10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019

o 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	81-2683619
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
1101 First Avenue North Fargo, North Dakota	58102
(Address of principal executive offices)	(Zip Code)

(701) 298-4200

Registrant’s telephone number, including area code

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	NODK	Nasdaq Capital Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).   x  Yes    No  o

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	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	x
		Emerging growth company	x

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. o

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

The number of shares of Registrant’s common stock outstanding on October 31, 2019 was 22,095,065. No preferred shares are issued or outstanding.

i 

TABLE OF CONTENTS

Part I. - FINANCIAL INFORMATION	3
Item 1. - Financial Statements	3
Unaudited Consolidated Balance Sheets	3
Unaudited Consolidated Statements of Operations	4
Unaudited Consolidated Statements of Comprehensive Income (Loss)	5
Unaudited Consolidated Statements of Changes in Equity	6
Unaudited Consolidated Statements of Cash Flows	8
Notes to Unaudited Consolidated Financial Statements	9
Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3. - Quantitative and Qualitative Disclosures about Market Risk	65
Item 4. - Controls and Procedures	65
Part II. - OTHER INFORMATION	66
Item 1. - Legal Proceedings	66
Item 1A. - Risk Factors	66
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3. - Defaults upon Senior Securities	67
Item 4. - Mine Safety Disclosures	67
Item 5. - Other Information	67
Item 6. - Exhibits	67
Signatures	68

ii 

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) and Direct Auto Insurance Company (acquired August 31, 2018), 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 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 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 Nodak Insurance, but all of its insurance policies are reinsured by Nodak Insurance through a 100% quota-share reinsurance agreement and Battle Creek is controlled by Nodak Insurance as a result of an affiliation agreement between Battle Creek and Nodak Insurance. Battle Creek 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; and

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

FORWARD-LOOKING STATEMENTS

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

· statements of goals, intentions and expectations;

· statements regarding prospects and business strategy; and

· estimates of future costs, benefits and results.

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.

 1

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 Direct Auto;

· 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;

· 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 Public Company Accounting Oversight Board, 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.

 2

Part I. -
FINANCIAL INFORMATION

Item 1. - Financial Statements

NI Holdings, Inc.

Unaudited Consolidated Balance Sheets

(dollar amounts in thousands, except par value) 

	September 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents	$	25,242		$	68,950
Fixed income securities, at fair value		299,095			254,969
Equity securities, at fair value		62,419			48,498
Other investments		1,914			1,954
Total cash and investments		388,670			374,371
Premiums and agents' balances receivable		77,026			34,287
Deferred policy acquisition costs		15,804			12,866
Reinsurance recoverables on losses		5,753			2,232
Accrued investment income		2,031			1,898
Federal income tax recoverable		1,257			—
Property and equipment		7,602			6,979
Receivable from Federal Crop Insurance Corporation		24,191			16,169
Goodwill and other intangibles		2,928			4,623
Other assets		3,859			5,067
Total assets	$	529,121		$	458,492
Liabilities:
Unpaid losses and loss adjustment expenses	$	117,373		$	87,121
Unearned premiums		101,417			84,767
Reinsurance premiums payable		4,277			—
Federal income tax payable		—			197
Deferred income taxes, net		3,394			711
Accrued expenses and other liabilities		10,353			9,943
Commitments and contingencies		—			—
Total liabilities		236,814			182,739
Equity:
Common stock, $0.01 par value, authorized: 25,000,000 shares; issued: 23,000,000 shares; and outstanding: 2019 – 22,095,065 shares, 2018 – 22,192,894 shares		230			230
Preferred stock, without par value, authorized 5,000,000 shares, no shares issued or outstanding		—			—
Additional paid-in capital		95,460			94,486
Unearned employee stock ownership plan shares		(1,914	)		(1,914	)
Retained earnings		201,351			183,946
Accumulated other comprehensive income, net of income taxes		6,011			6,376
Treasury stock, at cost, 2019 – 713,565 shares, 2018 – 615,736 shares		(12,308	)		(10,634	)
Non-controlling interest		3,477			3,263
Total equity		292,307			275,753
Total liabilities and equity	$	529,121		$	458,492

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

 3

NI Holdings, Inc.

Unaudited Consolidated Statements of Operations

(dollar amounts in thousands, except per share amounts) 

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019		2018
Revenues:
Net premiums earned	$	67,116		$	54,136	$	182,736	$	140,925
Fee and other income		527			5,175		1,637		6,022
Net investment income		1,983			1,629		5,504		4,521
Net capital gain on investments		622			3,160		9,591		3,879
Total revenues		70,248			64,100		199,468		155,347
Expenses:
Losses and loss adjustment expenses		61,558			37,456		135,985		97,026
Amortization of deferred policy acquisition costs		11,309			10,951		36,682		26,608
Other underwriting and general expenses		5,982			3,787		14,243		11,809
Total expenses		78,849			52,194		186,910		135,443
Income (loss) before income taxes		(8,601	)		11,906		12,558		19,904
Income tax expense (benefit)		(1,642	)		2,029		3,206		3,619
Net income (loss)		(6,959	)		9,877		9,352		16,285
Net income attributable to non-controlling interest		20			33		80		93
Net income (loss) attributable to NI Holdings, Inc.	$	(6,979	)	$	9,844	$	9,272	$	16,192
Basic earnings (loss) per common share	$	(0.32	)	$	0.44	$	0.42	$	0.72
Diluted earnings (loss) per common share	$	(0.31	)	$	0.44	$	0.42	$	0.72

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

 4

NI Holdings, Inc.

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(dollar amounts in thousands) 

	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 September 30, 2018									Nine Months Ended September 30, 2018
	Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total			Attributable to NI Holdings, Inc.			Attributable to Non- Controlling Interest			Total
Net income	$	9,844		$	33		$	9,877		$	16,192		$	93		$	16,285
Other comprehensive loss, before income taxes:
Holding gains (losses) on investments		2,787			(14	)		2,773			(375	)		(120	)		(495	)
Reclassification adjustment for net realized capital gain included in net income		(3,160	)		—			(3,160	)		(3,879	)		—			(3,879	)
Other comprehensive loss, before income taxes		(373	)		(14	)		(387	)		(4,254	)		(120	)		(4,374	)
Income tax benefit related to items of other comprehensive loss		78			3			81			893			25			918
Other comprehensive loss, net of income taxes		(295	)		(11	)		(306	)		(3,361	)		(95	)		(3,456	)
Comprehensive income (loss)	$	9,549		$	22		$	9,571		$	12,831		$	(2	)	$	12,829

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

 5

NI Holdings, Inc.

Unaudited Consolidated Statements of Changes in Equity

(dollar amounts in thousands) 

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, 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			—			134		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

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

 6

NI Holdings, Inc.

Unaudited Consolidated Statements of Changes in Equity

(dollar amounts in thousands) 

Three Months Ended September 30, 2018
	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, 2018	$	230	$	93,832	$	(2,157	)	$	159,213	$	12,932		$	(7,638	)	$	3,154		$	259,566
Net income		—		—		—			9,844		—			—			33			9,877
Other comprehensive loss, net of income taxes		—		—		—			—		(295	)		—			(11	)		(306	)
Share-based compensation		—		255		—			—		—			—			—			255
Balance, September 30, 2018	$	230	$	94,087	$	(2,157	)	$	169,057	$	12,637		$	(7,638	)	$	3,176		$	269,392

Nine Months Ended September 30, 2018
	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, 2018	$	230	$	93,496		$	(2,157	)	$	152,865	$	15,998		$	(8,037	)	$	3,178		$	255,573
Net income		—		—			—			16,192		—			—			93			16,285
Other comprehensive loss, net of income taxes		—		—			—			—		(3,361	)		—			(95	)		(3,456	)
Share-based compensation		—		990			—			—		—			—			—			990
Issuance of vested award shares		—		(399	)		—			—		—			399			—			—
Balance, September 30, 2018	$	230	$	94,087		$	(2,157	)	$	169,057	$	12,637		$	(7,638	)	$	3,176		$	269,392

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

 7

NI Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

(dollar amounts in thousands) 

	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	9,352		$	16,285
Adjustments to reconcile net income to operating cash flows:
Gain on acquisition of Direct Auto Insurance Company		—			(4,578	)
Net capital gain on investments		(9,591	)		(3,879	)
Deferred income tax expense (benefit)		569			(670	)
Depreciation of property and equipment		374			372
Amortization of intangibles		1,695			1,094
Share-based compensation		1,274			990
Amortization of deferred policy acquisition costs		36,682			26,608
Deferral of policy acquisition costs		(39,620	)		(29,542	)
Net amortization of premiums and discounts on investments		827			896
Gain on sale of property and equipment		11			—
Changes in operating assets and liabilities:
Premiums and agents’ balances receivable		(42,739	)		(31,264	)
Reinsurance premiums receivable / payable		4,277			316
Reinsurance recoverables on losses		(3,521	)		(1,500	)
Accrued investment income		(133	)		263
Receivable from Federal Crop Insurance Corporation		(8,022	)		(18,783	)
Federal income tax recoverable / payable		(1,454	)		(2,511	)
Other assets		1,208			184
Unpaid losses and loss adjustment expenses		30,252			18,796
Unearned premiums		16,650			19,091
Accrued expenses and other liabilities		412			3,120
Net cash flows from operating activities		(1,497	)		(4,712	)
Cash flows from investing activities:
Proceeds from sales of fixed income securities		36,924			51,298
Proceeds from sales of equity securities		12,373			16,689
Purchases of fixed income securities		(71,828	)		(57,423	)
Purchases of equity securities		(16,708	)		(8,722	)
Purchases of property and equipment, net		(1,009	)		(567	)
Acquisition of Direct Auto Insurance Company (cash consideration paid net of cash and cash equivalents acquired)		—			27,485
Other		62			18
Net cash flows from investing activities		(40,186	)		28,778
Cash flows from financing activities:
Purchases of treasury stock		(2,006	)		—
Issuance of restricted stock awards		(19	)		—
Net cash flows from financing activities		(2,025	)		—
Net (decrease) increase in cash and cash equivalents		(43,708	)		24,066
Cash and cash equivalents at beginning of period		68,950			27,594
Cash and cash equivalents at end of period	$	25,242		$	51,660

The Company paid $3,500 and $6,800 in federal income taxes during the nine month periods ended September 30, 2019 and 2018, respectively.

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

 8

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

Notes to Unaudited Consolidated Financial Statements

1. Organization

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

These consolidated financial statements of NI Holdings include the financial position and results of NI Holdings and six other entities:

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

· Nodak Agency, Inc. (“Nodak Agency”);

· American West Insurance Company (“American West”);

· Primero Insurance Company (“Primero”);

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

· Direct Auto Insurance Company (“Direct Auto”).

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 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 is controlled by Nodak Insurance via a surplus note and 100% quota-share agreement. 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. 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 and Direct Auto 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.

 9

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

2.       Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information 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 ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019.

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

3.       Summary of Significant Accounting Policies

Use of Estimates:

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.

Variable-Interest Entities:

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 two-thirds of the Board of Directors of Battle Creek via a 100% quota-share reinsurance agreement between Nodak Insurance and Battle Creek and a surplus note issued by Battle Creek to Nodak Insurance. Through the effects of the 100% quota-share agreement with Battle Creek, we are considered the primary beneficiary of Battle Creek’s operating results excluding investment income, bad debt expense, and income taxes. Therefore, 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 Equity in our Consolidated Balance Sheet.

 10

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

Cash and Cash Equivalents:

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.

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 in unrealized gains and losses on equity securities are reported as a component of net capital gain on investments in our operating results.

Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Amortization of premium and accretion of discount are computed using an effective interest method. Net investment income includes interest and dividend income together with amortization of purchase premiums and discounts, and is net of investment management and custody fees. Realized gains and losses on investments are determined using the specific identification method and are included in net capital gain on investments, along with the change in unrealized gains and losses on equity securities after January 1, 2019.

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.

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.

Fair Value of Other Financial Instruments:

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. The carrying value of these other invested assets was $1,914 at September 30, 2019 and $1,954 at December 31, 2018.

Reclassifications:

Certain amounts in the 2018 consolidated financial statements have been reclassified to conform to the 2019 presentation.

 11

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

Revenue Recognition:

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 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.

Policy Acquisition Costs:

We defer our policy acquisition costs, consisting primarily of commissions, 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.

Property and Equipment:

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.

Losses and Loss Adjustment Expenses:

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 reserving function through analysis of costs and trends and reviews of historical reserving results. 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.

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

 12

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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.

Income Taxes:

With the exception of Battle Creek, which files a stand-alone federal income tax return, we currently file a consolidated federal income tax return. For the year ended December 31, 2016, the consolidated federal income tax return included Nodak Mutual Insurance Company and its wholly-owned subsidiaries. For the year ended December 31, 2017 and thereafter, the consolidated federal income tax return included and will include thereafter NI Holdings and its wholly-owned subsidiaries. Direct Auto became part of the consolidated federal income tax return as of its acquisition date.

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 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.

The Company reports tax-related interest and penalties, if any, as part of income tax expense in the year such amounts are determinable.

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 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 also requires 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 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.

Credit Risk:

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 investment staff and 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 operating areas. All business is billed directly to policyholders.

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

Reinsurance:

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.

 13

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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 and Other Intangibles:

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 intangible assets with an indefinite useful life for impairment annually. We also assess goodwill and other intangible assets 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 intangible assets could result from changes in economic and operating conditions in future periods. We did not record any impairments of goodwill or other intangible assets during the three or nine month periods ended September 30, 2019 and 2018.

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 intangible assets 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.

4.            Acquisition of Direct Auto Insurance Company

On August 31, 2018, the Company completed the acquisition of 100% of the common stock of Direct Auto from the private shareholders of Direct Auto, and Direct Auto became a consolidated subsidiary of the Company. Direct Auto is a property and casualty insurance company specializing in non-standard automobile insurance in the state of Illinois. The Company realized a $4,578 gain on the purchase of Direct Auto due to the use of applicable purchase accounting guidance (known as a “bargain purchase”).

Direct Auto remains headquartered in Chicago, Illinois and the current president (who was also one of the principal shareholders) of Direct Auto continues to manage the Direct Auto insurance operations along with the current staff and management team. The results of Direct Auto are included as part of the Company’s non-standard auto 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 Direct Auto transaction. During the measurement period, adjustments to provisional purchase price allocations are recognized if new information is obtained about the facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as it is determined that no more information is obtainable, but in no case shall the measurement period exceed one year from the acquisition date. The Company did not make any adjustments during this period.

 14

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

The acquired Direct Auto business contributed revenues of $12,082 and net income of $2,067 to the Company for the three months ended September 30, 2019, and revenues of $36,924 and net income of $6,166 for the nine months ended September 30, 2019. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2017:

	Pro forma Three Months Ended September 30,					Pro forma Nine Months Ended September 30,
	2019			2018		2019		2018
Revenues	$	70,248		$	67,126	$	199,468	$	180,323
Net income (loss) attributable to NI Holdings, Inc.		(6,970	)		5,623		9,386		12,012
Basic earnings (loss) per share attributable to NI Holdings, Inc.		(0.31	)		0.25		0.42		0.54

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 Direct Auto 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, 2017, with the related income tax effects.

In 2018, the Company incurred $118 of acquisition-related costs. These expenses did not impact the pro forma amounts presented above.

The Company paid $17,000 in cash consideration to the private shareholders of Direct Auto. The acquisition of Direct Auto did not include any contingent consideration. The following table summarizes the consideration transferred to acquire Direct Auto and the amounts of identified assets acquired and liabilities assumed at the acquisition date:

Fair Value of Consideration:
Total cash consideration transferred	$	17,000
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Identifiable net assets:
Cash and cash equivalents	$	44,485
Fixed income securities, at fair value		11,414
Equity securities, at fair value		14,634
Premiums and agents' balances receivable		5,849
Accrued investment income		63
Property and equipment		31
Favorable lease contract (included in goodwill and other intangibles)		20
License (included in goodwill and other intangibles)		100
Trade name (included in goodwill and other intangibles)		248
Value of business acquired (included in goodwill and other intangibles)		5,134
Other assets		107
Unpaid losses and loss adjustment expenses		(40,967	)
Unearned premiums		(15,955	)
Federal income tax payable		(1,486	)
Deferred income taxes, net		(1,442	)
Accrued expenses and other liabilities		(657	)
Total identifiable net assets	$	21,578
Gain on bargain purchase	$	4,578

The fair value of the assets acquired includes premiums and agents’ balances receivable of $5,849. This is the gross amount due from policyholders and agents, none of which is anticipated to be uncollectible. The Company did not acquire any other material class of receivable as a result of the acquisition of Direct Auto.

We have completed our final analysis of the assets and liabilities acquired and assigned fair values to the acquired intangibles

 15

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

consisting of favorable lease contract, state insurance license, Direct Auto trade name, and VOBA intangible assets of $20, $100, $248, and $5,134, respectively. The state insurance license has an indefinite life, while the other intangible assets will be amortized over useful lives of up to five years.

The gain realized on bargain purchase of $4,578 from the Direct Auto acquisition is included in fee and other income in the Company’s Consolidated Statements of Operations during the three months ended September 30, 2018.

5.             Recent Accounting Pronouncements

As an emerging growth company, we have elected to use the extended transition period for complying with any new or revised financial accounting standards 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.

Adopted

On July 1, 2017, the Company early adopted amended guidance from the Financial Accounting Standards Board (the “FASB”) on goodwill impairment testing. Under the amended guidance, the optional qualitative assessment (Step 0) and the first step of the quantitative assessment (Step 1) remain unchanged. Step 2 is eliminated. As a result, for annual impairment testing or in the event a test is required prior to the annual test, the Company will use Step 0 to determine if an impairment might exist and Step 1 to determine the amount of goodwill impairment. An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in the reporting unit. The Company early adopted this guidance during the year ended December 31, 2017 on a prospective basis as a change in accounting principle, therefore at the date of adoption there was no impact to the Company’s financial position or results of operations.

In March 2016, the FASB issued amended guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the Consolidated Statement of Cash Flows. All excess income tax benefits and income tax deficiencies should be recognized as income tax expense or benefit in the Consolidated Statement of Operations, instead of affecting additional paid-in-capital on the Consolidated Balance Sheet. These discrete income tax items should be classified along with other income tax cash flows as an operating activity on the Consolidated Statement of Cash Flows. In addition, cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. Amendments requiring recognition of excess income tax benefits and income tax deficiencies in the Consolidated Statement of Operations should be applied prospectively. The Company early adopted this guidance on a prospective basis for the year ended December 31, 2017. At the date of adoption, there was an immaterial impact to the computation of diluted earnings per share, but no impact to the Company’s financial position or results of operations.

In February 2018, the FASB issued new guidance to provide companies the option to reclassify income tax effects that are stranded in accumulated other comprehensive income as a result of income tax reform to retained earnings. In the period of adoption, an entity was able to choose whether to apply the amendments retrospectively or in the period of adoption. The Company elected to early adopt this guidance on a prospective basis, resulting in a $2,717 reclassification of stranded income tax effects from accumulated other comprehensive income to retained earnings within the Equity section of the Consolidated Balance Sheet as of December 31, 2017. There was no impact to the Company’s financial position, results of operations, or cash flows.

In January 2019, the Company adopted amended guidance from the 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 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 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, which will add a level of volatility to our net income.

Not Yet Adopted

In May 2014, the FASB issued guidance 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 will replace most

 16

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017 for public business entities. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities. We currently believe that this guidance will have no impact on our financial position, results of operations, or cash flows when we adopt this guidance for the year ended December 31, 2019.

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 cumulative adoption. The new guidance, which replaces the current lease guidance, is effective for annual and interim reporting periods beginning after December 15, 2018 for public business entities. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. 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 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 public business entities which are SEC filers. For private companies and emerging growth companies, 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 as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are evaluating the impact this new guidance will have on our financial position, results of operations, and cash flows.

In August 2016, the FASB issued amended guidance that addresses diversity in how certain cash receipts and cash payments are presented and classified in the Consolidated Statement of Cash Flows. The amendments provide clarity on the treatment of eight specifically defined types of cash inflows and outflows. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019 using a retrospective transition method to each period presented or prospectively if adoption of an issue is impracticable. The adoption of this amended guidance will have no effect on our financial position or results of operations. We do not expect this amended guidance to have a significant impact on our Consolidated Statement of Cash Flows when we adopt this guidance for the year ended December 31, 2019.

In November 2016, the FASB issued amended guidance on the presentation of restricted cash in the Consolidated Statement of Cash Flows. Entities will be required 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. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities, 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. The amendments are to be applied using a retrospective transition method to each period presented. The adoption of this amended guidance will have no effect on our financial position or results of operations. We do not expect this amended guidance to have a significant impact on our Consolidated Statement of Cash Flows when we adopt this guidance for the year ended December 31, 2019.

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

 17

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

15, 2018, including interim periods within those fiscal years. 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 impact to our financial position, results of operations, and cash flows.

In August 2018, the FASB issued modified disclosure requirements relating to the fair value of assets and liabilities. The amended requirements are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. We do not expect these modified requirements will have a material impact on our financial statement disclosures.

