$3,582 based upon the policyholders’ surplus of Direct Auto at December 31, ~~2019.~~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 ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 or the year ended December 31, ~~2019.~~2020.

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 5 to the Unaudited Consolidated Financial Statements, included elsewhere in this Form 10-Q.

The Company’s assessment of market risk as of ~~September 30, 2020~~March 31, 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, ~~2019~~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(a)~~15d-15(b)) as of ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020,~~March 31, 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.

For a discussion of the Company’s potential risk or uncertainties, please see “Part 1 – Item 1A – Risk Factors” and “Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2019 Annual Report filed with the SEC, and “Part 1 – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, in each case as updated by the Company’s periodic filings with the SEC. Other than as described below, thereThere have been no material changes ~~to the~~in our assessment of our risk factors ~~disclosed in Part I – Item 1A of the Company’s 2019 Annual Report.~~

~~The impact of COVID-19 and responses thereto, and related risks, could materially affect our results of operations, financial position, and/or liquidity.~~

Beginning in March 2020, the global pandemic related to novel coronavirus COVID-19 began to impact the global and U.S. economy. The extent of this pandemic continues to evolve, thus the extent of the direct and indirect impacts of COVID-19 are not yet known and may not emerge for some time. We have experienced a decrease in premiumsfrom those set forth in our non-standard auto segment due to the COVID-19 pandemic, which has negatively impacted policy counts in our auto segments across all states. We expect that premiums may decrease in these segments as individuals and businesses reduce travel and seek to limit expenses, including the cost of insurance.

Federal, state, and local government actions to address and contain the impact of COVID-19 may adversely affect us. Regulatory restrictions or requirements could impact pricing, risk selection, and our rights and obligations with respect to our policies and insureds, including our ability to cancel policies or our right to collect premiums. At least one state regulator has issued an order requiring insurers to issue premium refunds, and regulators in other states could take similar actions. It is also possible that changes in economic conditions and steps taken by federal, state, and local governments in response to COVID-19 could require an increase in taxes at the federal, state, and local levels, which would adversely impact our results of operations.

~~The disruption in the financial markets related to COVID-19 has contributed to net unrealized investment losses, due to the impact of changes in fair value~~Annual Report on our equity investment portfolio. Our corporate fixed income portfolio may be adversely impacted by ratings downgrades, increased bankruptcies, and credit spread widening in distressed industries. In addition, many state and local governments may be operating under deficits or projected deficits. These deficits may be exacerbated by the costs of responding to COVID-19 and reduced tax revenues due to adverse economic conditions. The severity and duration of these deficits could have an adverse impact on the collectability and valuation of our municipal bond portfolio. Our investment portfolio also includes residential and commercial mortgage-backed securities, which could be adversely impacted by declines in real estate valuations and/or financial market disruption, including a heightened collection risk on the underlying mortgages. Further disruptions in global financial markets due to the continuing impact of COVID-19 could result in additional net realized and unrealized investment losses. In addition, declines in fixed income yields would result in decreases in net investment income from future investment activity, including re-investments.

We expect that the impact of COVID-19 on general economic activity may continue to negatively impact our premium volumes. We have experienced this impact in the first nine months of 2020 and this impact may further persistForm 10-K for the remainder of 2020, but the degree of the impact will depend on the extent and duration of the economic contraction. As a result of the anticipated impact of the pandemic on our earned premiums, our underwriting expense ratio may increase in the near term.

It is possible that changes in economic conditions and steps taken by the federal government and the Federal Reserve in response to COVID-19 could lead to higher inflation than we had anticipated, which could in turn lead to an increase in our loss costs and the need to strengthen claims and claim adjustment expense reserves. These impacts of inflation on loss costs and claims and claim adjustment expense reserves could be more pronounced for those lines of business that require a relatively longer period of time to finalize and settle claims for a given accident year and, accordingly, are relatively more inflation sensitive. Inflation could also adversely impact our general and administrative expenses. Changes in interest rates caused by inflation affect the carrying value of our fixed maturity investments and returns on our fixed maturity and short-term investments. An increase in interest rates reduces the market value of existing fixed maturity investments, thereby negatively impacting our book value.ended December 31, 2020.

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 ~~initial public offering~~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 ~~initial public offering.~~IPO.

Direct Auto was acquired on August 31, 2018 with $17,000 of the net proceeds from the ~~initial public offering.~~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 ~~initial public offering~~IPO at time of closing. The ~~Company will pay~~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 ~~initial public offering~~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 ~~initial public offering~~IPO to fund these buyback programs.

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

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.

~~In total during~~ During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, we ~~completed the repurchase of 804,743~~repurchased an additional 32,326 shares of our common stock for ~~$11,363. The repurchases made in the three months ended September 30, 2020 are described below.~~$596.

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 ~~November 4, 2020.~~May 5, 2021.