 18

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

6.             Investments

The amortized cost and estimated fair value of investment securities as of September 30, 2019 and December 31, 2018, were as follows:

	September 30, 2019
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	16,724	$	594	$	—		$	17,318
Obligations of states and political subdivisions		61,536		1,733		(55	)		63,214
Corporate securities		110,949		3,668		(10	)		114,607
Residential mortgage-backed securities		52,806		1,023		(29	)		53,800
Commercial mortgage-backed securities		24,753		872		(42	)		25,583
Asset-backed securities		24,585		164		(176	)		24,573
Total fixed income securities		291,353		8,054		(312	)		299,095
Equity securities:
Basic materials		1,603		204		(99	)		1,708
Communications		5,414		1,761		(250	)		6,925
Consumer, cyclical		5,625		3,552		(139	)		9,038
Consumer, non-cyclical		8,696		5,136		(399	)		13,433
Energy		3,907		142		(508	)		3,541
Financial		6,780		649		(32	)		7,397
Industrial		5,381		3,518		(59	)		8,840
Technology		6,401		5,285		(149	)		11,537
Total equity securities		43,807		20,247		(1,635	)		62,419
Total investments	$	335,160	$	28,301	$	(1,947	)	$	361,514

	December 31, 2018
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	19,183	$	158	$	(133	)	$	19,208
Obligations of states and political subdivisions		52,782		475		(559	)		52,698
Corporate securities		95,290		265		(1,413	)		94,142
Residential mortgage-backed securities		50,902		110		(729	)		50,283
Commercial mortgage-backed securities		19,520		65		(270	)		19,315
Asset-backed securities		19,617		4		(298	)		19,323
Total fixed income securities		257,294		1,077		(3,402	)		254,969
Equity securities:
Basic materials		1,527		—		(187	)		1,340
Communications		4,076		1,296		(424	)		4,948
Consumer, cyclical		5,128		2,650		(167	)		7,611
Consumer, non-cyclical		9,356		3,929		(916	)		12,369
Energy		1,622		8		(289	)		1,341
Financial		4,856		121		(549	)		4,428
Industrial		4,537		2,529		(368	)		6,698
Technology		7,037		3,647		(921	)		9,763
Total equity securities		38,139		14,180		(3,821	)		48,498
Total investments	$	295,433	$	15,257	$	(7,223	)	$	303,467

 19

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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, 2019
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	20,173	$	20,298
After one year through five years		93,395		95,597
After five years through ten years		57,859		60,607
After ten years		17,782		18,637
Mortgage / asset-backed securities		102,144		103,956
Total fixed income securities	$	291,353	$	299,095

	December 31, 2018
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	12,490	$	12,463
After one year through five years		96,900		96,614
After five years through ten years		52,128		51,351
After ten years		5,737		5,620
Mortgage / asset-backed securities		90,039		88,921
Total fixed income securities	$	257,294	$	254,969

Fixed income securities with a fair value of $6,342 at September 30, 2019 and $4,900 at December 31, 2018, were deposited with various state regulatory agencies as required by law. The Company has not pledged any assets to secure any obligations.

 20

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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

	September 30, 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:
Obligations of states and political subdivisions	$	5,894	$	(55	)	$	—	$	—		$	5,894	$	(55	)
Corporate securities		1,841		(6	)		2,707		(4	)		4,548		(10	)
Residential mortgage-backed securities		1,524		(7	)		2,706		(22	)		4,230		(29	)
Commercial mortgage-backed securities		3,424		(31	)		368		(11	)		3,792		(42	)
Asset-backed securities		2,056		(8	)		9,583		(168	)		11,639		(176	)
Total fixed income securities		14,739		(107	)		15,364		(205	)		30,103		(312	)
Equity securities:
Basic materials		719		(99	)		—		—			719		(99	)
Communications		451		(55	)		1,356		(195	)		1,807		(250	)
Consumer, cyclical		1,491		(139	)		—		—			1,491		(139	)
Consumer, non-cyclical		1,867		(384	)		410		(15	)		2,277		(399	)
Energy		1,602		(508	)		—		—			1,602		(508	)
Financial		1,553		(32	)		—		—			1,553		(32	)
Industrial		1,112		(59	)		—		—			1,112		(59	)
Technology		460		(142	)		448		(7	)		908		(149	)
Total equity securities		9,255		(1,418	)		2,214		(217	)		11,469		(1,635	)
Total investments	$	23,994	$	(1,525	)	$	17,578	$	(422	)	$	41,572	$	(1,947	)

 21

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

	December 31, 2018
	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	$	2,593	$	(3	)	$	7,523	$	(130	)	$	10,116	$	(133	)
Obligations of states and political subdivisions		8,467		(119	)		18,218		(440	)		26,685		(559	)
Corporate securities		24,793		(266	)		45,033		(1,147	)		69,826		(1,413	)
Residential mortgage-backed securities		10,325		(62	)		26,459		(667	)		36,784		(729	)
Commercial mortgage-backed securities		5,980		(55	)		7,117		(215	)		13,097		(270	)
Asset-backed securities		7,908		(183	)		10,276		(115	)		18,184		(298	)
Total fixed income securities		60,066		(688	)		114,626		(2,714	)		174,692		(3,402	)
Equity securities:
Basic materials		1,340		(187	)		—		—			1,340		(187	)
Communications		2,001		(378	)		167		(46	)		2,168		(424	)
Consumer, cyclical		1,237		(167	)		—		—			1,237		(167	)
Consumer, non-cyclical		4,781		(899	)		316		(17	)		5,097		(916	)
Energy		1,041		(289	)		—		—			1,041		(289	)
Financial		3,722		(549	)		—		—			3,722		(549	)
Industrial		2,281		(368	)		—		—			2,281		(368	)
Technology		3,212		(833	)		123		(88	)		3,335		(921	)
Total equity securities		19,615		(3,670	)		606		(151	)		20,221		(3,821	)
Total investments	$	79,681	$	(4,358	)	$	115,232	$	(2,865	)	$	194,913	$	(7,223	)

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 recorded no impairments during the three or nine month periods ended September 30, 2019, and impairments of $382 during the three and nine month periods ended September 30, 2018.

As of September 30, 2019, we held 75 fixed income securities with unrealized losses. As of December 31, 2018, we held 317 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.

 22

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

Net investment income consisted of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Fixed income securities	$	2,196	$	1,800	$	6,167	$	5,073
Equity securities		247		244		704		716
Real estate		91		91		273		273
Cash and cash equivalents		15		31		50		93
Total gross investment income		2,549		2,166		7,194		6,155
Investment expenses		566		537		1,690		1,634
Net investment income	$	1,983	$	1,629	$	5,504	$	4,521

Net capital gain on investments consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Gross realized gains:
Fixed income securities	$	58		$	7		$	114		$	69
Equity securities		1,386			3,976			2,408			5,109
Total gross realized gains		1,444			3,983			2,522			5,178
Gross realized losses, excluding other-than-temporary impairment losses:
Fixed income securities		(46	)		(116	)		(132	)		(394	)
Equity securities		(392	)		(325	)		(1,052	)		(523	)
Total gross realized losses, excluding other-than-temporary impairment losses		(438	)		(441	)		(1,184	)		(917	)
Other-than-temporary impairment losses		—			(382	)		—			(382	)
Net realized gain on investments		1,006			3,160			1,338			3,879
Change in net unrealized gain on equity securities		(384	)		—			8,253			—
Net capital gain on investments	$	622		$	3,160		$	9,591		$	3,879

Effective January 1, 2019, the market fluctuations attributed to equity securities are included in the Company’s results of operations. Prior to the adoption of this accounting pronouncement, net unrealized gains and losses on equity securities were recorded in accumulated other comprehensive income. The after-tax amount of unrealized gains on equity securities, aggregating $8,184 as of December 31, 2018, was reclassified from accumulated other comprehensive income to retained earnings as of January 1, 2019.

7.            Fair Value Measurements

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, 2019 and December 31, 2018 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 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, 2019 or December 31, 2018.

 23

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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, 2019
	Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	17,318	$	—	$	17,318	$	—
Obligations of states and political subdivisions		63,214		—		63,214		—
Corporate securities		114,607		—		114,607		—
Residential mortgage-backed securities		53,800		—		53,800		—
Commercial mortgage-backed securities		25,583		—		25,583		—
Asset-backed securities		24,573		—		24,573		—
Total fixed income securities		299,095		—		299,095		—
Equity securities:
Basic materials		1,708		1,708		—		—
Communications		6,925		6,925		—		—
Consumer, cyclical		9,038		9,038		—		—
Consumer, non-cyclical		13,433		13,433		—		—
Energy		3,541		3,541		—		—
Financial		7,397		7,397		—		—
Industrial		8,840		8,840		—		—
Technology		11,537		11,537		—		—
Total equity securities		62,419		62,419		—		—
Cash and cash equivalents		25,242		25,242		—		—
Total assets at fair value	$	386,756	$	87,661	$	299,095	$	—

	December 31, 2018
	Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	19,208	$	—	$	19,208	$	—
Obligations of states and political subdivisions		52,698		—		52,698		—
Corporate securities		94,142		—		94,142		—
Residential mortgage-backed securities		50,283		—		50,283		—
Commercial mortgage-backed securities		19,315		—		19,315		—
Asset-backed securities		19,323		—		19,323		—
Total fixed income securities		254,969		—		254,969		—
Equity securities:
Basic materials		1,340		1,340		—		—
Communications		4,948		4,948		—		—
Consumer, cyclical		7,611		7,611		—		—
Consumer, non-cyclical		12,369		12,369		—		—
Energy		1,341		1,341		—		—
Financial		4,428		4,428		—		—
Industrial		6,698		6,698		—		—
Technology		9,763		9,763		—		—
Total equity securities		48,498		48,498		—		—
Cash and cash equivalents		68,950		68,950		—		—
Total assets at fair value	$	372,417	$	117,448	$	254,969	$	—

There were no liabilities measured at fair value on a recurring basis at September 30, 2019 or December 31, 2018.

 24

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

8.             Reinsurance

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

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

As a group, during the three and nine month periods ended September 30, 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. During the years ended December 31, 2018 and 2017, the catastrophic retention amount was $10,000 while the catastrophic reinsurance was $74,600. Prior to January 1, 2017, the group collectively retained the first $5,000 of weather-related losses.

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-” 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, 2019						Nine Months Ended September 30, 2019
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	49,984		$	70,481		$	208,880		$	192,233
Assumed premium		1,203			1,234			5,235			5,233
Ceded premium		(4,599	)		(4,599	)		(14,730	)		(14,730	)
Net premiums	$	46,588		$	67,116		$	199,385		$	182,736
Percentage of assumed earned premium to net earned premium					1.8%						2.9%

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	46,220		$	63,737		$	174,074		$	154,916
Assumed premium		974			1,084			5,506			5,572
Ceded premium		(10,685	)		(10,685	)		(19,563	)		(19,563	)
Net premiums	$	36,509		$	54,136		$	160,017		$	140,925
Percentage of assumed earned premium to net earned premium					2.0%						4.0%

 25

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Direct losses and loss adjustment expenses	$	62,248		$	39,219		$	138,481		$	98,977
Assumed losses and loss adjustment expenses		2,017			827			3,000			1,903
Ceded losses and loss adjustment expenses		(2,707	)		(2,590	)		(5,496	)		(3,854	)
Net losses and loss adjustment expenses	$	61,558		$	37,456		$	135,985		$	97,026

If 100% of our ceded reinsurance was cancelled as of September 30, 2019 or December 31, 2018, no ceded commissions would need to be returned to the reinsurers. Reinsurance contracts are typically effective from January 1 through December 31 each year.

9.            Deferred Policy Acquisition Costs

Activity with regards to our deferred policy acquisition costs was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	16,721		$	12,190		$	12,866		$	8,859
Deferral of policy acquisition costs		10,392			10,554			39,620			29,542
Amortization of deferred policy acquisition costs		(11,309	)		(10,951	)		(36,682	)		(26,608	)
Balance, end of period	$	15,804		$	11,793		$	15,804		$	11,793

10.          Unpaid Losses and Loss Adjustment Expenses

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

	Nine Months Ended September 30,
	2019			2018
Balance at beginning of period:
Liability for unpaid losses and loss adjustment expenses	$	87,121		$	45,890
Reinsurance recoverables on losses		2,232			4,128
Net balance at beginning of period		84,889			41,762
Acquired unpaid losses and loss adjustment expenses related to:
Current year		—			17,795
Prior years		—			23,172
Total incurred		—			40,967
Incurred related to:
Current year		142,428			100,191
Prior years		(6,443	)		(3,165	)
Total incurred		135,985			97,026
Paid related to:
Current year		73,974			59,708
Prior years		35,280			20,022
Total paid		109,254			79,730
Balance at end of period:
Liability for unpaid losses and loss adjustment expenses		117,373			105,653
Reinsurance recoverables on losses		5,753			5,628
Net balance at end of period	$	111,620		$	100,025

The prior years’ provision for unpaid losses and loss adjustment expenses decreased by $6,443 during the nine months ended September 30, 2019, compared to a decrease of $3,165 during the nine months ended September 30, 2018. Increases and decreases

 26

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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. The decrease for the nine months ended September 30, 2019 was primarily attributable to favorable development of the Direct Auto book of business.

11.          Property and Equipment

Property and equipment consisted of the following:

	September 30, 2019			December 31, 2018			Estimated Useful Life
Cost:
Real estate	$	12,565		$	11,911		10 - 31 years
Electronic data processing equipment		1,349			1,286		5-7 years
Furniture and fixtures		2,856			2,829		5-7 years
Automobiles		1,694			1,596		2-3 years
Gross cost		18,464			17,622
Accumulated depreciation		(10,862	)		(10,643	)
Total property and equipment, net	$	7,602		$	6,979

Depreciation expense was $129 and $129 for the three months ended September 30, 2019 and 2018, respectively, and $374 and $372 for the nine months ended September 30, 2019 and 2018, respectively.

12.          Related Party Transactions

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 $384 and $383 during the three months ended September 30, 2019 and 2018, respectively. Royalties paid to the NDFB were $1,104 and $1,065 during the nine months ended September 30, 2019 and 2018, respectively. Royalty amounts payable of $17 and $108 were accrued as a liability to the NDFB at September 30, 2019 and December 31, 2018, 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, 2018 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 2019 without the prior approval of the North Dakota Insurance Department is $17,588 based upon the policyholders’ surplus of Nodak Insurance at December 31, 2018. Prior to its payment of any extraordinary dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if Nodak Insurance is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Nodak Insurance during the nine months ended September 30, 2019 or the year ended December 31, 2018.

The amount available for payment of dividends from Direct Auto to NI Holdings during 2019 without the prior approval of the Illinois Department of Insurance is $6,653 based upon the statutory net income of Direct Auto for the year ended December 31, 2018. 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 months ended September 30, 2019 or the year ended December 31, 2018.

 27

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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

	September 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents (overdraft)	$	(862	)	$	(818	)
Investments		4,626			4,304
Premiums and agents’ balances receivable		5,158			4,479
Reinsurance recoverables on losses (1)		26,982			21,117
Accrued investment income		33			31
Deferred income tax asset, net		355			414
Property and equipment		353			356
Other assets		44			48
Total assets	$	36,689		$	29,931
Liabilities:
Unpaid losses and loss adjustment expenses	$	10,718		$	6,579
Unearned premiums		16,290			14,538
Notes payable (1)		3,000			3,000
Reinsurance premiums payable (1)		2,026			972
Accrued expenses and other liabilities		1,178			1,579
Total liabilities		33,212			26,668
Equity:
Non-controlling interest		3,477			3,263
Total equity		3,477			3,263
Total liabilities and equity	$	36,689		$	29,931
(1)    Amount eliminated in consolidation.

Total statutory revenues of Battle Creek, after intercompany eliminations, which is limited to net investment income and other income, were $26 and $36, respectively, during the three months ended September 30, 2019 and 2018, respectively.

Total statutory revenues of Battle Creek, after intercompany eliminations, which is limited to net investment income and other income, were $103 and $112, respectively, during the nine months ended September 30, 2019 and 2018, respectively.

There were no statutory-basis expenses reported, after intercompany eliminations, during the three or nine months ended September 30, 2019 and 2018.

13.          Benefit Plans

The Company sponsors a money-purchase plan that covers all eligible employees. Plan costs are funded annually as they are earned. The Company’s contribution expense for the money-purchase plan totaled $95 and $196 during the three months ended September 30, 2019 and 2018, respectively, and $493 and $590 during the nine months ended September 30, 2019 and 2018, 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. The Company’s contributions expense to the 401(k) plan totaled $139 and $182 during the three months ended September 30, 2019 and 2018, respectively, and $417 and $421 during the nine months ended September 30, 2019 and 2018, respectively. All fees associated with both plans are deducted from the eligible employee accounts.

Deferred Compensation Plan

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 in a given calendar year by amounts that exceed the maximum contribution allowed by the Employee Retirement Income Security Act (“ERISA”). The Company’s expenses included $14 and $13 during the three months ended September 30, 2019 and 2018, respectively, and $41 and $40 during the nine months ended September 30, 2019 and 2018, respectively.

 28

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

Employee Stock Ownership Plan

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 primarily 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 initial ESOP participants are employees of Nodak Insurance. The employees of Primero and Direct Auto 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 $104 and $100 during the three months ended September 30, 2019 and 2018, respectively, and $301 and $303 during the nine months ended September 30, 2019 and 2018, respectively.

Through September 30, 2019 and December 31, 2018, 48,630 ESOP shares had been released and allocated to participants, with a remainder of 191,370 ESOP shares in suspense at September 30, 2019 and December 31, 2018. Using the Company’s quarter-end market price of $17.14 per share, the fair value of the unearned ESOP shares was $3,280 at September 30, 2019. 

 29

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

14.          Line of Credit

Nodak Insurance has a $5,000 line of credit with Wells Fargo Bank, N.A., of which there were no outstanding amounts as of September 30, 2019 or December 31, 2018. This line of credit is scheduled to expire on December 31, 2019.

15.          Income Taxes

At September 30, 2019 and December 31, 2018, we had no unrecognized tax benefits, no 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, 2019 or 2018.

At September 30, 2019 and December 31, 2018, the Company, other than Battle Creek, 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 $4,786 of net operating loss carryover at December 31, 2018. The net operating loss carryforward expires beginning in 2021 through 2030.

16.          Operating Leases

Our Primero subsidiary leases a facility in Spearfish, South Dakota under a non-cancellable operating lease expiring in 2023. Our Direct Auto subsidiary leases a facility in Chicago, Illinois under a non-cancellable operating lease expiring in 2020. There were expenses of $76 and $35 related to these leases during the three months ended September 30, 2019 and 2018, respectively, and expenses $227 and $65 during the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, we have minimum future commitments under non-cancellable leases as follows:

Year ending December 31,	Estimated Future Minimum Commitments
2019	$	76
2020	121
2021	60
2022	60
2023	30

We also sub-lease portions of our home office building under non-cancellable operating leases.

17.          Contingencies

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, 2019 or December 31, 2018.

 30

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

18. Common Stock

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

	Nine Months Ended September 30,
	2019			2018
Shares outstanding, beginning of period		22,192,894			22,337,644
Treasury shares repurchased through stock repurchase authorization		(116,034	)		—
Issuance of treasury shares for vesting of restricted stock units		18,205			22,200
Shares outstanding, end of period		22,095,065			22,359,844

On February 28, 2018, our Board of Directors approved an authorization for the repurchase of up to approximately $10 million 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 the nine months ended September 30, 2019. The cost of this treasury stock is a reduction of Equity within our Consolidated Balance Sheet. 

19. Stock Based Compensation

At its 2017 Annual Shareholders’ Meeting, the NI Holdings, Inc. 2017 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, 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, to compensate such persons through various stock and cash-based arrangements, and to provide them with opportunities for stock ownership 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 500,000 shares of common stock, subject to adjustments as provided in the Plan. No eligible participant may be granted more than 100,000 shares from any stock options, stock appreciation rights, or performance awards denominated in 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 $100 in any calendar year.

Restricted Stock Units

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 generally 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.

 31

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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

	RSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding and unearned at January 1, 2018		65,500		$	17.31
RSUs granted during 2018		40,000			16.25
RSUs earned during 2018		(31,620	)		16.99
Units outstanding and unearned at December 31, 2018		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 September 30, 2019		96,540		$	16.47

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,
	2019			2018			2019			2018
RSU compensation expense	$	165		$	185		$	627		$	827
Income tax benefit		(35	)		(39	)		(132	)		(174	)
RSU compensation expense, net of income taxes	$	130		$	146		$	495		$	653

At September 30, 2019, there was $940 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 3.02 years.

Performance Stock Units

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 will be achieved.

 32

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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

	PSUs		Weighted-Average Grant-Date Fair Value Per Share
Units outstanding at January 1, 2018		—	$	—
PSUs granted during 2018 (at target)		48,600		16.25
Units outstanding at December 31, 2018		48,600	$	16.25
PSUs granted during 2019 (at target)		62,400		15.21
Units outstanding at September 30, 2019		111,000	$	15.27

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,
	2019			2018			2019			2018
PSU compensation expense	$	175		$	70		$	647		$	163
Income tax benefit		(37	)		(14	)		(136	)		(34	)
PSU compensation expense, net of income taxes	$	138		$	56		$	511		$	129

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, 2019, there was $1,169 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 1.83 years.

 33

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

20.          Earnings Per Share

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 22,136,885 and 22,381,344, respectively, during the three months ended September 30, 2019 and 2018, respectively, and 22,194,102 and 22,373,579, respectively, during the nine months ended September 30, 2019 and 2018, 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,
	2019			2018		2019		2018
Basic earnings (loss) per common share:
Numerator:
Net income (loss) attributable to NI Holdings, Inc.	$	(6,979	)	$	9,844	$	9,272	$	16,192
Denominator:
Weighted average shares outstanding		22,136,885			22,381,344		22,194,102		22,373,579
Basic earnings (loss) per common share	$	(0.32	)	$	0.44	$	0.42	$	0.72
Diluted earnings (loss) per common share:
Numerator:
Net income (loss) attributable to NI Holdings, Inc.	$	(6,979	)	$	9,844	$	9,272	$	16,192
Denominator:
Number of shares used in basic computation		22,136,885			22,381,344		22,194,102		22,373,579
Weighted average effect of dilutive securities
Add: RSUs and PSUs		95,189			32,732		75,398		21,598
Number of shares used in diluted computation		22,232,074			22,414,076		22,269,500		22,395,177
Diluted earnings (loss) per common share	$	(0.31	)	$	0.44	$	0.42	$	0.72

 34

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

21.          Segment Information

We have four primary reportable operating segments, which consist of private passenger auto insurance, non-standard auto insurance, home and farm insurance, and crop insurance. A fifth segment captures all other insurance coverages we sell, including commercial coverages and 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, 2019 and 2018. 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 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.

 35

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

	Three Months Ended September 30, 2019
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	18,256		$	14,167		$	19,844		$	15,943		$	2,271		$	70,481
Assumed premiums earned		(7	)		—			8			(10	)		1,243			1,234
Ceded premiums earned		(933	)		(123	)		(1,944	)		(1,416	)		(183	)		(4,599	)
Net premiums earned		17,316			14,044			17,908			14,517			3,331			67,116
Direct losses and LAE		19,120			8,440			18,639			13,977			2,072			62,248
Assumed losses and LAE		94			—			—			1,316			607			2,017
Ceded losses and LAE		(498	)		—			(41	)		(2,151	)		(17	)		(2,707	)
Net losses and LAE		18,716			8,440			18,598			13,142			2,662			61,558
Gross margin		(1,400	)		5,604			(690	)		1,375			669			5,558
Underwriting and general expenses		4,438			5,207			4,892			1,983			771			17,291
Underwriting gain (loss)		(5,838	)		397			(5,582	)		(608	)		(102	)		(11,733	)
Fee and other income					363												527
					760
Net investment income																	1,983
Net capital gain on investments																	622
Loss before income taxes																	(8,601	)
Income taxes																	(1,642	)
Net loss																	(6,959	)
Net income attributable to non-controlling interest																	20
Net loss attributable to NI Holdings, Inc.																$	(6,979	)
Non-GAAP Ratios:
Loss and LAE ratio		108.1%			60.1%			103.9%			90.5%			79.9%			91.7%
Expense ratio		25.6%			37.1%			27.3%			13.7%			23.1%			25.8%
Combined ratio		133.7%			97.2%			131.2%			104.2%			103.1%			117.5%
Balances at September 30, 2019:
Premiums and agents’ balances receivable	$	18,776		$	8,186		$	9,238		$	39,275		$	1,551		$	77,026
Deferred policy acquisition costs		4,143			4,794			5,945			281			641			15,804
Reinsurance recoverables		377			—			1,330			2,855			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			9,942			117,373
Unearned premiums		28,312			16,723			40,114			11,233			5,035			101,417

 36

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

	Three Months Ended September 30, 2018
	Private Passenger Auto			Non- Standard Auto		Home and Farm			Crop			All Other			Total
Direct premiums earned	$	16,718		$	7,052	$	17,977		$	19,880		$	2,110		$	63,737
Assumed premiums earned		3			—		(4	)		27			1,058			1,084
Ceded premiums earned		(829	)		—		(1,736	)		(7,947	)		(173	)		(10,685	)
Net premiums earned		15,892			7,052		16,237			11,960			2,995			54,136
Direct losses and LAE		11,940			4,387		16,414			4,976			1,502			39,219
Assumed losses and LAE		140			—		(122	)		530			279			827
Ceded losses and LAE		(176	)		—		78			(1,991	)		(501	)		(2,590	)
Net losses and LAE		11,904			4,387		16,370			3,515			1,280			37,456
Gross margin		3,988			2,665		(133	)		8,445			1,715			16,680
Underwriting and general expenses		4,235			2,348		4,678			2,695			782			14,738
Underwriting gain (loss)		(247	)		317		(4,811	)		5,750			933			1,942
Fee and other income					343											5,175
					660
Net investment income																1,629
Net capital gain on investments																3,160
Loss before income taxes																11,906
Income taxes																2,029
Net income																9,877
Net income attributable to non-controlling interest																33
Net income attributable to NI Holdings, Inc.															$	9,844
Non-GAAP Ratios:
Loss and LAE ratio		74.9%			62.2%		100.8%			29.4%			42.7%			69.2%
Expense ratio		26.6%			33.3%		28.8%			22.5%			26.1%			27.2%
Combined ratio		101.6%			95.5%		129.6%			51.9%			68.8%			96.4%
Balances at September 30, 2018:
Premiums and agents’ balances receivable	$	17,003		$	7,498	$	9,094		$	27,710		$	1,440		$	62,745
Deferred policy acquisition costs		3,663			1,356		5,195			1,001			578			11,793
Reinsurance recoverables		42			—		979			2,425			2,182			5,628
Receivable from Federal Crop Insurance Corporation		—			—		—			29,284			—			29,284
Goodwill and other intangibles		—			7,036		—			—			—			7,036
Unpaid losses and LAE		19,094			48,020		15,536			13,714			9,289			105,653
Unearned premiums		26,363			17,871		36,764			12,509			4,801			98,308

 37

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

	Nine Months Ended September 30, 2019
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	52,792		$	44,029		$	57,592		$	31,159		$	6,661		$	192,233
Assumed premiums earned		—			—			—			2,087			3,146			5,233
Ceded premiums earned		(2,698	)		(123	)		(5,642	)		(5,718	)		(549	)		(14,730	)
Net premiums earned		50,094			43,906			51,950			27,528			9,258			182,736
Direct losses and LAE		41,300			27,416			41,396			23,046			5,323			138,481
Assumed losses and LAE		173			—			—			1,394			1,433			3,000
Ceded losses and LAE		(730	)		—			(1,329	)		(2,558	)		(879	)		(5,496	)
Net losses and LAE		40,743			27,416			40,067			21,882			5,877			135,985
Gross margin		9,351			16,490			11,883			5,646			3,381			46,751
Underwriting and general expenses		14,097			15,845			15,327			3,091			2,565			50,925
Underwriting gain (loss)		(4,746	)		645			(3,444	)		2,555			816			(4,174	)
Fee and other income					1,339												1,637
					1,984
Net investment income																	5,504
Net capital gain on investments																	9,591
Income before income taxes																	12,558
Income taxes																	3,206
Net income																	9,352
Net income attributable to non-controlling interest																	80
Net income attributable to NI Holdings, Inc.																$	9,272
Non-GAAP Ratios:
Loss and LAE ratio		81.3%			62.4%			77.1%			79.5%			63.5%			74.4%
Expense ratio		28.1%			36.1%			29.5%			11.2%			27.7%			27.9%
Combined ratio		109.5%			98.5%			106.6%			90.7%			91.2%			102.3%
Balances at September 30, 2019:
Premiums and agents’ balances receivable	$	18,776		$	8,186		$	9,238		$	39,275		$	1,551		$	77,026
Deferred policy acquisition costs		4,143			4,794			5,945			281			641			15,804
Reinsurance recoverables		377			—			1,330			2,855			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			9,942			117,373
Unearned premiums		28,312			16,723			40,114			11,233			5,035			101,417

 38

NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

	Nine Months Ended September 30, 2018
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	48,436		$	13,519		$	51,840		$	34,963		$	6,158		$	154,916
Assumed premiums earned		11			—			(13	)		2,311			3,263			5,572
Ceded premiums earned		(2,420	)		—			(4,851	)		(11,772	)		(520	)		(19,563	)
Net premiums earned		46,027			13,519			46,976			25,502			8,901			140,925
Direct losses and LAE		33,303			9,324			38,372			15,040			2,938			98,977
Assumed losses and LAE		188			—			(171	)		693			1,193			1,903
Ceded losses and LAE		(290	)		—			18			(2,896	)		(686	)		(3,854	)
Net losses and LAE		33,201			9,324			38,219			12,837			3,445			97,026
Gross margin		12,826			4,195			8,757			12,665			5,456			43,899
Underwriting and general expenses		13,357			4,273			14,770			3,346			2,671			38,417
Underwriting gain (loss)		(531	)		(78	)		(6,013	)		9,319			2,785			5,482
Fee and other income					994												6,022
					916
Net investment income																	4,521
Net capital gain on investments																	3,879
Income before income taxes																	19,904
Income taxes																	3,619
Net income																	16,285
Net income attributable to non-controlling interest																	93
Net income attributable to NI Holdings, Inc.																$	16,192
Non-GAAP Ratios:
Loss and LAE ratio		72.1%			69.0%			81.4%			50.3%			38.7%			68.8%
Expense ratio		29.0%			31.6%			31.4%			13.1%			30.0%			27.3%
Combined ratio		101.2%			100.6%			112.8%			63.5%			68.7%			96.1%
Balances at September 30, 2018:
Premiums and agents’ balances receivable	$	17,003		$	7,498		$	9,094		$	27,710		$	1,440		$	62,745
Deferred policy acquisition costs		3,663			1,356			5,195			1,001			578			11,793
Reinsurance recoverables		42			—			979			2,425			2,182			5,628
Receivable from Federal Crop Insurance Corporation		—			—			—			29,284			—			29,284
Goodwill and other intangibles		—			7,036			—			—			—			7,036
Unpaid losses and LAE		19,094			48,020			15,536			13,714			9,289			105,653
Unearned premiums		26,363			17,871			36,764			12,509			4,801			98,308

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NI Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except per share amounts) 

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 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, federal income taxes recoverable or payable, and equity.

22. Subsequent Events

We have evaluated subsequent events through November 6, 2019, the date these consolidated financial statements were available for issuance.

Pending Acquisition

On October 28, 2019, the Company entered into a definitive agreement to purchase 100 percent of the issued and outstanding stock of Westminster American Insurance Company (“Westminster American”) from private shareholders. Westminster American is headquartered in Owings Mills, Maryland and writes commercial multi-peril commercial insurance in the states of Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia, and West Virginia, and the District of Columbia through independent agents. The current president of Westminster American will continue to manage the Westminster American insurance operations along with the current staff and management team. The transaction is expected to close early next year subject to customary closing conditions, including regulatory approval.

Under the terms of the stock purchase agreement, NI Holdings has agreed to pay Westminster American shareholders $20 million at the closing date, and approximately $6.7 million annually over the three-year period from the date of closing, subject to certain adjustments. In addition, in connection with his continued employment after closing, NI Holdings has agreed to pay the current president of Westminster American a retention bonus in the aggregate amount of $5 million, payable over the five-year period from the date of closing.

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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.

All dollar amounts included in Item 2 herein are in thousands.

Overview

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 six other entities:

· Nodak Insurance – a wholly-owned subsidiary of NI Holdings;

· Nodak Agency – a wholly-owned subsidiary of Nodak Insurance;

· American West – a wholly-owned subsidiary of Nodak Insurance;

· Primero – an indirect, wholly-owned subsidiary of Nodak Insurance;

· Battle Creek – an affiliated company of Nodak Insurance; and

· Direct Auto – a wholly-owned subsidiary of NI Holdings.

Battle Creek is managed by Nodak Insurance, and Nodak Insurance reinsures 100% of the risk on all insurance policies issued by Battle Creek. Nodak Agency is an inactive shell corporation.

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, and Direct Auto became a consolidated subsidiary of the Company. Direct Auto is a property and casualty insurance company specializing in non-standard automobile insurance in the state of Illinois. Direct Auto remains headquartered in Chicago, Illinois and the current president of Direct Auto continues to manage the Direct Auto insurance operations along with the staff and management team in place at the time of acquisition. The results of Direct Auto are included as part of the Company’s non-standard auto 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 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. Nodak Insurance and Battle Creek are rated “A” by A.M. Best, which is the third highest out of a possible 15 ratings. American West is rated “A-”. Primero and Direct Auto are unrated.

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A chart of the corporate structure follows:

NI HOLDINGS, INC. ORGANIZATIONAL CHART
	Nodak Mutual Group, Inc.
	≥ 55%
	ownership
	NI Holdings, Inc.
	100%		100%
	ownership		ownership
	Nodak Insurance Company		Direct Auto Insurance Company
100%	100%		100%
ownership	ownership	Affiliation	ownership
Nodak Agency, Inc.	American West Insurance Company	Battle Creek Mutual Insurance Company	Tri-State, Ltd
			100%
			ownership
			Primero Insurance Company

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

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019		2018
Direct premiums written	$	49,984		$	46,220	$	208,880	$	174,074
Net premiums earned		67,116			54,136		182,736		140,925
Net income (loss) before non-controlling interest		(6,959	)		9,877		9,352		16,285

	September 30, 2019		December 31, 2018
Total assets	$	529,121	$	458,492
Equity		292,307		275,753

Marketplace Conditions and Trends

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 believe that the market is generally in a stable phase as different portions of the market respond to higher frequency and severity of weather-related events.

Unlike property and casualty insurance, the total crop insurance premiums written each year vary mainly based on prevailing commodity prices for the type of crops insured, because the aggregate number of acres planted 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

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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.

Principal Revenue Items

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

Gross and net premiums written

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

Premiums earned

Premiums earned is the earned portion of net premiums written. Gross premiums written include all premiums recorded by an insurance company during a specified policy period. 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, 2019, one-half of the premiums would be earned in 2019 and the other half would be earned in 2020.

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 generally recognized and earned during the period of risk, which usually begins in spring and ends with harvest in the fall. Under the federal crop insurance program, farmers must purchase crop insurance with respect to spring planted crops by March 15. By July 15, the farmer must report the number of acres 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.

Net investment income and net capital gain (loss) on investments

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. 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, changes in unrealized gains and losses on the Company’s investments in equity securities are included in 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. Unrealized gains and losses on fixed income securities continue to be recorded in other comprehensive income. The new accounting treatment has no effect on Equity.

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

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Principal Expense Items

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 Loss Adjustment Expenses

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.

Income taxes

Current income taxes represent amounts paid to the federal government and certain states whose payment is based upon net income (subject to regulatory adjustments) generated by the Company. As noted above, it does not include state premium taxes that are based purely on the collection of policyholder premiums. NI Holdings uses the asset and liability method of accounting for deferred income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the income tax bases of its assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion of the deferred income tax asset will not be realized. The effect of a change in tax rates is recognized in the period of the enactment date. Total income taxes reflect both current income taxes and the change in the net deferred income tax asset or liability, excluding amounts attributed to accumulated other comprehensive income.

Non-GAAP Financial Measures

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 non-GAAP financial measures that NI Holdings presents may not be compatible 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.

Loss and LAE ratio

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.

Expense ratio

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.

Combined ratio

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

 44

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

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.

Net premiums written to statutory surplus ratio

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)

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.

Net income (loss) and return on average equity

NI Holdings uses net income (loss) to measure its profit and uses return on average equity to measure its effectiveness in utilizing 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 equity for that period.

Critical Accounting Policies

General

The preparation of financial statements in accordance with GAAP requires both the use of estimates and judgment relative to the application of appropriate accounting policies. NI Holdings is required to make estimates and assumptions in certain circumstances that affect amounts reported in its 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.

Unpaid Losses and Loss Adjustment Expenses

How reserves are established

With respect to its traditional property and casualty insurance products, the Company maintains reserves for the payment of claims (indemnity losses) and expenses related to adjusting those claims (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”).

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.

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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 loss payments 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 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, to develop 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 utilizes the ratio of paid allocated loss adjustment expense (“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

 46

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.

Changes in liability law and public attitudes regarding damage awards

Laws governing liability claims and judicial interpretations thereof can change over time, which can expand the scope of coverage anticipated by insurers when initially establishing reserves for claims. In addition, public attitudes regarding damage awards can result in judges and juries granting higher recoveries for damages than expected by claims personnel when 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.

Change in claims handling and/or setting case reserves

Changes in Company personnel and/or the approach to how claims are reported, adjusted, and reserved may affect the reserves established by the Company. As discussed above, the setting of IBNR reserves is not an exact science and involves the expert judgment of an actuary. One actuary’s reserve opinion may differ slightly from another actuary’s opinion. This is the primary reason why the IBNR reserve estimate is customarily reported as a range by a company’s actuary, which provides a company with an acceptable “range” to use in establishing its best estimate for IBNR reserves.

Economic inflation

A sudden and extreme increase in the economic inflation rate could have a significant impact on 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.

Increases or decreases in claim severity for reasons other than inflation

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

Actual settlement experience different from historical data trends

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.

Change in Reporting Lag

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.

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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.

Actuarial Loss Reserves

NI Holdings’ liabilities for unpaid losses and LAE are summarized below:

	September 30, 2019		December 31, 2018
Case reserves	$	115,966	$	76,150
IBNR reserves		1,407		10,971
Liability for unpaid losses and LAE	$	117,373	$	87,121
Reinsurance recoverables on losses		5,753		2,232
Net unpaid losses and LAE	$	111,620	$	84,889

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

	September 30, 2019
	Case Reserves		IBNR Reserves			Total Reserves
Private passenger auto	$	15,981	$	5,466		$	21,447
Non-standard auto		59,311		(11,639	)		47,672
Home and farm		11,550		3,024			14,574
Crop		23,913		(175	)		23,738
All other		5,211		4,731			9,942
Liability for unpaid losses and LAE	$	115,966	$	1,407		$	117,373
Reinsurance recoverables on losses		4,894		859			5,753
Net unpaid losses and LAE	$	111,072	$	548		$	111,620

	December 31, 2018
	Case Reserves		IBNR Reserves			Total Reserves
Private passenger auto	$	13,298	$	4,856		$	18,154
Non-standard auto		49,109		(2,323	)		46,786
Home and farm		8,216		2,516			10,732
Crop		2,070		56			2,126
All other		3,457		5,866			9,323
Liability for unpaid losses and LAE	$	76,150	$	10,971		$	87,121
Reinsurance recoverables on losses		1,201		1,031			2,232
Net unpaid losses and LAE	$	74,949	$	9,940		$	84,889

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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.

Total Reserves

As of September 30, 2019, 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 $882.

Inflation

Inflation is not explicitly selected in the loss reserve analysis. However, historical inflation is embedded in the estimated loss development reserving function through analysis of costs and trends and reviews of historical reserving results. The following table displays the impact on net income after income taxes resulting from various changes from the inflation factor implicitly embedded in the estimated payment pattern as of December 31, 2018, which is deemed consistent with September 30, 2019. 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
-1%	$	(1,170	)
1%		1,200
3%		3,693
5%		6,318

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.

Case Reserves

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 income taxes that results from various changes to the level of case reserves as of December 31, 2018, which is deemed consistent with September 30, 2019. 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
-10%	$	(6,045	)
-5%		(3,022	)
-2%		(1,209	)
+2%		1,209
+5%		3,022
+10%		6,045

Investments

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 Equity as a component of other comprehensive income (loss) and, accordingly, have no effect on net income (loss). Effective January 1, 2019, changes in unrealized investment gains or losses on equity securities will impact net income (loss) as they occur instead of as an adjustment to Equity 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 is recognized.

NI Holdings evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis. NI Holdings assesses whether OTTI is present when the fair value of a security is less than its amortized cost. OTTI is considered to have occurred with respect to fixed income securities if (1) an entity intends to sell the security, (2) it is more likely than not an entity will be required to sell the security before recovery of its amortized cost basis, or (3) the present value of the expected cash flows is not

 49

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 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 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 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 months ended September 30, 2019, NI Holdings’ investment portfolio experienced an increase in net unrealized gains of $18,320.

	September 30, 2019			December 31, 2018			Change
Fixed income securities:
Gross unrealized gains	$	8,054		$	1,077		$	6,977
Gross unrealized losses		(312	)		(3,402	)		3,090
Net fixed income unrealized gains (losses)		7,742			(2,325	)		10,067
Equity securities:
Gross unrealized gains		20,247			14,180			6,067
Gross unrealized losses		(1,635	)		(3,821	)		2,186
Net equity unrealized gains		18,612			10,359			8,253
Net unrealized gains	$	26,354		$	8,034		$	18,320

The fixed income portion of the portfolio experienced increases in unrealized gains and decreases in unrealized losses during the nine months ended September 30, 2019, which is believed to be reflective of a change in the general market bias with respect to future interest rate actions that may be taken by the Federal Reserve. The net increase of $10,067 is reflected directly in Equity as a component of accumulated other comprehensive income.

The equity portion of the portfolio experienced increases in unrealized gains and decreases in unrealized losses, which are attributed to favorable conditions in the stock market during the nine months ended September 30, 2019. The net increase of $8,253 is included in net capital gains on investments on the Company’s Consolidated Statements of Operations.

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

For the nine months ended September 30, 2019, NI Holdings did not recognize any other-than-temporary impairments of its investment securities. For the year ended December 31, 2018, NI Holdings recognized $382 of other-than-temporary impairments of its investment securities.

For more information on the Company’s investments, see Note 6 to the Unaudited Consolidated Financial Statements, included elsewhere in this Report.

Fair Value Measurements

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

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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.

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,

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for the three or nine month periods ended September 30, 2019 or the year ended December 31, 2018. 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 Report.

Deferred Policy Acquisition Costs and Value of Business Acquired

Certain direct policy acquisition costs consisting of commissions, 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.

No deferred policy acquisition costs (“DAC”) were recorded in the acquisition for Direct Auto in accordance with purchase accounting guidance. Rather, a separate intangible asset representing the value of business acquired (“VOBA”) was valued at $5,134 and established at the closing date. This VOBA intangible asset will be amortized into expense as the acquired unearned premiums are reported into income, in the same way as DAC. Policy acquisition costs relating to new business written by Direct Auto will be deferred following the closing date. The release of the VOBA asset and the establishment of new DAC will generally offset each other over the twelve months following the acquisition of Direct Auto.

At September 30, 2019 and December 31, 2018, deferred policy acquisition costs, the VOBA intangible asset, and the related liability for unearned premiums were as follows:

	September 30, 2019		December 31, 2018
Deferred policy acquisition costs	$	15,804	$	12,866
Value of business acquired intangible asset		—		1,648
Liability for unearned premiums		101,417		84,767

The method followed in computing deferred policy acquisition costs 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 deferred policy acquisition costs. If the estimation of net realizable value indicates that the deferred policy acquisition costs are not recoverable, they would be written off or a premium deficiency reserve would be established.

Income Taxes

Current income taxes represent amounts paid to the federal government and certain states whose payment is based upon net income (subject to regulatory adjustments) generated by the Company. 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 $6,974 at September 30, 2019 and $5,741 at December 31, 2018, arising primarily from unearned premiums, loss reserve discounting, and net operating loss carryforwards. A valuation allowance is required to be established for any portion of the deferred income tax asset for which the Company believes it is more likely than not that it will not be realized. A valuation allowance of $587 was maintained at September 30, 2019 and December 31, 2018.

NI Holdings had gross deferred income tax liabilities of $9,781 at September 30, 2019 and $5,865 at December 31, 2018, arising primarily from deferred policy acquisition costs and net unrealized capital gains on investments.

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, 2019, NI Holdings had no material unrecognized tax benefits or accrued interest and penalties. Federal tax years 2013 through 2017 are open for examination.

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Results of Operations

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. We believe that the market is generally in a stable phase as different portions of the market respond to higher frequency and severity of weather-related events.

Premiums in the multi-peril crop insurance business are primarily influenced by the number of acres and types of crops insured because the pricing is set by the RMA rather than individual insurance carriers. The expected experience of this business for the calendar year may also significantly impact 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 second quarter, and earned ratably over the period of risk, which extends into fourth quarter.

Premiums in the crop hail insurance business are also generally written in 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 throughout the year and earned throughout the year. 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.

For more information on the Company’s results of operations by segment, see Note 21 to the Unaudited Consolidated Financial Statements, included elsewhere in this Report.