	Pro forma Three Months Ended September 30,					Pro forma Nine Months Ended September 30,
	2020		2019			2020		2019
Revenues	$	80,854	$	75,915		$	222,707	$	215,814

Net income (loss) attributable to NI Holdings, Inc.		3,913		(7,031	)		20,624		7,636

Basic earnings (loss) per share attributable to NI Holdings, Inc.		0.18		(0.32	)		0.94		0.34

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

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

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

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

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

	September 30, 2020			December 31, 2019			Estimated Useful Life
Cost:
Real estate	$	15,260		$	12,733		10 - 31 years
Electronic data processing equipment		1,342			1,271		5-7 years
Furniture and fixtures		2,867			2,796		5-7 years
Automobiles		1,237			1,130		2-3 years
Gross cost		20,706			17,930

Accumulated depreciation		(10,698	)		(10,236	)
Total property and equipment, net	$	10,008		$	7,694

Three Months Ended September 30, 2019
	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 Equity
Balance, July 1, 2019	$	230	$	95,121	$	(1,914	)	$	208,330	$	4,427	$	(12,308	)	$	3,428	$	297,314

Net income (loss)		-		-		-			(6,979)		-		-			20		(6,959	)
Other comprehensive income, net of income taxes		-		-		-			-		1,584		-			29		1,613
Share-based compensation		-		339		-			-		-		-			-		339
Balance, September 30, 2019	$	230	$	95,460	$	(1,914	)	$	201,351	$	6,011	$	(12,308	)	$	3,477	$	292,307

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net income	$	18,898		$	9,352
Adjustments to reconcile net income to net cash flows from operating activities:
Net capital gain on investments		(1,380	)		(9,591	)
Deferred income tax (benefit) expense		(511	)		569
Depreciation of property and equipment		545			374
Amortization of intangibles		4,781			1,695
Share-based compensation		1,662			1,274
Amortization of deferred policy acquisition costs		39,277			36,682
Deferral of policy acquisition costs		(47,763	)		(39,620	)
Net amortization of premiums and discounts on investments		1,031			827
Loss on sale of property and equipment		7			11
Changes in operating assets and liabilities:
Premiums and agents’ balances receivable		(39,670	)		(42,739	)
Reinsurance premiums receivable / payable		438			4,277
Reinsurance recoverables on losses		(8,748	)		(3,521	)
Accrued investment income		64			(133	)
Receivable from Federal Crop Insurance Corporation		4,711			(8,022	)
Income tax recoverable / payable		(2,050	)		(1,454	)
Other assets		753			1,208
Unpaid losses and loss adjustment expenses		32,985			30,252
Unearned premiums		20,079			16,650
Accrued expenses and other liabilities		5,835			412
Net cash flows from operating activities		30,944			(1,497	)

Cash flows from investing activities:
Proceeds from maturities and sales of fixed income securities		67,029			36,924
Proceeds from sales of equity securities		13,176			12,373
Purchases of fixed income securities		(73,502	)		(71,828	)
Purchases of equity securities		(15,630	)		(16,708	)
Purchases of property and equipment, net		(489	)		(1,009	)
Acquisition of Westminster American Insurance Company (cash consideration paid net of cash and cash equivalents acquired)		(703	)		-
Other		(258	)		62
Net cash flows from investing activities		(10,377	)		(40,186	)

Cash flows from financing activities:
Purchases of treasury stock		(11,363	)		(2,006	)
Issuance of restricted stock awards		(31	)		(19	)
Net cash flows from financing activities		(11,394	)		(2,025	)

Net increase (decrease) in cash and cash equivalents		9,173			(43,708	)

Cash and cash equivalents at beginning of period		62,132			68,950

Cash and cash equivalents at end of period	$	71,305		$	25,242


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

Income taxes paid	$	7,819		$	3,955

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

September 30, 2020	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization:
Trade names	$	748	$	141	$	607
Distribution network		6,700		279		6,421
Value of business acquired		4,750		4,425		325
Total subject to amortization		12,198		4,845		7,353

Not subject to amortization – state insurance licenses		1,900		-		1,900
Total	$	14,098	$	4,845	$	9,253

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

	RSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding and unearned at January 1, 2019		73,880		$	16.87
RSUs granted during 2019		57,100			15.81
RSUs earned during 2019		(34,440	)		16.24
Units outstanding and unearned at December 31, 2019		96,540		$	16.47

RSUs granted during 2020		66,000			14.27
RSUs earned during 2020		(46,760	)		16.33
Units outstanding and unearned at September 30, 2020		115,780		$	15.27

	PSUs		Weighted-Average Grant-Date Fair Value Per Share
Units outstanding at January 1, 2019		48,600	$	16.25
PSUs granted during 2019 (at target)		62,400		15.21
Units outstanding at December 31, 2019		111,000	$	15.27

PSUs granted during 2020 (at target)		63,600		14.26
Units outstanding at September 30, 2020		174,600	$	15.15

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

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

Period in 2020	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)
July 1-31, 2020		159,100	$	15.82		159,100	$	5,696
August 1-31, 2020		64,620		16.73		64,620		4,615
September 1-30, 2020		61,425		15.99		61,425		3,633
Total		285,145	$	16.06		285,145	$	3,633

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

Exhibit Number			Description
	10.1	#	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		~~Inline~~ 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.~~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
	Brian R. Doom
	Chief Financial Officer (Principal Financial and Accounting Officer)