Three Months ended September 30, 2019 and 2018

The consolidated net loss for NI Holdings was $6,959 for the three months ended September 30, 2019 compared to net income of $9,877 a year ago. The major components of NI Holdings’ operating revenues and net income for the two periods were as follows:

	Three Months Ended September 30,
	2019			2018
Revenues:
Net premiums earned	$	67,116		$	54,136
Fee and other income		527			5,175
Net investment income		1,983			1,629
Net capital gain on investments		622			3,160
Total revenues	$	70,248		$	64,100
Components of net income (loss):
Net premiums earned	$	67,116		$	54,136
Losses and loss adjustment expenses		61,558			37,456
Amortization of deferred policy acquisition costs and other underwriting and general expenses		17,291			14,738
Underwriting gain (loss)		(11,733	)		1,942
Fee and other income		527			5,175
Net investment income		1,983			1,629
Net capital gain on investments		622			3,160
Income (loss) before income taxes		(8,601	)		11,906
Income taxes		(1,642	)		2,029
Net income (loss)	$	(6,959	)	$	9,877

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Net Premiums Earned

NI Holdings’ net premiums earned for the three months ended September 30, 2019 increased 24.0% to $67,116 compared to $54,136 for the three months ended September 30, 2018.

	Three Months Ended September 30,
	2019		2018
Net premiums earned:
Private passenger auto	$	17,316	$	15,892
Non-standard auto		14,044		7,052
Home and farm		17,908		16,237
Crop		14,517		11,960
All other		3,331		2,995
Total net premiums earned	$	67,116	$	54,136

	Three Months Ended September 30,
	2019			2018
Net premiums earned:
Direct premium	$	70,481		$	63,737
Assumed premium		1,234			1,084
Ceded premium		(4,599	)		(10,685	)
Total net premiums earned	$	67,116		$	54,136

Direct premiums earned for the third quarter of 2019 increased $6,744, or 10.6%, to $70,481 from $63,737 for the third quarter of 2018. The addition of the Direct Auto non-standard auto business contributed $11,088 in direct premiums earned during the three months ended September 30, 2019 compared to $3,591 in the third quarter of 2018.

Assumed premiums earned increased slightly, primarily related to the assumed domestic and international business in our all other segment. Ceded premiums earned decreased significantly, generally reflecting a deterioration of the crop segment in 2019 compared to 2018. Planting of crops in spring 2019 was delayed due to cooler and wetter conditions, while cooler and wetter conditions in the fall has delayed harvest. This has resulted in significant gain-sharing changes year-over-year due to a higher anticipated multi-peril crop loss ratio in 2019 when compared to 2018.

Our personal lines of business (private passenger auto, home and farm) continued their strong growth in South Dakota. Our non-standard auto premiums also increased year-over-year due to the acquisition of Direct Auto. Direct premiums for crop business are lower in 2019 compared to 2018 due in part to lower commodity prices, although net premiums are higher due to the gain-sharing calculation of premiums under the federal program based on our projected loss ratio for the year.

Losses and LAE

NI Holdings’ net losses and LAE for the three months ended September 30, 2019 increased 64.4% to $61,558 compared to $37,456 for the three months ended September 30, 2018. The Company’s loss and LAE ratio increased to 91.7% for 2019, compared to 69.2% for 2018.

	Three Months Ended September 30,
	2019		2018
Loss and LAE ratio:
Private passenger auto		108.1%		74.9%
Non-standard auto		60.1%		62.2%
Home and farm		103.9%		100.8%
Crop		90.5%		29.4%
All other		79.9%		42.7%
Total loss and LAE ratio		91.7%		69.2%

The Company’s overall loss and LAE experience deteriorated year-over-year, across most segments of the Company.

Increased weather activity affected our private passenger auto, home and farm, and all other segments in the third quarter of 2019. A high frequency of localized storms brought hail and wind damage to homes, farms, commercial businesses, and vehicles. The private passenger auto business was also affected by higher frequency and severity of liability losses during the third quarter, resulting in deterioration to that segment’s loss ratio.

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The loss and LAE ratio for non-standard auto improved slightly. Favorable experience for Direct Auto continues to offset the increased loss experience in Primero. The statutory increase in minimum liability limits in the state of Nevada resulted in a higher than anticipated increase in the average paid claim and average loss reserve, which has had a negative impact on the results for Primero. We believe that we have implemented the necessary rate increases to address this adverse claims experience, and are carefully monitoring the ongoing results in the event that additional increases are warranted. These higher rates have caused a decrease in the number of vehicles insured both in Arizona and Nevada. However, premiums remain flat due to the overall rate increases.

Our loss experience is currently estimated at above average levels for both our multi-peril crop business and crop hail business for 2019, compared to favorable loss experience for 2018. The wet spring and cool summer across North Dakota resulted in a delay for some crops to mature, while a wet fall has delayed the harvest of those crops.

NI Holdings realized unfavorable development on prior accident years of $1,227 in the third quarter of 2019, compared to $2,583 of favorable development on prior accident years realized in the third quarter of 2018. 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 21.6% to $17,921 in third quarter 2019 compared to $14,738 in 2018.

	Three Months Ended September 30,
	2019			2018
Underlying expenses	$	16,374		$	14,341
Deferral of policy acquisition costs		(10,392	)		(10,554	)
Other underwriting and general expenses		5,982			3,787
Amortization of deferred policy acquisition costs		11,309			10,951
Total reported expenses	$	17,921		$	14,738

Underlying expenses were $2,033 higher in the three months ended September 30, 2019 compared to a year ago. The new Direct Auto subsidiary contributed $4,263 of underlying expenses to the current quarter, compared to $2,518 a year ago.

Expense deferrals were slightly less in the three months ended September 30, 2019 compared to 2018, while amortization of those costs was slightly higher in 2019. Both expense deferrals and amortization were considerably higher in 2019 for non-standard auto due to the Direct Auto business, compared to including only one month of Direct Auto in the deferral and amortization calculations for 2018. Other segments generally decreased for both expense deferrals and amortization, as direct written premium decreased in the third quarter of 2019 compared to a year ago.

The expense ratio of 25.8% for the three months ended September 30, 2019 was 1.4 percentage points lower than the expense ratio in the third quarter of 2018 as premium growth outpaced the increase in expenses.

Underwriting Gain (Loss)

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.

	Three Months Ended September 30,
	2019			2018
Underwriting gain (loss):
Private passenger auto	$	(5,838	)	$	(247	)
Non-standard auto		397			317
Home and farm		(5,582	)		(4,811	)
Crop		(608	)		5,750
All other		(102	)		933
Total underwriting gain (loss)	$	(11,733	)	$	1,942

The underwriting results of the Company for the third quarter deteriorated year-over-year.

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Increased weather activity affected our private passenger auto, home and farm, and all other segments in the third quarter of 2019. A high frequency of localized storms brought hail and wind damage to homes, farms, commercial businesses, and vehicles. The private passenger auto business was also affected by higher frequency and severity of liability losses during the third quarter, resulting in deterioration to that segment’s underwriting results.

Non-standard auto results continued to be profitable. Direct Auto continues to produce favorable underwriting performance while Primero continues to be impacted by the adverse development from the statutory minimum liability limit change in 2018.

The underwriting results on crop insurance decreased compared to a year ago, as the 2019 growing season has not been as favorable for our multi-peril crop business and late summer hail storms have adversely impacted our crop hail business.

Fee and Other Income

NI Holdings had fee and other income of $527 for the three months ended September 30, 2019, compared to $5,175 for the three months ended September 30, 2018. Fee income attributable to the non-standard auto segment is a key component in measuring its profitability. Fee income on this business increased to $363 for the three months ended September 30, 2019 from $343 for the three months ended September 30, 2018, due to the addition of Direct Auto. In the third quarter of 2018, the Company recognized a pre-tax gain of $4,578 as part of other income as a result of the purchase accounting afforded the purchase of Direct Auto.

Net Investment Income

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:

	Three Months Ended September 30,
	2019		2018
Average cash and invested assets	$	393,876	$	342,523
Gross investment income	$	2,549	$	2,166
Investment expenses		566		537
Net investment income	$	1,983	$	1,629
Gross return on average cash and invested assets		2.6%		2.5%
Net return on average cash and invested assets		2.0%		1.9%

Investment income, net of investment expense, increased $354 for the three months ended September 30, 2019 compared to a year ago. This increase is attributable to the increase in invested assets, due primarily to the acquisition of Direct Auto. The weighted average gross yield on invested assets increased slightly to 2.6% in 2019 from 2.5% in 2018.

As of September 30, 2019, our overall book yield for our combined fixed income and equity portfolio was 2.9%. The average duration was 3.4. The Direct Auto cash and cash equivalents have now been invested in accordance with our investment policy.

Net Capital Gain on Investments

NI Holdings had realized capital gains on investment of $1,006 for the three months ended September 30, 2019, compared to gains of $3,160 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 loss of $384 attributed to the change in unrealized appreciation of its equity securities for the three months ended September 30, 2019. Prior to January 1, 2019, such unrealized gains and losses were included in other comprehensive income. Pre-tax net unrealized gains on equity securities recorded in other comprehensive income were $510 for the three months ended September 30, 2018, with total losses of $8,174 for the year ended December 31, 2018. Although we anticipate a higher level of short-term volatility going forward in our reported results due to similar market fluctuations, we continue to believe that this asset class presents viable investment opportunities.

The Company recorded no other-than-temporary impairments in the three months ended September 30, 2019, and $382 of other-than-temporary impairments in the three months ended September 30, 2018.

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, 2019, the Company had net unrealized gains on fixed income securities of $7,742 and net unrealized gains on equity securities of $18,612. At December 31, 2018, the Company had net unrealized losses on fixed income securities of $2,325 and net unrealized gains on equity

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securities of $10,359. The increase in the fair value of our fixed income securities is believed to be reflective of a change in the general market bias with respect to anticipated future interest rate actions that may be taken by the Federal Reserve. The increase in the fair value of our equity securities is consistent with the fluctuations in the equity markets in the same period.

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 believes that any declines in fair value in its existing portfolio are most likely attributable to short-term market trends and there is no evidence that the Company will not recover the entire amortized cost basis.

Income before Income Taxes

For the three months ended September 30, 2019, NI Holdings had pre-tax loss of $8,601 compared to pre-tax income of $11,906 for the three months ended September 30, 2018. The decrease in pre-tax results was largely attributable to increased weather activity affecting most of our business, less favorable growing conditions for our multi-peril crop business, and increased frequency and severity of liability claims in our private passenger auto segment during the three months ended September 30, 2019.

Income Taxes

NI Holdings recorded income tax benefit of $1,642 for the three months ended September 30, 2019, compared to income tax expense of $2,029 for the three months ended September 30, 2018. 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 2019 was 19.1% compared to an effective tax rate of 17.0% for the third quarter of 2018.

The valuation allowance against certain deferred income tax assets remained at $587 as of September 30, 2019, the same amount as December 31, 2018.

Net Income

For the three months ended September 30, 2019, NI Holdings had net loss before non-controlling interest of $6,959 compared to net income of $9,877 for 2018. This decrease in net income was primarily attributable to increased weather activity affecting most of our business, less favorable growing conditions for our multi-peril crop business, and increased frequency and severity of liability claims in our private passenger auto segment during the three months ended September 30, 2019.

Return on Average Equity

For the three months ended September 30, 2019, NI Holdings had annualized return on average equity, after non-controlling interest, of -9.6% compared to annualized return on average equity, after non-controlling interest, of 15.1% for the three months ended September 30, 2018. Average equity is calculated as the average between beginning and ending equity excluding non-controlling interest for the period.

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Nine Months ended September 30, 2019 and 2018

The consolidated net income for NI Holdings was $9,352 for the nine months ended September 30, 2019 compared to $16,285 a year ago. The major components of NI Holdings’ operating revenues and net income for the two periods were as follows:

	Nine Months Ended September 30,
	2019			2018
Revenues:
Net premiums earned	$	182,736		$	140,925
Fee and other income		1,637			6,022
Net investment income		5,504			4,521
Net capital gain on investments		9,591			3,879
Total revenues	$	199,468		$	155,347
Components of net income:
Net premiums earned	$	182,736		$	140,925
Losses and loss adjustment expenses		135,985			97,026
Amortization of deferred policy acquisition costs and other underwriting and general expenses		50,925			38,417
Underwriting income		(4,174	)		5,482
Fee and other income		1,637			6,022
Net investment income		5,504			4,521
Net capital gain on investments		9,591			3,879
Income before income taxes		12,558			19,904
Income taxes		3,206			3,619
Net income	$	9,352		$	16,285

Net Premiums Earned

NI Holdings’ net premiums earned for the nine months ended September 30, 2019 increased 29.7% to $182,736 compared to $140,925 for the nine months ended September 30, 2018.

	Nine Months Ended September 30,
	2019		2018
Net premiums earned:
Private passenger auto	$	50,094	$	46,027
Non-standard auto		43,906		13,519
Home and farm		51,950		46,976
Crop		27,528		25,502
All other		9,258		8,901
Total net premiums earned	$	182,736	$	140,925

	Nine Months Ended September 30,
	2019			2018
Net premiums earned:
Direct premium	$	192,233		$	154,916
Assumed premium		5,233			5,572
Ceded premium		(14,730	)		(19,563	)
Total net premiums earned	$	182,736		$	140,925

Direct premiums earned for the first nine months of 2019 increased $37,317, or 24.1%, to $192,233 from $154,916 for the first nine months of 2018. The addition of the Direct Auto non-standard auto business contributed $33,079 in direct premiums earned during the nine months ended September 30, 2019 compared to $3,591 a year ago.

Assumed premiums earned decreased slightly, primarily related to crop hail business from Rural Mutual. Ceded premiums earned decreased due to less gain-sharing of multi-peril crop premiums to the federal government.

Our personal lines of business (private passenger auto, home and farm) continued their strong growth in South Dakota. Our non-standard auto premiums also increased year-over-year due to the acquisition of Direct Auto. Direct premiums for crop business

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are lower in 2019 compared to 2018 due in part to lower commodity prices, although net premiums are higher due to less gain-sharing of premiums based on our projected loss ratio for the year.

Losses and LAE

NI Holdings’ net losses and LAE for the nine months ended September 30, 2019 increased 40.2% to $135,985 compared to $97,026 for the nine months ended September 30, 2018. The Company’s loss and LAE ratio increased to 74.4% for 2019, compared to 68.8% for 2018.

	Nine Months Ended September 30,
	2019		2018
Loss and LAE ratio:
Private passenger auto		81.3%		72.1%
Non-standard auto		62.4%		69.0%
Home and farm		77.1%		81.4%
Crop		79.5%		50.3%
All other		63.5%		38.7%
Total loss and LAE ratio		74.4%		68.8%

The Company’s overall loss and LAE experience deteriorated year-over-year, primarily in the private passenger auto, crop, and all other segments.

Net losses for private passenger auto increased through the third quarter of 2019 compared to a year ago, as third quarter weather activity and liability losses both increased substantially compared to a year ago. Net losses for home and farm were at expected levels, with farm business at a profit.

Net losses for non-standard auto included a combination of favorable loss experience development in Direct Auto, partially offset by unfavorable loss experience development in Primero. In Primero, the statutory increase in minimum liability limits in the state of Nevada resulted in a higher than anticipated increase in the average paid claim and average loss reserve. This has driven up our loss experience, which we have addressed through rate increases. These rate increases have challenged our ability to write new policies during the second half of 2019, but will address the increased loss ratios.

Our loss experience is currently estimated at above average levels for both our multi-peril crop business and crop hail business for 2019, compared to favorable loss experience for 2018. The wet spring and cool summer across North Dakota resulted in a delay for some crops to mature, while a wet fall has delayed the harvest of those crops.

NI Holdings realized favorable development on prior accident years of $6,443 in the first nine months of 2019, compared to $3,165 of favorable development on prior accident years realized in the first nine months of 2018. 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 32.6% to $50,925 in the first nine months of 2019 compared to $38,417 in 2018.

	Nine Months Ended September 30,
	2019			2018
Underlying expenses	$	53,863		$	41,351
Deferral of policy acquisition costs		(39,620	)		(29,542	)
Other underwriting and general expenses		14,243			11,809
Amortization of deferred policy acquisition costs		36,682			26,608
Total reported expenses	$	50,925		$	38,417

Underlying expenses were $12,512 higher in the nine months ended September 30, 2019 compared to a year ago. The new Direct Auto subsidiary contributed $14,144 of underlying expenses to the current year, compared to $2,518 a year ago. Policy acquisition costs have increased due to higher written premiums.

Expense deferrals were $10,078 higher in the first nine months of 2019 compared to the first nine months of 2018 primarily due to increases in direct premiums written in 2019 and the new Direct Auto business. Amortization of those costs was $10,074 higher in 2019 for the same reasons.

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The expense ratio of 27.9% for the nine months ended September 30, 2019 was 0.6 percentage points higher than the expense ratio in the first nine months of 2018. This ratio increase reflects the higher commission rates for the Direct Auto non-standard auto business.

Underwriting Gain (Loss)

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.

	Nine Months Ended September 30,
	2019			2018
Underwriting gain (loss):
Private passenger auto	$	(4,746	)	$	(531	)
Non-standard auto		645			(78	)
Home and farm		(3,444	)		(6,013	)
Crop		2,555			9,319
All other		816			2,785
Total underwriting gain (loss)	$	(4,174	)	$	5,482

The underwriting results of the Company for the nine months ended September 30, 2019 decreased year-over-year. Loss experience increased in the private passenger auto, crop, and all other segments.

Increased weather activity, and a higher frequency and severity of liability losses for the auto lines, resulted in lower underwriting results in our private passenger auto and commercial businesses. The home and farm segment also experienced increased weather activity in the third quarter of 2019, although the underwriting results for the first nine months of 2019 are still favorable compared to a year ago.

The non-standard auto results improved from last year as a result of the new Direct Auto business. The underwriting gain on crop insurance decreased, due to the higher projected loss ratio for the multi-peril crop business and a higher loss ratio for the crop hail line.

Fee and Other Income

NI Holdings had fee and other income of $1,637 for the nine months ended September 30, 2019, compared to $6,022 for the nine months ended September 30, 2018. Fee income attributable to the non-standard auto segment is a key component in measuring its profitability. Fee income on this business increased to $1,339 for the nine months ended September 30, 2019 from $994 for the nine months ended September 30, 2018, due to growth in Primero’s non-standard auto business and the addition of Direct Auto. In the third quarter of 2018, the Company recognized a pre-tax gain of $4,578 as part of other income as a result of the purchase accounting afforded the purchase of Direct Auto.

Net Investment Income

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,
	2019		2018
Average cash and invested assets	$	388,023	$	328,166
Gross investment income	$	7,194	$	6,155
Investment expenses		1,690		1,634
Net investment income	$	5,504	$	4,521
Gross return on average cash and invested assets		2.5%		2.5%
Net return on average cash and invested assets		1.9%		1.8%

Investment income, net of investment expense, increased $983 for the nine months ended September 30, 2019 compared to a year ago. This increase is attributable to the increase in invested assets, due primarily to the acquisition of Direct Auto. The weighted average gross yield on invested assets remained steady at 2.5% in 2019 compared to 2018.

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As of September 30, 2019, our overall book yield for our combined fixed income and equity portfolio was 2.9%. The average duration was 3.4. The Direct Auto cash and cash equivalents have now been invested in accordance with our investment policy.

Net Capital Gain on Investments

NI Holdings had realized capital gains on investment of $1,338 for the nine months ended September 30, 2019, compared to $3,879 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 $8,253 attributed to the change in unrealized appreciation of its equity securities for the nine months ended September 30, 2019. Prior to January 1, 2019, such unrealized gains and losses were included in other comprehensive income. Pre-tax net unrealized gains on equity securities recorded in other comprehensive income were $1,293 for the nine months ended September 30, 2018, with total losses of $8,174 for the year ended December 31, 2018. Although we anticipate a higher level of short-term volatility going forward in our reported results due to similar market fluctuations, we continue to believe that this asset class presents viable investment opportunities.

The Company recorded no other-than-temporary impairments in the nine months ended September 30, 2019, and $382 of other-than-temporary impairments in the nine months ended September 30, 2018.

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, 2019, the Company had net unrealized gains on fixed income securities of $7,742 and net unrealized gains on equity securities of $18,612. At December 31, 2018, the Company had net unrealized losses on fixed income securities of $2,325 and net unrealized gains on equity securities of $10,359. The increase in the fair value of our fixed income securities is believed to be reflective of a change in the general market bias with respect to anticipated future interest rate actions that may be taken by the Federal Reserve. The increase in the fair value of our equity securities is consistent with the fluctuations in the equity markets in the same period.

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 believes that any declines in fair value in its existing portfolio are most likely attributable to short-term market trends and there is no evidence that the Company will not recover the entire amortized cost basis.

Income before Income Taxes

For the nine months ended September 30, 2019, NI Holdings had pre-tax income of $12,558 compared to $19,904 for the nine months ended September 30, 2018. The decrease in pre-tax income was largely attributable to increased loss experience in our private passenger auto, crop, and all other segments in the nine months ended September 30, 2019.

Income Taxes

NI Holdings recorded income tax expense of $3,206 for the nine months ended September 30, 2019, compared to $3,619 for the nine months ended September 30, 2018. A portion of income tax expense relates to state income taxes primarily for the state of Illinois. Our effective tax rate for the first nine months of 2019 was 25.5% compared to an effective tax rate of 18.2% for the first nine months of 2018.

The valuation allowance against certain deferred income tax assets remained at $587 as of September 30, 2019, the same amount as December 31, 2018.

Net Income

For the nine months ended September 30, 2019, NI Holdings had net income before non-controlling interest of $9,352 compared to $16,285 for 2018. This decrease in net income was primarily attributable to increased loss experience in our private passenger auto, crop, and all other segments in the nine months ended September 30, 2019.

Return on Average Equity

For the nine months ended September 30, 2019, NI Holdings had annualized return on average equity, after non-controlling interest, of 4.4% compared to annualized return on average equity, after non-controlling interest, of 8.3% for the nine months ended September 30, 2018. Average equity is calculated as the average between beginning and ending equity excluding non-controlling interest for the period.

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Financial Position

The major components of NI Holdings’ financial position are as follows:

	September 30, 2019		December 31, 2018
Assets:
Cash and investments	$	388,670	$	374,371
Premiums and agents’ balances receivable		77,026		34,287
Deferred policy acquisition costs		15,804		12,866
Other assets		47,621		36,968
Total assets	$	529,121	$	458,492
Liabilities:
Unpaid losses and loss adjustment expenses	$	117,373	$	87,121
Unearned premiums		101,417		84,767
Other liabilities		18,024		10,851
Total liabilities		236,814		182,739
Equity		292,307		275,753
Total liabilities and equity	$	529,121	$	458,492

At September 30, 2019, NI Holdings had total assets of $529,121, an increase of $70,629, or 15.4%, from December 31, 2018. Cash and investments increased due to market fluctuations in both the fixed income and equity markets. Premiums and agents’ balances receivable increased due to recognition of 2019 crop insurance written premiums. Deferred policy acquisition costs increased due to increasing written premium across all segments. Other assets increased due to additional amounts receivable from the Federal Crop Insurance Corporation.

At September 30, 2019, total liabilities were $236,814, an increase of $54,075, or 29.6%, from December 31, 2018. Unpaid losses and loss adjustment expenses increased due to higher levels of claims experience during the third quarter to be settled by the end of the year. Unearned premiums also increased due to the recognition of 2019 crop insurance written premiums.

Total equity increased by $16,554, or 6.0%, during the nine months ended September 30, 2019. The increase in equity reflects consolidated net income of $9,352 for the nine-month period, and higher fair values of our fixed income securities.

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Liquidity and Capital Resources

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, which we plan to use for strategic acquisitions. However, these funds are available if necessary to meet the demands of claim settlements and operating expenses. Through September 30, 2019, we have used that money to acquire $13,039 in treasury stock and, in 2018, we used $17,000 for the acquisition of Direct Auto.

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 months ended September 30, 2019 and 2018 were as follows:

	Nine Months Ended September 30,
	2019			2018
Net cash flows from operating activities	$	(1,497	)	$	(4,712	)
Net cash flows from investing activities		(40,186	)		28,778
Net cash flows from financing activities		(2,025	)		—
Net increase (decrease) in cash and cash equivalents	$	(43,708	)	$	24,066

For the nine months ended September 30, 2019, net cash used by operating activities totaled $1,497 compared to $4,712 a year ago. Consolidated net income aggregated $9,352 for the nine months ended September 30, 2019 compared to $16,285 for the same period a year ago. The decrease in net income was offset by the impact of changes in the receivable from the Federal Crop Insurance Corporation, as well as unpaid losses and loss adjustment expenses.

Net cash used by investing activities totaled $40,186 for the nine months ended September 30, 2019, compared to $28,778 net cash provided by investing activities a year ago. In the third quarter of 2018, the acquisition of Direct Auto provided $27,485 of cash and cash equivalents in excess of the purchase price. The current year reflects the impact of investing excess cash generated from operations and the Direct Auto acquisition into longer term investments.

Net cash used by financing activities totaled $2,025 for the nine months ended September 30, 2019. There was no net cash provided or used by financing activities for the nine months ended September 30, 2018. The Company repurchased shares of its own common stock for $2,006 during 2019.

As a standalone entity, and outside of the net proceeds from the recent initial public offering, NI Holdings’ principal source of long-term liquidity will be dividend payments from Nodak Insurance and Direct Auto.

Nodak Insurance will be 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 2019 without the prior approval of the North Dakota Insurance Department is approximately $17,588 based upon the policyholders’ surplus of Nodak Insurance at December 31, 2018. Prior to its payment of any extraordinary dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if an insurance company is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Nodak Insurance during the nine months ended September 30, 2019 or the year ended December 31, 2018.

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

 63

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 2019 without the prior approval of the Illinois Department of Insurance is $6,653 based upon the statutory net income of Direct Auto for the year ended December 31, 2018. 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 months ended September 30, 2019 or the year ended December 31, 2018.

Off-Balance Sheet Arrangements

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.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 5 to the Unaudited Consolidated Financial Statements, included elsewhere in this Report.

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Item 3. - Quantitative and Qualitative Disclosures about Market Risk

The Company’s assessment of market risk as of September 30, 2019 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, 2018 filed with the SEC.

Item 4. - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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)) as of September 30, 2019. 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 and timely, providing them with material information relating to the Company required to be disclosed in the reports the Company files or submits under the Exchange Act.

Changes in Internal Controls

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, 2019, to which this report relates that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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Part II. -
OTHER INFORMATION

Item 1. - Legal Proceedings

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.

Item 1A. - Risk Factors

There have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2018.

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds

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 (file number 333-214057) registering our common stock. On March 13, 2017, the Company completed the initial public offering 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.

Direct Auto was acquired on August 31, 2018 with $17,000 of the net proceeds from the initial public offering. There has been no material change in the planned use of proceeds from our initial public offering 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 purchased 191,265 shares of our common stock for $2,996 during the three months ended December 31, 2018, and 116,034 shares of our common stock for $2,006 during the nine months ended September 30, 2019.

Period in 2019	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)
First quarter		100	$	15.96		100	$	7,002
Second quarter		115,934		17.29		115,934		4,998
Third quarter		—		—		—		4,998
Nine months ended September 30		116,034	$	17.29		116,034	$	4,998

⁽¹⁾ Shares purchased pursuant to the March 5, 2018 publicly announced share repurchase authorization of up to approximately $10,000 of the Company’s outstanding common stock.  

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Item 3. - Defaults upon Senior Securities

Not Applicable

Item 4. - Mine Safety Disclosures

Not Applicable

Item 5. - Other Information

None

Item 6. - Exhibits

Exhibit Number	Description
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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Signatures

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 6, 2019.

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)

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Michael J. Alexander, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NI Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 6, 2019	/s/ Michael J. Alexander
	Michael J. Alexander
	President and Chief Executive Officer
	(Principal Executive Officer)

 69

EX-31.2

Exhibit 31.2

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Brian R. Doom, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NI Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 6, 2019	/s/ Brian R. Doom
	Brian R. Doom
	Chief Financial Officer
	(Principal Financial Officer)

 70

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of NI Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Michael J. Alexander, President and Chief Executive Officer, and Brian R. Doom, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to our knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 6, 2019	/s/ Michael J. Alexander
	Michael J. Alexander
	President and Chief Executive Officer
	(Principal Executive Officer)
November 6, 2019	/s/ Brian R. Doom
	Brian R. Doom
	Chief Financial Officer
	(Principal Financial Officer)

 71

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Common Stock

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Common Stock

18. Common Stock

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

	Nine Months Ended September 30,
	2019			2018
Shares outstanding, beginning of period		22,192,894			22,337,644
Treasury shares repurchased through stock repurchase authorization		(116,034	)		—
Issuance of treasury shares for vesting of restricted stock units		18,205			22,200
Shares outstanding, end of period		22,095,065			22,359,844

On February 28, 2018, our Board of Directors approved an authorization for the repurchase of up to approximately $10 million 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 the nine months ended September 30, 2019. The cost of this treasury stock is a reduction of Equity within our Consolidated Balance Sheet. 

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Line of Credit

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Line of Credit

14.          Line of Credit

Nodak Insurance has a $5,000 line of credit with Wells Fargo Bank, N.A., of which there were no outstanding amounts as of September 30, 2019 or December 31, 2018. This line of credit is scheduled to expire on December 31, 2019.

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Unrecognized tax benefits
Interest and penalties
Battle Creek [Member]
Net operating loss carryover		$ 4,786
Expiration date	Dec. 31, 2030

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Related Party Transactions (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Related Party Transaction [Line Items]
Payment of dividends					$ 17,588
NDFB [Member]
Related Party Transaction [Line Items]
Royalties	$ 384	$ 383	$ 1,104	$ 1,065
Accrued royalties	17		17		108
Direct Auto Insurance Company [Member]
Related Party Transaction [Line Items]
Payment of dividends					$ 6,653
Battle Creek [Member]
Related Party Transaction [Line Items]
Related party revenues	$ 26	$ 36	$ 103	$ 112

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Reinsurance (Schedule of reconciliation of direct to net losses and loss adjustment expenses) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Reinsurance Disclosures [Abstract]
Direct losses and loss adjustment expenses	$ 62,248	$ 39,219	$ 138,481	$ 98,977
Assumed losses and loss adjustment expenses	2,017	827	3,000	1,903
Ceded losses and loss adjustment expenses	(2,707)	(2,590)	(5,496)	(3,854)
Net losses and loss adjustment expenses	$ 61,558	$ 37,456	$ 135,985	$ 97,026

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of reconciliation of the numerators and denominators we used in the basic and diluted per share

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,
	2019			2018		2019		2018
Basic earnings (loss) per common share:
Numerator:
Net income (loss) attributable to NI Holdings, Inc.	$	(6,979	)	$	9,844	$	9,272	$	16,192
Denominator:
Weighted average shares outstanding		22,136,885			22,381,344		22,194,102		22,373,579
Basic earnings (loss) per common share	$	(0.32	)	$	0.44	$	0.42	$	0.72
Diluted earnings (loss) per common share:
Numerator:
Net income (loss) attributable to NI Holdings, Inc.	$	(6,979	)	$	9,844	$	9,272	$	16,192
Denominator:
Number of shares used in basic computation		22,136,885			22,381,344		22,194,102		22,373,579
Weighted average effect of dilutive securities
Add: RSUs and PSUs		95,189			32,732		75,398		21,598
Number of shares used in diluted computation		22,232,074			22,414,076		22,269,500		22,395,177
Diluted earnings (loss) per common share	$	(0.31	)	$	0.44	$	0.42	$	0.72

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Acquisition of Direct Auto Insurance Company (Narrative) (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Business Acquisition [Line Items]
Revenue contribution		$ 70,248	$ 64,100	$ 199,468	$ 155,347
Net income		(6,959)	9,877	9,352	16,285
Direct Auto Insurance Company [Member]
Business Acquisition [Line Items]
Ownership percentage in acquisition	100.00%
Gain on bargain purchase	$ 4,578			4,578
Revenue contribution		12,082		36,924
Net income		$ 2,067		$ 6,166
Acquisition related costs incurred			$ 118		$ 118

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Subsequent Events (Details) - Westminster American Insurance Company [Member] - Subsequent Event [Member]	1 Months Ended
	Oct. 28, 2019 USD ($)
Subsequent Event [Line Items]
Ownership percentage in acquisition	100.00%
Amount of acquisition	$ 20,000,000
Retention bonus	5,000,000
Annually over the three-year period [Member]
Subsequent Event [Line Items]
Amount of acquisition	$ 6,700,000

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Common Stock (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Feb. 28, 2018
Equity [Abstract]
Authorization for repurchase of shares value				$ 10,000
Shares repurchased	116,034		191,265
Shares repurchased, value	$ 2,006		$ 2,966

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Stock Based Compensation (Schedule of RSU activity) (Details) - Restricted Stock [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSU compensation expense	$ 165	$ 185	$ 627	$ 827
Income tax benefit	(35)	(39)	(132)	(174)
RSU compensation expense, net of income taxes	$ 130	$ 146	$ 495	$ 653

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Earnings per Share (Schedule of Calculations of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic earnings (loss) per common share:
Net income (loss) attributable to NI Holdings, Inc.	$ (6,979)	$ 9,844	$ 9,272	$ 16,192
Weighted average shares outstanding	22,136,885	22,381,344	22,194,102	22,373,579
Basic earnings (loss) per common share	$ (0.32)	$ 0.44	$ 0.42	$ 0.72
Numerator:
Net income (loss) attributable to NI Holdings, Inc.	$ (6,979)	$ 9,844	$ 9,272	$ 16,192
Denominator:
Number of shares used in basic computation	22,136,885	22,381,344	22,194,102	22,373,579
Weighted average effect of dilutive securities
Add: Restricted stock units and performance share units	95,189	32,732	75,398	21,598
Number of shares used in per share computations	22,232,074	22,414,076	22,269,500	22,395,177
Diluted earnings (loss) per common share	$ (0.31)	$ 0.44	$ 0.42	$ 0.72

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Investments (Schedule of components of Net realized capital gains on investments) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Gross realized gains	$ 1,444	$ 3,983	$ 2,522	$ 5,178
Gross realized losses, excluding other-than-temporary impairment losses	(438)	(441)	(1,184)	(917)
Other-than-temporary impairment losses		(382)		(382)
Net capital gain on investments	622	3,160	9,591	3,879
Change in net unrealized gain on equity securities	(384)		8,253
Net realized gain on investments	622	3,160	9,591	3,879
Fixed income securities [Member]
Gross realized gains	58	7	114	69
Gross realized losses, excluding other-than-temporary impairment losses	(46)	(116)	(132)	(394)
Equity Securities [Member]
Gross realized gains	1,386	3,976	2,408	5,109
Gross realized losses, excluding other-than-temporary impairment losses	$ (392)	$ (325)	$ (1,052)	$ (523)

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Investments (Schedule of amortized cost and estimated fair value of investment securities) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Cost or Amortized Cost	$ 335,160	$ 295,433
Gross Unrealized Gains	28,301	15,257
Gross Unrealized Losses	(1,947)	(7,223)
Fair Value	361,514	303,467
Fixed income securities [Member]
Cost or Amortized Cost	291,353	257,294
Gross Unrealized Gains	8,054	1,077
Gross Unrealized Losses	(312)	(3,402)
Fair Value	299,095	254,969
Fixed income securities [Member] | U.S. Government and agencies [Member]
Cost or Amortized Cost	16,724	19,183
Gross Unrealized Gains	594	158
Gross Unrealized Losses		(133)
Fair Value	17,318	19,208
Fixed income securities [Member] | Obligations of states and political subdivisions [Member]
Cost or Amortized Cost	61,536	52,782
Gross Unrealized Gains	1,733	475
Gross Unrealized Losses	(55)	(559)
Fair Value	63,214	52,698
Fixed income securities [Member] | Corporate securities [Member]
Cost or Amortized Cost	110,949	95,290
Gross Unrealized Gains	3,668	265
Gross Unrealized Losses	(10)	(1,413)
Fair Value	114,607	94,142
Fixed income securities [Member] | Residential mortgage-backed securities [Member]
Cost or Amortized Cost	52,806	50,902
Gross Unrealized Gains	1,023	110
Gross Unrealized Losses	(29)	(729)
Fair Value	53,800	50,283
Fixed income securities [Member] | Commercial mortgage-backed securities [Member]
Cost or Amortized Cost	24,753	19,520
Gross Unrealized Gains	872	65
Gross Unrealized Losses	(42)	(270)
Fair Value	25,583	19,315
Fixed income securities [Member] | Asset backed securities [Member]
Cost or Amortized Cost	24,585	19,617
Gross Unrealized Gains	164	4
Gross Unrealized Losses	(176)	(298)
Fair Value	24,573	19,323
Equity Securities [Member]
Cost or Amortized Cost	43,807	38,139
Gross Unrealized Gains	20,247	14,180
Gross Unrealized Losses	(1,635)	(3,821)
Fair Value	62,419	48,498
Equity Securities [Member] | Basic materials [Member]
Cost or Amortized Cost	1,603	1,527
Gross Unrealized Gains	204
Gross Unrealized Losses	(99)	(187)
Fair Value	1,708	1,340
Equity Securities [Member] | Communications [Member]
Cost or Amortized Cost	5,414	4,076
Gross Unrealized Gains	1,761	1,296
Gross Unrealized Losses	(250)	(424)
Fair Value	6,925	4,948
Equity Securities [Member] | Consumer, cyclical [Member]
Cost or Amortized Cost	5,625	5,128
Gross Unrealized Gains	3,552	2,650
Gross Unrealized Losses	(139)	(167)
Fair Value	9,038	7,611
Equity Securities [Member] | Consumer, non-cyclical [Member]
Cost or Amortized Cost	8,696	9,356
Gross Unrealized Gains	5,136	3,929
Gross Unrealized Losses	(399)	(916)
Fair Value	13,433	12,369
Equity Securities [Member] | Energy [Member]
Cost or Amortized Cost	3,907	1,622
Gross Unrealized Gains	142	8
Gross Unrealized Losses	(508)	(289)
Fair Value	3,541	1,341
Equity Securities [Member] | Financial [Member]
Cost or Amortized Cost	6,780	4,856
Gross Unrealized Gains	649	121
Gross Unrealized Losses	(32)	(549)
Fair Value	7,397	4,428
Equity Securities [Member] | Industrial [Member]
Cost or Amortized Cost	5,381	4,537
Gross Unrealized Gains	3,518	2,529
Gross Unrealized Losses	(59)	(368)
Fair Value	8,840	6,698
Equity Securities [Member] | Technology [Member]
Cost or Amortized Cost	6,401	7,037
Gross Unrealized Gains	5,285	3,647
Gross Unrealized Losses	(149)	(921)
Fair Value	$ 11,537	$ 9,763

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Unaudited Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	23,000,000	23,000,000
Common stock, shares outstanding	22,095,065	22,192,894
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Treasury stock, shares	713,565	615,736

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Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash Flows from Operating Activities:
Net income	$ 9,352	$ 16,285
Adjustments to reconcile net income to operating cash flows:
Gain on acquisition of Direct Auto Insurance Company		(4,578)
Net capital gain on investments	(9,591)	(3,879)
Deferred income tax expense (benefit)	569	(670)
Depreciation of property and equipment	374	372
Amortization of intangibles	1,695	1,094
Share-based compensation	1,274	990
Amortization of deferred policy acquisition costs	36,682	26,608
Deferral of policy acquisition costs	(39,620)	(29,542)
Net amortization of premiums and discounts on investments	827	896
Gain on sale of property and equipment	11
Changes in operating assets and liabilities:
Premiums and agents' balances receivable	(42,739)	(31,264)
Reinsurance premiums receivable / payable	4,277	316
Reinsurance recoverables on losses	(3,521)	(1,500)
Accrued investment income	(133)	263
Receivable from Federal Crop Insurance Corporation	(8,022)	(18,783)
Federal income tax recoverable / payable	(1,454)	(2,511)
Other assets	1,208	184
Unpaid losses and loss adjustment expenses	30,252	18,796
Unearned premiums	16,650	19,091
Accrued expenses and other liabilities	412	3,120
Net cash flows from operating activities	(1,497)	(4,712)
Cash flows from investing activities:
Proceeds from sales of fixed income securities	36,924	51,298
Proceeds from sales of equity securities	12,373	16,689
Purchases of fixed income securities	(71,828)	(57,423)
Purchases of equity securities	(16,708)	(8,722)
Purchases of property and equipment, net	(1,009)	(567)
Acquisition of Direct Auto Insurance Company (cash consideration paid net of cash and cash equivalents acquired)		27,485
Other	62	18
Net cash flows from investing activities	(40,186)	28,778
Cash flows from financing activities:
Purchases of treasury stock	(2,006)
Issuance of restricted stock awards	(19)
Net cash flows from financing activities	(2,025)
Net (decrease) increase in cash and cash equivalents	(43,708)	24,066
Cash and cash equivalents at beginning of period	68,950	27,594
Cash and cash equivalents at end of period	$ 25,242	$ 51,660

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Investments (Tables)

9 Months Ended

Sep. 30, 2019

Marketable Securities [Abstract]

Schedule of amortized cost and estimated fair value of securities

The amortized cost and estimated fair value of investment securities as of September 30, 2019 and December 31, 2018, were as follows:

	September 30, 2019
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	16,724	$	594	$	—		$	17,318
Obligations of states and political subdivisions		61,536		1,733		(55	)		63,214
Corporate securities		110,949		3,668		(10	)		114,607
Residential mortgage-backed securities		52,806		1,023		(29	)		53,800
Commercial mortgage-backed securities		24,753		872		(42	)		25,583
Asset-backed securities		24,585		164		(176	)		24,573
Total fixed income securities		291,353		8,054		(312	)		299,095
Equity securities:
Basic materials		1,603		204		(99	)		1,708
Communications		5,414		1,761		(250	)		6,925
Consumer, cyclical		5,625		3,552		(139	)		9,038
Consumer, non-cyclical		8,696		5,136		(399	)		13,433
Energy		3,907		142		(508	)		3,541
Financial		6,780		649		(32	)		7,397
Industrial		5,381		3,518		(59	)		8,840
Technology		6,401		5,285		(149	)		11,537
Total equity securities		43,807		20,247		(1,635	)		62,419
Total investments	$	335,160	$	28,301	$	(1,947	)	$	361,514

	December 31, 2018
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	19,183	$	158	$	(133	)	$	19,208
Obligations of states and political subdivisions		52,782		475		(559	)		52,698
Corporate securities		95,290		265		(1,413	)		94,142
Residential mortgage-backed securities		50,902		110		(729	)		50,283
Commercial mortgage-backed securities		19,520		65		(270	)		19,315
Asset-backed securities		19,617		4		(298	)		19,323
Total fixed income securities		257,294		1,077		(3,402	)		254,969
Equity securities:
Basic materials		1,527		—		(187	)		1,340
Communications		4,076		1,296		(424	)		4,948
Consumer, cyclical		5,128		2,650		(167	)		7,611
Consumer, non-cyclical		9,356		3,929		(916	)		12,369
Energy		1,622		8		(289	)		1,341
Financial		4,856		121		(549	)		4,428
Industrial		4,537		2,529		(368	)		6,698
Technology		7,037		3,647		(921	)		9,763
Total equity securities		38,139		14,180		(3,821	)		48,498
Total investments	$	295,433	$	15,257	$	(7,223	)	$	303,467

Schedule of amortized cost and fair value of fixed income securities by contractual maturity

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, 2019
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	20,173	$	20,298
After one year through five years		93,395		95,597
After five years through ten years		57,859		60,607
After ten years		17,782		18,637
Mortgage / asset-backed securities		102,144		103,956
Total fixed income securities	$	291,353	$	299,095

	December 31, 2018
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	12,490	$	12,463
After one year through five years		96,900		96,614
After five years through ten years		52,128		51,351
After ten years		5,737		5,620
Mortgage / asset-backed securities		90,039		88,921
Total fixed income securities	$	257,294	$	254,969

Schedule of unrealized loss of securities

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

	September 30, 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:
Obligations of states and political subdivisions	$	5,894	$	(55	)	$	—	$	—		$	5,894	$	(55	)
Corporate securities		1,841		(6	)		2,707		(4	)		4,548		(10	)
Residential mortgage-backed securities		1,524		(7	)		2,706		(22	)		4,230		(29	)
Commercial mortgage-backed securities		3,424		(31	)		368		(11	)		3,792		(42	)
Asset-backed securities		2,056		(8	)		9,583		(168	)		11,639		(176	)
Total fixed income securities		14,739		(107	)		15,364		(205	)		30,103		(312	)
Equity securities:
Basic materials		719		(99	)		—		—			719		(99	)
Communications		451		(55	)		1,356		(195	)		1,807		(250	)
Consumer, cyclical		1,491		(139	)		—		—			1,491		(139	)
Consumer, non-cyclical		1,867		(384	)		410		(15	)		2,277		(399	)
Energy		1,602		(508	)		—		—			1,602		(508	)
Financial		1,553		(32	)		—		—			1,553		(32	)
Industrial		1,112		(59	)		—		—			1,112		(59	)
Technology		460		(142	)		448		(7	)		908		(149	)
Total equity securities		9,255		(1,418	)		2,214		(217	)		11,469		(1,635	)
Total investments	$	23,994	$	(1,525	)	$	17,578	$	(422	)	$	41,572	$	(1,947	)

	December 31, 2018
	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	$	2,593	$	(3	)	$	7,523	$	(130	)	$	10,116	$	(133	)
Obligations of states and political subdivisions		8,467		(119	)		18,218		(440	)		26,685		(559	)
Corporate securities		24,793		(266	)		45,033		(1,147	)		69,826		(1,413	)
Residential mortgage-backed securities		10,325		(62	)		26,459		(667	)		36,784		(729	)
Commercial mortgage-backed securities		5,980		(55	)		7,117		(215	)		13,097		(270	)
Asset-backed securities		7,908		(183	)		10,276		(115	)		18,184		(298	)
Total fixed income securities		60,066		(688	)		114,626		(2,714	)		174,692		(3,402	)
Equity securities:
Basic materials		1,340		(187	)		—		—			1,340		(187	)
Communications		2,001		(378	)		167		(46	)		2,168		(424	)
Consumer, cyclical		1,237		(167	)		—		—			1,237		(167	)
Consumer, non-cyclical		4,781		(899	)		316		(17	)		5,097		(916	)
Energy		1,041		(289	)		—		—			1,041		(289	)
Financial		3,722		(549	)		—		—			3,722		(549	)
Industrial		2,281		(368	)		—		—			2,281		(368	)
Technology		3,212		(833	)		123		(88	)		3,335		(921	)
Total equity securities		19,615		(3,670	)		606		(151	)		20,221		(3,821	)
Total investments	$	79,681	$	(4,358	)	$	115,232	$	(2,865	)	$	194,913	$	(7,223	)

Schedule of net investment income

Net investment income consisted of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Fixed income securities	$	2,196	$	1,800	$	6,167	$	5,073
Equity securities		247		244		704		716
Real estate		91		91		273		273
Cash and cash equivalents		15		31		50		93
Total gross investment income		2,549		2,166		7,194		6,155
Investment expenses		566		537		1,690		1,634
Net investment income	$	1,983	$	1,629	$	5,504	$	4,521

Schedule of net realized gain (loss) on investments

Net capital gain on investments consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Gross realized gains:
Fixed income securities	$	58		$	7		$	114		$	69
Equity securities		1,386			3,976			2,408			5,109
Total gross realized gains		1,444			3,983			2,522			5,178
Gross realized losses, excluding other-than-temporary impairment losses:
Fixed income securities		(46	)		(116	)		(132	)		(394	)
Equity securities		(392	)		(325	)		(1,052	)		(523	)
Total gross realized losses, excluding other-than-temporary impairment losses		(438	)		(441	)		(1,184	)		(917	)
Other-than-temporary impairment losses		—			(382	)		—			(382	)
Net realized gain on investments		1,006			3,160			1,338			3,879
Change in net unrealized gain on equity securities		(384	)		—			8,253			—
Net capital gain on investments	$	622		$	3,160		$	9,591		$	3,879

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Unpaid Losses and Loss Adjustment Expenses (Tables)

9 Months Ended

Sep. 30, 2019

Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract]

Schedule of Activity in the liability for unpaid losses and loss adjustment expenses

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

	Nine Months Ended September 30,
	2019			2018
Balance at beginning of period:
Liability for unpaid losses and loss adjustment expenses	$	87,121		$	45,890
Reinsurance recoverables on losses		2,232			4,128
Net balance at beginning of period		84,889			41,762
Acquired unpaid losses and loss adjustment expenses related to:
Current year		—			17,795
Prior years		—			23,172
Total incurred		—			40,967
Incurred related to:
Current year		142,428			100,191
Prior years		(6,443	)		(3,165	)
Total incurred		135,985			97,026
Paid related to:
Current year		73,974			59,708
Prior years		35,280			20,022
Total paid		109,254			79,730
Balance at end of period:
Liability for unpaid losses and loss adjustment expenses		117,373			105,653
Reinsurance recoverables on losses		5,753			5,628
Net balance at end of period	$	111,620		$	100,025

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Unpaid Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2019

Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract]

Unpaid Losses and Loss Adjustment Expenses

10.          Unpaid Losses and Loss Adjustment Expenses

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

	Nine Months Ended September 30,
	2019			2018
Balance at beginning of period:
Liability for unpaid losses and loss adjustment expenses	$	87,121		$	45,890
Reinsurance recoverables on losses		2,232			4,128
Net balance at beginning of period		84,889			41,762
Acquired unpaid losses and loss adjustment expenses related to:
Current year		—			17,795
Prior years		—			23,172
Total incurred		—			40,967
Incurred related to:
Current year		142,428			100,191
Prior years		(6,443	)		(3,165	)
Total incurred		135,985			97,026
Paid related to:
Current year		73,974			59,708
Prior years		35,280			20,022
Total paid		109,254			79,730
Balance at end of period:
Liability for unpaid losses and loss adjustment expenses		117,373			105,653
Reinsurance recoverables on losses		5,753			5,628
Net balance at end of period	$	111,620		$	100,025

The prior years’ provision for unpaid losses and loss adjustment expenses decreased by $6,443 during the nine months ended September 30, 2019, compared to a decrease of $3,165 during the nine months ended September 30, 2018. 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. The decrease for the nine months ended September 30, 2019 was primarily attributable to favorable development of the Direct Auto book of business.

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Investments

9 Months Ended

Sep. 30, 2019

Marketable Securities [Abstract]

Investments

6.             Investments

The amortized cost and estimated fair value of investment securities as of September 30, 2019 and December 31, 2018, were as follows:

	September 30, 2019
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	16,724	$	594	$	—		$	17,318
Obligations of states and political subdivisions		61,536		1,733		(55	)		63,214
Corporate securities		110,949		3,668		(10	)		114,607
Residential mortgage-backed securities		52,806		1,023		(29	)		53,800
Commercial mortgage-backed securities		24,753		872		(42	)		25,583
Asset-backed securities		24,585		164		(176	)		24,573
Total fixed income securities		291,353		8,054		(312	)		299,095
Equity securities:
Basic materials		1,603		204		(99	)		1,708
Communications		5,414		1,761		(250	)		6,925
Consumer, cyclical		5,625		3,552		(139	)		9,038
Consumer, non-cyclical		8,696		5,136		(399	)		13,433
Energy		3,907		142		(508	)		3,541
Financial		6,780		649		(32	)		7,397
Industrial		5,381		3,518		(59	)		8,840
Technology		6,401		5,285		(149	)		11,537
Total equity securities		43,807		20,247		(1,635	)		62,419
Total investments	$	335,160	$	28,301	$	(1,947	)	$	361,514

	December 31, 2018
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. Government and agencies	$	19,183	$	158	$	(133	)	$	19,208
Obligations of states and political subdivisions		52,782		475		(559	)		52,698
Corporate securities		95,290		265		(1,413	)		94,142
Residential mortgage-backed securities		50,902		110		(729	)		50,283
Commercial mortgage-backed securities		19,520		65		(270	)		19,315
Asset-backed securities		19,617		4		(298	)		19,323
Total fixed income securities		257,294		1,077		(3,402	)		254,969
Equity securities:
Basic materials		1,527		—		(187	)		1,340
Communications		4,076		1,296		(424	)		4,948
Consumer, cyclical		5,128		2,650		(167	)		7,611
Consumer, non-cyclical		9,356		3,929		(916	)		12,369
Energy		1,622		8		(289	)		1,341
Financial		4,856		121		(549	)		4,428
Industrial		4,537		2,529		(368	)		6,698
Technology		7,037		3,647		(921	)		9,763
Total equity securities		38,139		14,180		(3,821	)		48,498
Total investments	$	295,433	$	15,257	$	(7,223	)	$	303,467

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, 2019
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	20,173	$	20,298
After one year through five years		93,395		95,597
After five years through ten years		57,859		60,607
After ten years		17,782		18,637
Mortgage / asset-backed securities		102,144		103,956
Total fixed income securities	$	291,353	$	299,095

	December 31, 2018
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	12,490	$	12,463
After one year through five years		96,900		96,614
After five years through ten years		52,128		51,351
After ten years		5,737		5,620
Mortgage / asset-backed securities		90,039		88,921
Total fixed income securities	$	257,294	$	254,969

Fixed income securities with a fair value of $6,342 at September 30, 2019 and $4,900 at December 31, 2018, 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, 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:
Obligations of states and political subdivisions	$	5,894	$	(55	)	$	—	$	—		$	5,894	$	(55	)
Corporate securities		1,841		(6	)		2,707		(4	)		4,548		(10	)
Residential mortgage-backed securities		1,524		(7	)		2,706		(22	)		4,230		(29	)
Commercial mortgage-backed securities		3,424		(31	)		368		(11	)		3,792		(42	)
Asset-backed securities		2,056		(8	)		9,583		(168	)		11,639		(176	)
Total fixed income securities		14,739		(107	)		15,364		(205	)		30,103		(312	)
Equity securities:
Basic materials		719		(99	)		—		—			719		(99	)
Communications		451		(55	)		1,356		(195	)		1,807		(250	)
Consumer, cyclical		1,491		(139	)		—		—			1,491		(139	)
Consumer, non-cyclical		1,867		(384	)		410		(15	)		2,277		(399	)
Energy		1,602		(508	)		—		—			1,602		(508	)
Financial		1,553		(32	)		—		—			1,553		(32	)
Industrial		1,112		(59	)		—		—			1,112		(59	)
Technology		460		(142	)		448		(7	)		908		(149	)
Total equity securities		9,255		(1,418	)		2,214		(217	)		11,469		(1,635	)
Total investments	$	23,994	$	(1,525	)	$	17,578	$	(422	)	$	41,572	$	(1,947	)

	December 31, 2018
	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	$	2,593	$	(3	)	$	7,523	$	(130	)	$	10,116	$	(133	)
Obligations of states and political subdivisions		8,467		(119	)		18,218		(440	)		26,685		(559	)
Corporate securities		24,793		(266	)		45,033		(1,147	)		69,826		(1,413	)
Residential mortgage-backed securities		10,325		(62	)		26,459		(667	)		36,784		(729	)
Commercial mortgage-backed securities		5,980		(55	)		7,117		(215	)		13,097		(270	)
Asset-backed securities		7,908		(183	)		10,276		(115	)		18,184		(298	)
Total fixed income securities		60,066		(688	)		114,626		(2,714	)		174,692		(3,402	)
Equity securities:
Basic materials		1,340		(187	)		—		—			1,340		(187	)
Communications		2,001		(378	)		167		(46	)		2,168		(424	)
Consumer, cyclical		1,237		(167	)		—		—			1,237		(167	)
Consumer, non-cyclical		4,781		(899	)		316		(17	)		5,097		(916	)
Energy		1,041		(289	)		—		—			1,041		(289	)
Financial		3,722		(549	)		—		—			3,722		(549	)
Industrial		2,281		(368	)		—		—			2,281		(368	)
Technology		3,212		(833	)		123		(88	)		3,335		(921	)
Total equity securities		19,615		(3,670	)		606		(151	)		20,221		(3,821	)
Total investments	$	79,681	$	(4,358	)	$	115,232	$	(2,865	)	$	194,913	$	(7,223	)

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 recorded no impairments during the three or nine month periods ended September 30, 2019, and impairments of $382 during the three and nine month periods ended September 30, 2018.

As of September 30, 2019, we held 75 fixed income securities with unrealized losses. As of December 31, 2018, we held 317 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.

Net investment income consisted of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Fixed income securities	$	2,196	$	1,800	$	6,167	$	5,073
Equity securities		247		244		704		716
Real estate		91		91		273		273
Cash and cash equivalents		15		31		50		93
Total gross investment income		2,549		2,166		7,194		6,155
Investment expenses		566		537		1,690		1,634
Net investment income	$	1,983	$	1,629	$	5,504	$	4,521

Net capital gain on investments consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Gross realized gains:
Fixed income securities	$	58		$	7		$	114		$	69
Equity securities		1,386			3,976			2,408			5,109
Total gross realized gains		1,444			3,983			2,522			5,178
Gross realized losses, excluding other-than-temporary impairment losses:
Fixed income securities		(46	)		(116	)		(132	)		(394	)
Equity securities		(392	)		(325	)		(1,052	)		(523	)
Total gross realized losses, excluding other-than-temporary impairment losses		(438	)		(441	)		(1,184	)		(917	)
Other-than-temporary impairment losses		—			(382	)		—			(382	)
Net realized gain on investments		1,006			3,160			1,338			3,879
Change in net unrealized gain on equity securities		(384	)		—			8,253			—
Net capital gain on investments	$	622		$	3,160		$	9,591		$	3,879

Effective January 1, 2019, the market fluctuations attributed to equity securities are included in the Company’s results of operations. Prior to the adoption of this accounting pronouncement, net unrealized gains and losses on equity securities were recorded in accumulated other comprehensive income. The after-tax amount of unrealized gains on equity securities, aggregating $8,184 as of December 31, 2018, was reclassified from accumulated other comprehensive income to retained earnings as of January 1, 2019.

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Basis of Presentation

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

2.       Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information 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 ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019.

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

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Earnings Per Share (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Weighted average shares outstanding	22,136,885	22,381,344	22,194,102	22,373,579
Net common shares outstanding	22,095,065		22,095,065		22,192,894
Common Stock [Member]
Net common shares outstanding

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Segment Information (Schedule of revenue by insurance product line) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Direct premiums earned	$ 70,481	$ 63,737	$ 192,233	$ 154,916
Assumed premiums earned	1,234	1,084	5,233	5,572
Ceded premiums earned	(4,599)	(10,685)	(14,730)	(19,563)
Net premiums earned	67,116	54,136	182,736	140,925
Direct losses and LAE	62,248	39,219	138,481	98,977
Assumed losses and LAE	2,017	827	3,000	1,903
Ceded losses and LAE	(2,707)	(2,590)	(5,496)	(3,854)
Net losses and LAE	61,558	37,456	135,985	97,026
Gross margin	5,558	16,680	46,751	43,899
Underwriting and general expenses	17,291	14,738	50,925	38,417
Underwriting gain (loss)	(11,733)	1,942	(4,174)	5,482
Fee and other income	527	5,175	1,637	6,022
Net investment income	1,983	1,629	5,504	4,521
Net capital gain on investments	622	3,160	9,591	3,879
Loss before income taxes	(8,601)	11,906	12,558	19,904
Income taxes	(1,642)	2,029	3,206	3,619
Net loss	(6,959)	9,877	9,352	16,285
Net income attributable to non-controlling interest	20	33	80	93
Net loss attributable to NI Holdings, Inc.	$ (6,979)	$ 9,844	$ 9,272	$ 16,192
Non-GAAP Ratios:
Loss and LAE ratio	91.70%	69.20%	74.40%	68.80%
Expense ratio	25.80%	27.20%	27.90%	27.30%
Combined ratio	117.50%	96.40%	102.30%	96.10%
Premiums and agents' balances receivable	$ 77,026	$ 62,745	$ 77,026	$ 62,745		$ 34,287
Deferred policy acquisition costs	15,804	11,793	15,804	11,793	$ 16,721	12,866	$ 12,190	$ 8,859
Reinsurance recoverables	5,753	5,628	5,753	5,628		2,232
Receivable from Federal Crop Insurance Corporation	24,191	29,284	24,191	29,284		16,169
Goodwill and other intangibles	2,928	7,036	2,928	7,036		4,623
Unpaid losses and LAE	117,373	105,653	117,373	105,653		87,121
Unearned premiums	101,417	98,308	101,417	98,308		$ 84,767
Private Passenger Auto [Member]
Direct premiums earned	18,256	16,718	52,792	48,436
Assumed premiums earned	(7)	3		11
Ceded premiums earned	(933)	(829)	(2,698)	(2,420)
Net premiums earned	17,316	15,892	50,094	46,027
Direct losses and LAE	19,120	11,940	41,300	33,303
Assumed losses and LAE	94	140	173	188
Ceded losses and LAE	(498)	(176)	(730)	(290)
Net losses and LAE	18,716	11,904	40,743	33,201
Gross margin	(1,400)	3,988	9,351	12,826
Underwriting and general expenses	4,438	4,235	14,097	13,357
Underwriting gain (loss)	$ (5,838)	$ (247)	$ (4,746)	$ (531)
Non-GAAP Ratios:
Loss and LAE ratio	108.10%	74.90%	81.30%	72.10%
Expense ratio	25.60%	26.60%	28.10%	29.00%
Combined ratio	133.70%	101.60%	109.50%	101.20%
Premiums and agents' balances receivable	$ 18,776	$ 17,003	$ 18,776	$ 17,003
Deferred policy acquisition costs	4,143	3,663	4,143	3,663
Reinsurance recoverables	377	42	377	42
Receivable from Federal Crop Insurance Corporation
Goodwill and other intangibles
Unpaid losses and LAE	21,447	19,094	21,447	19,094
Unearned premiums	28,312	26,363	28,312	26,363
Non Standard Auto [Member]
Direct premiums earned	14,167	7,052	44,029	13,519
Assumed premiums earned
Ceded premiums earned	(123)		(123)
Net premiums earned	14,044	7,052	43,906	13,519
Direct losses and LAE	8,440	4,387	27,416	9,324
Assumed losses and LAE
Ceded losses and LAE
Net losses and LAE	8,440	4,387	27,416	9,324
Gross margin	5,604	2,665	16,490	4,195
Underwriting and general expenses	5,207	2,348	15,845	4,273
Underwriting gain (loss)	397	317	645	(78)
Fee and other income	363	343	1,339	994
Other income net	$ 760	$ 660	$ 1,984	$ 916
Non-GAAP Ratios:
Loss and LAE ratio	60.10%	62.20%	62.40%	69.00%
Expense ratio	37.10%	33.30%	36.10%	31.60%
Combined ratio	97.20%	95.50%	98.50%	100.60%
Premiums and agents' balances receivable	$ 8,186	$ 7,498	$ 8,186	$ 7,498
Deferred policy acquisition costs	4,794	1,356	4,794	1,356
Reinsurance recoverables
Receivable from Federal Crop Insurance Corporation
Goodwill and other intangibles	2,928	7,036	2,928	7,036
Unpaid losses and LAE	47,672	48,020	47,672	48,020
Unearned premiums	16,723	17,871	16,723	17,871
Home and Farm [Member]
Direct premiums earned	19,844	17,977	57,592	51,840
Assumed premiums earned	8	(4)		(13)
Ceded premiums earned	(1,944)	(1,736)	(5,642)	(4,851)
Net premiums earned	17,908	16,237	51,950	46,976
Direct losses and LAE	18,639	16,414	41,396	38,372
Assumed losses and LAE		(122)		(171)
Ceded losses and LAE	(41)	78	(1,329)	18
Net losses and LAE	18,598	16,370	40,067	38,219
Gross margin	(690)	(133)	11,883	8,757
Underwriting and general expenses	4,892	4,678	15,327	14,770
Underwriting gain (loss)	$ (5,582)	$ (4,811)	$ (3,444)	$ (6,013)
Non-GAAP Ratios:
Loss and LAE ratio	103.90%	100.80%	77.10%	81.40%
Expense ratio	27.30%	28.80%	29.50%	31.40%
Combined ratio	131.20%	129.60%	106.60%	112.80%
Premiums and agents' balances receivable	$ 9,238	$ 9,094	$ 9,238	$ 9,094
Deferred policy acquisition costs	5,945	5,195	5,945	5,195
Reinsurance recoverables	1,330	979	1,330	979
Receivable from Federal Crop Insurance Corporation
Goodwill and other intangibles
Unpaid losses and LAE	14,574	15,536	14,574	15,536
Unearned premiums	40,114	36,764	40,114	36,764
Crop [Member]
Direct premiums earned	15,943	19,880	31,159	34,963
Assumed premiums earned	(10)	27	2,087	2,311
Ceded premiums earned	(1,416)	(7,947)	(5,718)	(11,772)
Net premiums earned	14,517	11,960	27,528	25,502
Direct losses and LAE	13,977	4,976	23,046	15,040
Assumed losses and LAE	1,316	530	1,394	693
Ceded losses and LAE	(2,151)	(1,991)	(2,558)	(2,896)
Net losses and LAE	13,142	3,515	21,882	12,837
Gross margin	1,375	8,445	5,646	12,665
Underwriting and general expenses	1,983	2,695	3,091	3,346
Underwriting gain (loss)	$ (608)	$ 5,750	$ 2,555	$ 9,319
Non-GAAP Ratios:
Loss and LAE ratio	90.50%	29.40%	79.50%	50.30%
Expense ratio	13.70%	22.50%	11.20%	13.10%
Combined ratio	104.20%	51.90%	90.70%	63.50%
Premiums and agents' balances receivable	$ 39,275	$ 27,710	$ 39,275	$ 27,710
Deferred policy acquisition costs	281	1,001	281	1,001
Reinsurance recoverables	2,855	2,425	2,855	2,425
Receivable from Federal Crop Insurance Corporation	24,191	29,284	24,191	29,284
Goodwill and other intangibles
Unpaid losses and LAE	23,738	13,714	23,738	13,714
Unearned premiums	11,233	12,509	11,233	12,509
All Other [Member]
Direct premiums earned	2,271	2,110	6,661	6,158
Assumed premiums earned	1,243	1,058	3,146	3,263
Ceded premiums earned	(183)	(173)	(549)	(520)
Net premiums earned	3,331	2,995	9,258	8,901
Direct losses and LAE	2,072	1,502	5,323	2,938
Assumed losses and LAE	607	279	1,433	1,193
Ceded losses and LAE	(17)	(501)	(879)	(686)
Net losses and LAE	2,662	1,280	5,877	3,445
Gross margin	669	1,715	3,381	5,456
Underwriting and general expenses	771	782	2,565	2,671
Underwriting gain (loss)	$ (102)	$ 933	$ 816	$ 2,785
Non-GAAP Ratios:
Loss and LAE ratio	79.90%	42.70%	63.50%	38.70%
Expense ratio	23.10%	26.10%	27.70%	30.00%
Combined ratio	103.10%	68.80%	91.20%	68.70%
Premiums and agents' balances receivable	$ 1,551	$ 1,440	$ 1,551	$ 1,440
Deferred policy acquisition costs	641	578	641	578
Reinsurance recoverables	1,191	2,182	1,191	2,182
Receivable from Federal Crop Insurance Corporation
Goodwill and other intangibles
Unpaid losses and LAE	9,942	9,289	9,942	9,289
Unearned premiums	$ 5,035	$ 4,801	$ 5,035	$ 4,801

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Operating Leases (Schedule of Minimum Future Commitments Under Non-Cancellable Leases) (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases, Operating [Abstract]
Remaining 2019	$ 76
2020	121
2021	60
2022	60
2023	$ 30

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Stock Based Compensation (Schedule of Restricted Stock Outstanding) (Details) - Restricted Stock [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Shares
Units outstanding at Begning	73,880	65,500
RSUs granted during 2018	57,100	40,000
RSUs earned during 2018	(34,440)	(31,620)
Units outstanding at Ending	96,540	73,880
Weighted Average Grant-Date Fair Value Per Share
Units outstanding at Begning	$ 16.87	$ 17.31
RSUs granted during 2019	15.81	16.25
RSUs earned during 2019	16.24	16.99
Units outstanding at Ending	$ 16.47	$ 16.87

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Unaudited Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Assets:
Cash and cash equivalents	$ 25,242	$ 68,950
Fixed income securities, at fair value	299,095	254,969
Equity securities, at fair value	62,419	48,498
Other investments	1,914	1,954
Total cash and investments	388,670	374,371
Premiums and agents' balances receivable	77,026	34,287
Deferred policy acquisition costs	15,804	12,866
Reinsurance recoverables on losses	5,753	2,232
Accrued investment income	2,031	1,898
Federal income tax recoverable	1,257
Property and equipment	7,602	6,979
Receivable from Federal Crop Insurance Corporation	24,191	16,169
Goodwill and other intangibles	2,928	4,623
Other assets	3,859	5,067
Total assets	529,121	458,492
Liabilities:
Unpaid losses and loss adjustment expenses	117,373	87,121
Unearned premiums	101,417	84,767
Reinsurance premiums payable	4,277
Federal income tax payable		197
Deferred income taxes, net	3,394	711
Accrued expenses and other liabilities	10,353	9,943
Commitments and Contingencies
Total liabilities	236,814	182,739
Equity:
Common stock, $0.01 par value, authorized: 25,000,000 shares; issued: 23,000,000 shares; and outstanding: 2019 - 22,095,065 shares, 2018 - 22,192,894 shares	230	230
Preferred stock, without par value, authorized 5,000,000 shares, no shares issued or outstanding
Additional paid-in capital	95,460	94,486
Unearned employee stock ownership plan shares	(1,914)	(1,914)
Retained earnings	201,351	183,946
Accumulated other comprehensive income, net of income taxes	6,011	6,376
Treasury stock, at cost, 2019 - 713,565 shares, 2018 - 615,736 shares	(12,308)	(10,634)
Non-controlling interest	3,477	3,263
Total equity	292,307	275,753
Total liabilities and equity	$ 529,121	$ 458,492

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Unaudited Consolidated Statements of Changes in Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Unearned Employee Stock Ownership Plan Shares [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income, Net of Income Taxes [Member]	Treasury Stock	Non-controlling Interest [Member]	Total
Balance at Dec. 31, 2017	$ 230	$ 93,496	$ (2,157)	$ 152,865	$ 15,998	$ (8,037)	$ 3,178	$ 255,573
Net income (loss)				16,192			93	16,285
Other comprehensive income (loss), net of income taxes					(3,361)		(95)	(3,456)
Share-based compensation		990						990
Issuance of vested award shares		(399)				399
Balance at Sep. 30, 2018	230	94,087	(2,157)	169,057	12,637	(7,638)	3,176	269,392
Balance at Dec. 31, 2017	230	93,496	(2,157)	152,865	15,998	(8,037)	3,178	255,573
Purchase of treasury stock								(2,966)
Balance at Dec. 31, 2018	230	94,486	(1,914)	183,946	6,376	(10,634)	3,263	275,753
Balance at Jun. 30, 2018	230	93,832	(2,157)	159,213	12,932	(7,638)	3,154	259,566
Net income (loss)				9,844			33	9,877
Other comprehensive income (loss), net of income taxes					(295)		(11)	(306)
Share-based compensation		255						255
Balance at Sep. 30, 2018	230	94,087	(2,157)	169,057	12,637	(7,638)	3,176	269,392
Balance at Dec. 31, 2018	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 (loss)				9,272			80	9,352
Other comprehensive income (loss), net of income taxes					7,819		134	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 at Sep. 30, 2019	230	95,460	(1,914)	201,351	6,011	(12,308)	3,477	292,307
Balance at Jun. 30, 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 (loss), net of income taxes					1,584		29	1,613
Share-based compensation		339						339
Balance at Sep. 30, 2019	$ 230	$ 95,460	$ (1,914)	$ 201,351	$ 6,011	$ (12,308)	$ 3,477	$ 292,307

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Fair Value Measurements (Schedule of assets, which are measured on a recurring basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Total fixed income securities	$ 299,095	$ 254,969
Total equity securities	62,419	48,498
Cash and cash equivalents	25,242	68,950	$ 51,660	$ 27,594
Total assets at fair value	386,756	372,417
U.S. Government and agencies [Member]
Total fixed income securities	17,318	19,208
Obligations of states and political subdivisions [Member]
Total fixed income securities	63,214	52,698
Corporate securities [Member]
Total fixed income securities	114,607	94,142
Residential mortgage-backed securities [Member]
Total fixed income securities	53,800	50,283
Commercial mortgage-backed securities [Member]
Total fixed income securities	25,583	19,315
Asset backed securities [Member]
Total fixed income securities	24,573	19,323
Basic materials [Member]
Total equity securities	1,708	1,340
Communications [Member]
Total equity securities	6,925	4,948
Consumer, cyclical [Member]
Total equity securities	9,038	7,611
Consumer, non-cyclical [Member]
Total equity securities	13,433	12,369
Energy [Member]
Total equity securities	3,541	1,341
Financial [Member]
Total equity securities	7,397	4,428
Industrial [Member]
Total equity securities	8,840	6,698
Technology [Member]
Total equity securities	11,537	9,763
Level I [Member]
Total fixed income securities
Total equity securities	62,419	48,498
Cash and cash equivalents	25,242	68,950
Total assets at fair value	87,661	117,448
Level I [Member] | U.S. Government and agencies [Member]
Total fixed income securities
Level I [Member] | Obligations of states and political subdivisions [Member]
Total fixed income securities
Level I [Member] | Corporate securities [Member]
Total fixed income securities
Level I [Member] | Residential mortgage-backed securities [Member]
Total fixed income securities
Level I [Member] | Commercial mortgage-backed securities [Member]
Total fixed income securities
Level I [Member] | Asset backed securities [Member]
Total fixed income securities
Level I [Member] | Basic materials [Member]
Total equity securities	1,708	1,340
Level I [Member] | Communications [Member]
Total equity securities	6,925	4,948
Level I [Member] | Consumer, cyclical [Member]
Total equity securities	9,038	7,611
Level I [Member] | Consumer, non-cyclical [Member]
Total equity securities	13,433	12,369
Level I [Member] | Energy [Member]
Total equity securities	3,541	1,341
Level I [Member] | Financial [Member]
Total equity securities	7,397	4,428
Level I [Member] | Industrial [Member]
Total equity securities	8,840	6,698
Level I [Member] | Technology [Member]
Total equity securities	11,537	9,763
Level II [Member]
Total fixed income securities	299,095	254,969
Total equity securities
Cash and cash equivalents
Total assets at fair value	299,095	254,969
Level II [Member] | U.S. Government and agencies [Member]
Total fixed income securities	17,318	19,208
Level II [Member] | Obligations of states and political subdivisions [Member]
Total fixed income securities	63,214	52,698
Level II [Member] | Corporate securities [Member]
Total fixed income securities	114,607	94,142
Level II [Member] | Residential mortgage-backed securities [Member]
Total fixed income securities	53,800	50,283
Level II [Member] | Commercial mortgage-backed securities [Member]
Total fixed income securities	25,583	19,315
Level II [Member] | Asset backed securities [Member]
Total fixed income securities	24,573	19,323
Level II [Member] | Basic materials [Member]
Total equity securities
Level II [Member] | Communications [Member]
Total equity securities
Level II [Member] | Consumer, cyclical [Member]
Total equity securities
Level II [Member] | Consumer, non-cyclical [Member]
Total equity securities
Level II [Member] | Energy [Member]
Total equity securities
Level II [Member] | Financial [Member]
Total equity securities
Level II [Member] | Industrial [Member]
Total equity securities
Level II [Member] | Technology [Member]
Total equity securities
Level III [Member]
Total fixed income securities
Total equity securities
Cash and cash equivalents
Total assets at fair value
Level III [Member] | U.S. Government and agencies [Member]
Total fixed income securities
Level III [Member] | Obligations of states and political subdivisions [Member]
Total fixed income securities
Level III [Member] | Corporate securities [Member]
Total fixed income securities
Level III [Member] | Residential mortgage-backed securities [Member]
Total fixed income securities
Level III [Member] | Commercial mortgage-backed securities [Member]
Total fixed income securities
Level III [Member] | Asset backed securities [Member]
Total fixed income securities
Level III [Member] | Basic materials [Member]
Total equity securities
Level III [Member] | Communications [Member]
Total equity securities
Level III [Member] | Consumer, cyclical [Member]
Total equity securities
Level III [Member] | Consumer, non-cyclical [Member]
Total equity securities
Level III [Member] | Energy [Member]
Total equity securities
Level III [Member] | Financial [Member]
Total equity securities
Level III [Member] | Industrial [Member]
Total equity securities
Level III [Member] | Technology [Member]
Total equity securities

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Investments (Schedule of Fixed Maturities) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Marketable Securities [Abstract]
Amortized Cost, Due to mature One year or less	$ 20,173	$ 12,490
Amortized Cost, Due to mature After one year through five years	93,395	96,900
Amortized Cost, Due to mature After five years through ten years	57,859	52,128
Amortized Cost, Due to mature After ten years	17,782	5,737
Amortized Cost, Due to mature Mortgage/asset-backed securities	102,144	90,039
Available-for-sale Securities, Debt Maturities, Amortized Cost	291,353	257,294
Fair Value, Due to mature One year or less	20,298	12,463
Fair Value, Due to mature After one year through five years	95,597	96,614
Fair Value, Due to mature After five years through ten years	60,607	51,351
Fair Value, Due to mature After ten years	18,637	5,620
Fair Value, Due to mature Mortgage/asset-backed securities	103,956	88,921
Available-for-sale Securities, Debt Securities, Estimated Fair Value	$ 299,095	$ 254,969

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Acquisition of Direct Auto Insurance Company (Tables)

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Schedule of Proforma Information of Business Combination

The acquired Direct Auto business contributed revenues of $12,082 and net income of $2,067 to the Company for the three months ended September 30, 2019, and revenues of $36,924 and net income of $6,166 for the nine months ended September 30, 2019. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2017:

	Pro forma Three Months Ended September 30,					Pro forma Nine Months Ended September 30,
	2019			2018		2019		2018
Revenues	$	70,248		$	67,126	$	199,468	$	180,323
Net income (loss) attributable to NI Holdings, Inc.		(6,970	)		5,623		9,386		12,012
Basic earnings (loss) per share attributable to NI Holdings, Inc.		(0.31	)		0.25		0.42		0.54

Schedule of Identified Assets Acquired and Liabilities Assumed

The Company paid $17,000 in cash consideration to the private shareholders of Direct Auto. The acquisition of Direct Auto did not include any contingent consideration. The following table summarizes the consideration transferred to acquire Direct Auto and the amounts of identified assets acquired and liabilities assumed at the acquisition date:

Fair Value of Consideration:
Total cash consideration transferred	$	17,000
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Identifiable net assets:
Cash and cash equivalents	$	44,485
Fixed income securities, at fair value		11,414
Equity securities, at fair value		14,634
Premiums and agents' balances receivable		5,849
Accrued investment income		63
Property and equipment		31
Favorable lease contract (included in goodwill and other intangibles)		20
License (included in goodwill and other intangibles)		100
Trade name (included in goodwill and other intangibles)		248
Value of business acquired (included in goodwill and other intangibles)		5,134
Other assets		107
Unpaid losses and loss adjustment expenses		(40,967	)
Unearned premiums		(15,955	)
Federal income tax payable		(1,486	)
Deferred income taxes, net		(1,442	)
Accrued expenses and other liabilities		(657	)
Total identifiable net assets	$	21,578
Gain on bargain purchase	$	4,578

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Deferred Policy Acquisition Costs (Tables)

9 Months Ended

Sep. 30, 2019

Reinsurance Disclosures [Abstract]

Schedule of deferred policy acquisition costs

Activity with regards to our deferred policy acquisition costs was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	16,721		$	12,190		$	12,866		$	8,859
Deferral of policy acquisition costs		10,392			10,554			39,620			29,542
Amortization of deferred policy acquisition costs		(11,309	)		(10,951	)		(36,682	)		(26,608	)
Balance, end of period	$	15,804		$	11,793		$	15,804		$	11,793

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Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Investments, All Other Investments [Abstract]

Fair Value Measurements

7.            Fair Value Measurements

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, 2019 and December 31, 2018 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 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, 2019 or December 31, 2018.

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, 2019
	Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	17,318	$	—	$	17,318	$	—
Obligations of states and political subdivisions		63,214		—		63,214		—
Corporate securities		114,607		—		114,607		—
Residential mortgage-backed securities		53,800		—		53,800		—
Commercial mortgage-backed securities		25,583		—		25,583		—
Asset-backed securities		24,573		—		24,573		—
Total fixed income securities		299,095		—		299,095		—
Equity securities:
Basic materials		1,708		1,708		—		—
Communications		6,925		6,925		—		—
Consumer, cyclical		9,038		9,038		—		—
Consumer, non-cyclical		13,433		13,433		—		—
Energy		3,541		3,541		—		—
Financial		7,397		7,397		—		—
Industrial		8,840		8,840		—		—
Technology		11,537		11,537		—		—
Total equity securities		62,419		62,419		—		—
Cash and cash equivalents		25,242		25,242		—		—
Total assets at fair value	$	386,756	$	87,661	$	299,095	$	—

	December 31, 2018
	Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	19,208	$	—	$	19,208	$	—
Obligations of states and political subdivisions		52,698		—		52,698		—
Corporate securities		94,142		—		94,142		—
Residential mortgage-backed securities		50,283		—		50,283		—
Commercial mortgage-backed securities		19,315		—		19,315		—
Asset-backed securities		19,323		—		19,323		—
Total fixed income securities		254,969		—		254,969		—
Equity securities:
Basic materials		1,340		1,340		—		—
Communications		4,948		4,948		—		—
Consumer, cyclical		7,611		7,611		—		—
Consumer, non-cyclical		12,369		12,369		—		—
Energy		1,341		1,341		—		—
Financial		4,428		4,428		—		—
Industrial		6,698		6,698		—		—
Technology		9,763		9,763		—		—
Total equity securities		48,498		48,498		—		—
Cash and cash equivalents		68,950		68,950		—		—
Total assets at fair value	$	372,417	$	117,448	$	254,969	$	—

There were no liabilities measured at fair value on a recurring basis at September 30, 2019 or December 31, 2018.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

3.       Summary of Significant Accounting Policies

Use of Estimates:

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.

Variable-Interest Entities:

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 two-thirds of the Board of Directors of Battle Creek via a 100% quota-share reinsurance agreement between Nodak Insurance and Battle Creek and a surplus note issued by Battle Creek to Nodak Insurance. Through the effects of the 100% quota-share agreement with Battle Creek, we are considered the primary beneficiary of Battle Creek’s operating results excluding investment income, bad debt expense, and income taxes. Therefore, 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 Equity in our Consolidated Balance Sheet.

Cash and Cash Equivalents:

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.

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 in unrealized gains and losses on equity securities are reported as a component of net capital gain on investments in our operating results.

Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Amortization of premium and accretion of discount are computed using an effective interest method. Net investment income includes interest and dividend income together with amortization of purchase premiums and discounts, and is net of investment management and custody fees. Realized gains and losses on investments are determined using the specific identification method and are included in net capital gain on investments, along with the change in unrealized gains and losses on equity securities after January 1, 2019.

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.

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.

Fair Value of Other Financial Instruments:

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. The carrying value of these other invested assets was $1,914 at September 30, 2019 and $1,954 at December 31, 2018.

Reclassifications:

Certain amounts in the 2018 consolidated financial statements have been reclassified to conform to the 2019 presentation.

Revenue Recognition:

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 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.

Policy Acquisition Costs:

We defer our policy acquisition costs, consisting primarily of commissions, 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.

Property and Equipment:

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.

Losses and Loss Adjustment Expenses:

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 reserving function through analysis of costs and trends and reviews of historical reserving results. 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.

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.

Income Taxes:

With the exception of Battle Creek, which files a stand-alone federal income tax return, we currently file a consolidated federal income tax return. For the year ended December 31, 2016, the consolidated federal income tax return included Nodak Mutual Insurance Company and its wholly-owned subsidiaries. For the year ended December 31, 2017 and thereafter, the consolidated federal income tax return included and will include thereafter NI Holdings and its wholly-owned subsidiaries. Direct Auto became part of the consolidated federal income tax return as of its acquisition date.

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 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.

The Company reports tax-related interest and penalties, if any, as part of income tax expense in the year such amounts are determinable.

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 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 also requires 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 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.

Credit Risk:

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 investment staff and 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 operating areas. All business is billed directly to policyholders.

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

Reinsurance:

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 and Other Intangibles:

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 intangible assets with an indefinite useful life for impairment annually. We also assess goodwill and other intangible assets 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 intangible assets could result from changes in economic and operating conditions in future periods. We did not record any impairments of goodwill or other intangible assets during the three or nine month periods ended September 30, 2019 and 2018.

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 intangible assets 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.

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Property and Equipment

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

11.          Property and Equipment

Property and equipment consisted of the following:

	September 30, 2019			December 31, 2018			Estimated Useful Life
Cost:
Real estate	$	12,565		$	11,911		10 - 31 years
Electronic data processing equipment		1,349			1,286		5-7 years
Furniture and fixtures		2,856			2,829		5-7 years
Automobiles		1,694			1,596		2-3 years
Gross cost		18,464			17,622
Accumulated depreciation		(10,862	)		(10,643	)
Total property and equipment, net	$	7,602		$	6,979

Depreciation expense was $129 and $129 for the three months ended September 30, 2019 and 2018, respectively, and $374 and $372 for the nine months ended September 30, 2019 and 2018, respectively.

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Stock Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock Based Compensation

19. Stock Based Compensation

At its 2017 Annual Shareholders’ Meeting, the NI Holdings, Inc. 2017 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, 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, to compensate such persons through various stock and cash-based arrangements, and to provide them with opportunities for stock ownership 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 500,000 shares of common stock, subject to adjustments as provided in the Plan. No eligible participant may be granted more than 100,000 shares from any stock options, stock appreciation rights, or performance awards denominated in 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 $100 in any calendar year.

Restricted Stock Units

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 generally 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:

	RSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding and unearned at January 1, 2018		65,500		$	17.31
RSUs granted during 2018		40,000			16.25
RSUs earned during 2018		(31,620	)		16.99
Units outstanding and unearned at December 31, 2018		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 September 30, 2019		96,540		$	16.47

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,
	2019			2018			2019			2018
RSU compensation expense	$	165		$	185		$	627		$	827
Income tax benefit		(35	)		(39	)		(132	)		(174	)
RSU compensation expense, net of income taxes	$	130		$	146		$	495		$	653

At September 30, 2019, there was $940 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 3.02 years.

Performance Stock Units

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 will be achieved.

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

	PSUs		Weighted-Average Grant-Date Fair Value Per Share
Units outstanding at January 1, 2018		—	$	—
PSUs granted during 2018 (at target)		48,600		16.25
Units outstanding at December 31, 2018		48,600	$	16.25
PSUs granted during 2019 (at target)		62,400		15.21
Units outstanding at September 30, 2019		111,000	$	15.27

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,
	2019			2018			2019			2018
PSU compensation expense	$	175		$	70		$	647		$	163
Income tax benefit		(37	)		(14	)		(136	)		(34	)
PSU compensation expense, net of income taxes	$	138		$	56		$	511		$	129

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, 2019, there was $1,169 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 1.83 years.

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

15.          Income Taxes

At September 30, 2019 and December 31, 2018, we had no unrecognized tax benefits, no 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, 2019 or 2018.

At September 30, 2019 and December 31, 2018, the Company, other than Battle Creek, 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 $4,786 of net operating loss carryover at December 31, 2018. The net operating loss carryforward expires beginning in 2021 through 2030.

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Related Party Transactions (Schedule of impact of consolidating Battle Creek into our consolidated balance sheets) (Details) - USD ($) $ in Thousands		Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Assets:
Accrued investment income		$ 2,031		$ 1,898
Property and equipment		7,602		6,979
Other assets		3,859		5,067
Total assets		529,121		458,492
Liabilities:
Unpaid losses and loss adjustment expenses		117,373		87,121	$ 105,653
Unearned premiums		101,417		84,767	98,308
Reinsurance premiums payable		4,277
Total liabilities		236,814		182,739
Equity:
Non-controlling interest		3,477		3,263
Total equity		292,307	$ 297,314	275,753	$ 269,392	$ 259,566	$ 255,573
Total liabilities and equity		529,121		458,492
Battle Creek [Member]
Assets:
Cash and cash equivalents (overdraft)		(862)		(818)
Investments		4,626		4,304
Premiums and agents' balances receivable		5,158		4,479
Reinsurance recoverables on losses	[1]	26,982		21,117
Accrued investment income		33		31
Deferred income tax asset, net		355		414
Property and equipment		353		356
Other assets		44		48
Total assets		36,689		29,931
Liabilities:
Unpaid losses and loss adjustment expenses		10,718		6,579
Unearned premiums		16,290		14,538
Notes payable	[1]	3,000		3,000
Reinsurance premiums payable	[1]	2,026		972
Accrued expenses and other liabilities		1,178		1,579
Total liabilities		33,212		26,668
Equity:
Non-controlling interest		3,477		3,263
Total equity		3,477		3,263
Total liabilities and equity		$ 36,689		$ 29,931

[1] Amount eliminated in consolidation.

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Deferred Policy Acquisition Costs (Schedule of deferred policy acquisition costs) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Deferred Policy Acquisition Costs Disclosures [Abstract]
Balance, beginning of period	$ 16,721	$ 12,190	$ 12,866	$ 8,859
Deferral of policy acquisition costs	10,392	10,554	39,620	29,542
Amortization of deferred policy acquisition costs	(11,309)	(10,951)	(36,682)	(26,608)
Balance, end of period	$ 15,804	$ 11,793	$ 15,804	$ 11,793

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Operating Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Operating Leased Assets [Line Items]
Operating lease expenses	$ 76	$ 35	$ 227	$ 65
Primero Subsidiary Lease [Member]
Operating Leased Assets [Line Items]
Lease expiration date			Dec. 31, 2023
Direct Auto Subsidiary Lease [Member]
Operating Leased Assets [Line Items]
Lease expiration date			Dec. 31, 2020

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Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Schedule of Restricted Stock Outstanding

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

	RSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding and unearned at January 1, 2018		65,500		$	17.31
RSUs granted during 2018		40,000			16.25
RSUs earned during 2018		(31,620	)		16.99
Units outstanding and unearned at December 31, 2018		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 September 30, 2019		96,540		$	16.47

Schedule of RSU activity

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,
	2019			2018			2019			2018
RSU compensation expense	$	165		$	185		$	627		$	827
Income tax benefit		(35	)		(39	)		(132	)		(174	)
RSU compensation expense, net of income taxes	$	130		$	146		$	495		$	653

Schedule of Performance Stock Outstanding

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

	PSUs		Weighted-Average Grant-Date Fair Value Per Share
Units outstanding at January 1, 2018		—	$	—
PSUs granted during 2018 (at target)		48,600		16.25
Units outstanding at December 31, 2018		48,600	$	16.25
PSUs granted during 2019 (at target)		62,400		15.21
Units outstanding at September 30, 2019		111,000	$	15.27

Schedule of PSU activity

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,
	2019			2018			2019			2018
PSU compensation expense	$	175		$	70		$	647		$	163
Income tax benefit		(37	)		(14	)		(136	)		(34	)
PSU compensation expense, net of income taxes	$	138		$	56		$	511		$	129

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Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other invested assets	$ 1,914	$ 1,954
Federal Deposit Insurance Corporation amount	250
Short-term investment balances in investment that are insured by SIPC	$ 500
Nodak Insurance [Member]
Ownership percentage	100.00%
Battle Creek [Member]
Ownership percentage	100.00%

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Reinsurance (Schedule of reconciliation of direct to net premiums on both a written and an earned basis) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Premiums Written
Direct premium	$ 49,984	$ 46,220	$ 208,880	$ 174,074
Assumed premium	1,203	974	5,235	5,506
Ceded premium	(4,599)	(10,685)	(14,730)	(19,563)
Net premiums	46,588	36,509	199,385	160,017
Premiums Earned
Direct premium	70,481	63,737	192,233	154,916
Assumed premium	1,234	1,084	5,233	5,572
Ceded premium	(4,599)	(10,685)	(14,730)	(19,563)
Net premiums	$ 67,116	$ 54,136	$ 182,736	$ 140,925
Percentage of assumed earned premium to net earned premium	1.80%	2.00%	2.90%	4.00%

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Unaudited Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues:
Net premiums earned	$ 67,116	$ 54,136	$ 182,736	$ 140,925
Fee and other income	527	5,175	1,637	6,022
Net investment income	1,983	1,629	5,504	4,521
Net capital gain on investments	622	3,160	9,591	3,879
Total revenues	70,248	64,100	199,468	155,347
Expenses:
Losses and loss adjustment expenses	61,558	37,456	135,985	97,026
Amortization of deferred policy acquisition costs	11,309	10,951	36,682	26,608
Other underwriting and general expenses	5,982	3,787	14,243	11,809
Total expenses	78,849	52,194	186,910	135,443
Income (loss) before income taxes	(8,601)	11,906	12,558	19,904
Income tax expense (benefit)	(1,642)	2,029	3,206	3,619
Net income (loss)	(6,959)	9,877	9,352	16,285
Net income attributable to non-controlling interest	20	33	80	93
Net income (loss) attributable to NI Holdings, Inc.	$ (6,979)	$ 9,844	$ 9,272	$ 16,192
Basic earnings (loss) per common share	$ (0.32)	$ 0.44	$ 0.42	$ 0.72
Diluted earnings (loss) per common share	$ (0.31)	$ 0.44	$ 0.42	$ 0.72

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Investments (Schedule of Net Investment Income) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Total gross investment income	$ 2,549	$ 2,166	$ 7,194	$ 6,155
Investment expenses	566	537	1,690	1,634
Net investment income	1,983	1,629	5,504	4,521
Fixed income securities [Member]
Total gross investment income	2,196	1,800	6,167	5,073
Equity Securities [Member]
Total gross investment income	247	244	704	716
Real estate [Member]
Total gross investment income	91	91	273	273
Cash and Cash Equivalents [Member]
Total gross investment income	$ 15	$ 31	$ 50	$ 93

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Investments (Narrative) (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Investments [Abstract]
Fixed income securities with a fair value		$ 6,342		$ 4,900
Impairment of investments	$ 382		$ 382
Percentage of fixed maturities amortized cost values		80.00%
Unrealized gains on equity securities			$ 8,184
Fixed income securities [Member]
Investments [Abstract]
Number of securities		75		317

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Unaudited Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Statement of Cash Flows [Abstract]
Paid income tax	$ 3,500	$ 6,800

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Common Stock (Schedule of changes in number of common stock) (Details) - shares	9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Equity [Abstract]
Shares outstanding, beginning of period	22,192,894	22,337,644	22,337,644
Treasury shares repurchased through stock repurchase authorization	(116,034)		(191,265)
Issuance of treasury shares for vesting of restricted stock units	18,205	22,200
Shares outstanding, end of period	22,095,065	22,359,844	22,192,894

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Stock Based Compensation (Schedule of Outstanding Performance Stock Units) (Details) - Performance Stock Units [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Shares
Units outstanding at Begning	48,600
Grants (at target)	62,400	48,600
Units outstanding at Ending	111,000	48,600
Weighted Average Grant Date Fair Value
Units outstanding at Begning	$ 16.25
Grants (at target)	15.21	16.25
Units outstanding at Ending	$ 15.27	$ 16.25

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Deferred Policy Acquisition Costs

9 Months Ended

Sep. 30, 2019

Deferred Policy Acquisition Costs Disclosures [Abstract]

Deferred Policy Acquisition Costs

9.            Deferred Policy Acquisition Costs

Activity with regards to our deferred policy acquisition costs was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	16,721		$	12,190		$	12,866		$	8,859
Deferral of policy acquisition costs		10,392			10,554			39,620			29,542
Amortization of deferred policy acquisition costs		(11,309	)		(10,951	)		(36,682	)		(26,608	)
Balance, end of period	$	15,804		$	11,793		$	15,804		$	11,793

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Recent Accounting Pronouncements

5.             Recent Accounting Pronouncements

As an emerging growth company, we have elected to use the extended transition period for complying with any new or revised financial accounting standards 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.

Adopted

On July 1, 2017, the Company early adopted amended guidance from the Financial Accounting Standards Board (the “FASB”) on goodwill impairment testing. Under the amended guidance, the optional qualitative assessment (Step 0) and the first step of the quantitative assessment (Step 1) remain unchanged. Step 2 is eliminated. As a result, for annual impairment testing or in the event a test is required prior to the annual test, the Company will use Step 0 to determine if an impairment might exist and Step 1 to determine the amount of goodwill impairment. An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in the reporting unit. The Company early adopted this guidance during the year ended December 31, 2017 on a prospective basis as a change in accounting principle, therefore at the date of adoption there was no impact to the Company’s financial position or results of operations.

In March 2016, the FASB issued amended guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the Consolidated Statement of Cash Flows. All excess income tax benefits and income tax deficiencies should be recognized as income tax expense or benefit in the Consolidated Statement of Operations, instead of affecting additional paid-in-capital on the Consolidated Balance Sheet. These discrete income tax items should be classified along with other income tax cash flows as an operating activity on the Consolidated Statement of Cash Flows. In addition, cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. Amendments requiring recognition of excess income tax benefits and income tax deficiencies in the Consolidated Statement of Operations should be applied prospectively. The Company early adopted this guidance on a prospective basis for the year ended December 31, 2017. At the date of adoption, there was an immaterial impact to the computation of diluted earnings per share, but no impact to the Company’s financial position or results of operations.

In February 2018, the FASB issued new guidance to provide companies the option to reclassify income tax effects that are stranded in accumulated other comprehensive income as a result of income tax reform to retained earnings. In the period of adoption, an entity was able to choose whether to apply the amendments retrospectively or in the period of adoption. The Company elected to early adopt this guidance on a prospective basis, resulting in a $2,717 reclassification of stranded income tax effects from accumulated other comprehensive income to retained earnings within the Equity section of the Consolidated Balance Sheet as of December 31, 2017. There was no impact to the Company’s financial position, results of operations, or cash flows.

In January 2019, the Company adopted amended guidance from the 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 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 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, which will add a level of volatility to our net income.

Not Yet Adopted

In May 2014, the FASB issued guidance 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 will replace 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. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017 for public business entities. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities. We currently believe that this guidance will have no impact on our financial position, results of operations, or cash flows when we adopt this guidance for the year ended December 31, 2019.

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 cumulative adoption. The new guidance, which replaces the current lease guidance, is effective for annual and interim reporting periods beginning after December 15, 2018 for public business entities. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. 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 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 public business entities which are SEC filers. For private companies and emerging growth companies, 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 as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are evaluating the impact this new guidance will have on our financial position, results of operations, and cash flows.

In August 2016, the FASB issued amended guidance that addresses diversity in how certain cash receipts and cash payments are presented and classified in the Consolidated Statement of Cash Flows. The amendments provide clarity on the treatment of eight specifically defined types of cash inflows and outflows. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019 using a retrospective transition method to each period presented or prospectively if adoption of an issue is impracticable. The adoption of this amended guidance will have no effect on our financial position or results of operations. We do not expect this amended guidance to have a significant impact on our Consolidated Statement of Cash Flows when we adopt this guidance for the year ended December 31, 2019.

In November 2016, the FASB issued amended guidance on the presentation of restricted cash in the Consolidated Statement of Cash Flows. Entities will be required 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. For private companies and emerging growth companies, this guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities, 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. The amendments are to be applied using a retrospective transition method to each period presented. The adoption of this amended guidance will have no effect on our financial position or results of operations. We do not expect this amended guidance to have a significant impact on our Consolidated Statement of Cash Flows when we adopt this guidance for the year ended December 31, 2019.

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 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 impact to our financial position, results of operations, and cash flows.

In August 2018, the FASB issued modified disclosure requirements relating to the fair value of assets and liabilities. The amended requirements are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. We do not expect these modified requirements will have a material impact on our financial statement disclosures.

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

22. Subsequent Events

We have evaluated subsequent events through November 6, 2019, the date these consolidated financial statements were available for issuance.

Pending Acquisition

On October 28, 2019, the Company entered into a definitive agreement to purchase 100 percent of the issued and outstanding stock of Westminster American Insurance Company (“Westminster American”) from private shareholders. Westminster American is headquartered in Owings Mills, Maryland and writes commercial multi-peril commercial insurance in the states of Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia, and West Virginia, and the District of Columbia through independent agents. The current president of Westminster American will continue to manage the Westminster American insurance operations along with the current staff and management team. The transaction is expected to close early next year subject to customary closing conditions, including regulatory approval.

Under the terms of the stock purchase agreement, NI Holdings has agreed to pay Westminster American shareholders $20 million at the closing date, and approximately $6.7 million annually over the three-year period from the date of closing, subject to certain adjustments. In addition, in connection with his continued employment after closing, NI Holdings has agreed to pay the current president of Westminster American a retention bonus in the aggregate amount of $5 million, payable over the five-year period from the date of closing.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Investments, All Other Investments [Abstract]

Schedule of Financial Instruments at Fair Value Measured on a Recurring Basis

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, 2019
	Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	17,318	$	—	$	17,318	$	—
Obligations of states and political subdivisions		63,214		—		63,214		—
Corporate securities		114,607		—		114,607		—
Residential mortgage-backed securities		53,800		—		53,800		—
Commercial mortgage-backed securities		25,583		—		25,583		—
Asset-backed securities		24,573		—		24,573		—
Total fixed income securities		299,095		—		299,095		—
Equity securities:
Basic materials		1,708		1,708		—		—
Communications		6,925		6,925		—		—
Consumer, cyclical		9,038		9,038		—		—
Consumer, non-cyclical		13,433		13,433		—		—
Energy		3,541		3,541		—		—
Financial		7,397		7,397		—		—
Industrial		8,840		8,840		—		—
Technology		11,537		11,537		—		—
Total equity securities		62,419		62,419		—		—
Cash and cash equivalents		25,242		25,242		—		—
Total assets at fair value	$	386,756	$	87,661	$	299,095	$	—

	December 31, 2018
	Total		Level I		Level II		Level III
Fixed income securities:
U.S. Government and agencies	$	19,208	$	—	$	19,208	$	—
Obligations of states and political subdivisions		52,698		—		52,698		—
Corporate securities		94,142		—		94,142		—
Residential mortgage-backed securities		50,283		—		50,283		—
Commercial mortgage-backed securities		19,315		—		19,315		—
Asset-backed securities		19,323		—		19,323		—
Total fixed income securities		254,969		—		254,969		—
Equity securities:
Basic materials		1,340		1,340		—		—
Communications		4,948		4,948		—		—
Consumer, cyclical		7,611		7,611		—		—
Consumer, non-cyclical		12,369		12,369		—		—
Energy		1,341		1,341		—		—
Financial		4,428		4,428		—		—
Industrial		6,698		6,698		—		—
Technology		9,763		9,763		—		—
Total equity securities		48,498		48,498		—		—
Cash and cash equivalents		68,950		68,950		—		—
Total assets at fair value	$	372,417	$	117,448	$	254,969	$	—

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Reinsurance Disclosures [Abstract]

Schedule of Property and equipment

Property and equipment consisted of the following:

	September 30, 2019			December 31, 2018			Estimated Useful Life
Cost:
Real estate	$	12,565		$	11,911		10 - 31 years
Electronic data processing equipment		1,349			1,286		5-7 years
Furniture and fixtures		2,856			2,829		5-7 years
Automobiles		1,694			1,596		2-3 years
Gross cost		18,464			17,622
Accumulated depreciation		(10,862	)		(10,643	)
Total property and equipment, net	$	7,602		$	6,979

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Segment Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Information

21.          Segment Information

We have four primary reportable operating segments, which consist of private passenger auto insurance, non-standard auto insurance, home and farm insurance, and crop insurance. A fifth segment captures all other insurance coverages we sell, including commercial coverages and 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, 2019 and 2018. 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 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, 2019
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	18,256		$	14,167		$	19,844		$	15,943		$	2,271		$	70,481
Assumed premiums earned		(7	)		—			8			(10	)		1,243			1,234
Ceded premiums earned		(933	)		(123	)		(1,944	)		(1,416	)		(183	)		(4,599	)
Net premiums earned		17,316			14,044			17,908			14,517			3,331			67,116
Direct losses and LAE		19,120			8,440			18,639			13,977			2,072			62,248
Assumed losses and LAE		94			—			—			1,316			607			2,017
Ceded losses and LAE		(498	)		—			(41	)		(2,151	)		(17	)		(2,707	)
Net losses and LAE		18,716			8,440			18,598			13,142			2,662			61,558
Gross margin		(1,400	)		5,604			(690	)		1,375			669			5,558
Underwriting and general expenses		4,438			5,207			4,892			1,983			771			17,291
Underwriting gain (loss)		(5,838	)		397			(5,582	)		(608	)		(102	)		(11,733	)
Fee and other income					363												527
					760
Net investment income																	1,983
Net capital gain on investments																	622
Loss before income taxes																	(8,601	)
Income taxes																	(1,642	)
Net loss																	(6,959	)
Net income attributable to non-controlling interest																	20
Net loss attributable to NI Holdings, Inc.																$	(6,979	)
Non-GAAP Ratios:
Loss and LAE ratio		108.1%			60.1%			103.9%			90.5%			79.9%			91.7%
Expense ratio		25.6%			37.1%			27.3%			13.7%			23.1%			25.8%
Combined ratio		133.7%			97.2%			131.2%			104.2%			103.1%			117.5%
Balances at September 30, 2019:
Premiums and agents’ balances receivable	$	18,776		$	8,186		$	9,238		$	39,275		$	1,551		$	77,026
Deferred policy acquisition costs		4,143			4,794			5,945			281			641			15,804
Reinsurance recoverables		377			—			1,330			2,855			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			9,942			117,373
Unearned premiums		28,312			16,723			40,114			11,233			5,035			101,417

	Three Months Ended September 30, 2018
	Private Passenger Auto			Non- Standard Auto		Home and Farm			Crop			All Other			Total
Direct premiums earned	$	16,718		$	7,052	$	17,977		$	19,880		$	2,110		$	63,737
Assumed premiums earned		3			—		(4	)		27			1,058			1,084
Ceded premiums earned		(829	)		—		(1,736	)		(7,947	)		(173	)		(10,685	)
Net premiums earned		15,892			7,052		16,237			11,960			2,995			54,136
Direct losses and LAE		11,940			4,387		16,414			4,976			1,502			39,219
Assumed losses and LAE		140			—		(122	)		530			279			827
Ceded losses and LAE		(176	)		—		78			(1,991	)		(501	)		(2,590	)
Net losses and LAE		11,904			4,387		16,370			3,515			1,280			37,456
Gross margin		3,988			2,665		(133	)		8,445			1,715			16,680
Underwriting and general expenses		4,235			2,348		4,678			2,695			782			14,738
Underwriting gain (loss)		(247	)		317		(4,811	)		5,750			933			1,942
Fee and other income					343											5,175
					660
Net investment income																1,629
Net capital gain on investments																3,160
Loss before income taxes																11,906
Income taxes																2,029
Net income																9,877
Net income attributable to non-controlling interest																33
Net income attributable to NI Holdings, Inc.															$	9,844
Non-GAAP Ratios:
Loss and LAE ratio		74.9%			62.2%		100.8%			29.4%			42.7%			69.2%
Expense ratio		26.6%			33.3%		28.8%			22.5%			26.1%			27.2%
Combined ratio		101.6%			95.5%		129.6%			51.9%			68.8%			96.4%
Balances at September 30, 2018:
Premiums and agents’ balances receivable	$	17,003		$	7,498	$	9,094		$	27,710		$	1,440		$	62,745
Deferred policy acquisition costs		3,663			1,356		5,195			1,001			578			11,793
Reinsurance recoverables		42			—		979			2,425			2,182			5,628
Receivable from Federal Crop Insurance Corporation		—			—		—			29,284			—			29,284
Goodwill and other intangibles		—			7,036		—			—			—			7,036
Unpaid losses and LAE		19,094			48,020		15,536			13,714			9,289			105,653
Unearned premiums		26,363			17,871		36,764			12,509			4,801			98,308

	Nine Months Ended September 30, 2019
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	52,792		$	44,029		$	57,592		$	31,159		$	6,661		$	192,233
Assumed premiums earned		—			—			—			2,087			3,146			5,233
Ceded premiums earned		(2,698	)		(123	)		(5,642	)		(5,718	)		(549	)		(14,730	)
Net premiums earned		50,094			43,906			51,950			27,528			9,258			182,736
Direct losses and LAE		41,300			27,416			41,396			23,046			5,323			138,481
Assumed losses and LAE		173			—			—			1,394			1,433			3,000
Ceded losses and LAE		(730	)		—			(1,329	)		(2,558	)		(879	)		(5,496	)
Net losses and LAE		40,743			27,416			40,067			21,882			5,877			135,985
Gross margin		9,351			16,490			11,883			5,646			3,381			46,751
Underwriting and general expenses		14,097			15,845			15,327			3,091			2,565			50,925
Underwriting gain (loss)		(4,746	)		645			(3,444	)		2,555			816			(4,174	)
Fee and other income					1,339												1,637
					1,984
Net investment income																	5,504
Net capital gain on investments																	9,591
Income before income taxes																	12,558
Income taxes																	3,206
Net income																	9,352
Net income attributable to non-controlling interest																	80
Net income attributable to NI Holdings, Inc.																$	9,272
Non-GAAP Ratios:
Loss and LAE ratio		81.3%			62.4%			77.1%			79.5%			63.5%			74.4%
Expense ratio		28.1%			36.1%			29.5%			11.2%			27.7%			27.9%
Combined ratio		109.5%			98.5%			106.6%			90.7%			91.2%			102.3%
Balances at September 30, 2019:
Premiums and agents’ balances receivable	$	18,776		$	8,186		$	9,238		$	39,275		$	1,551		$	77,026
Deferred policy acquisition costs		4,143			4,794			5,945			281			641			15,804
Reinsurance recoverables		377			—			1,330			2,855			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			9,942			117,373
Unearned premiums		28,312			16,723			40,114			11,233			5,035			101,417

	Nine Months Ended September 30, 2018
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	48,436		$	13,519		$	51,840		$	34,963		$	6,158		$	154,916
Assumed premiums earned		11			—			(13	)		2,311			3,263			5,572
Ceded premiums earned		(2,420	)		—			(4,851	)		(11,772	)		(520	)		(19,563	)
Net premiums earned		46,027			13,519			46,976			25,502			8,901			140,925
Direct losses and LAE		33,303			9,324			38,372			15,040			2,938			98,977
Assumed losses and LAE		188			—			(171	)		693			1,193			1,903
Ceded losses and LAE		(290	)		—			18			(2,896	)		(686	)		(3,854	)
Net losses and LAE		33,201			9,324			38,219			12,837			3,445			97,026
Gross margin		12,826			4,195			8,757			12,665			5,456			43,899
Underwriting and general expenses		13,357			4,273			14,770			3,346			2,671			38,417
Underwriting gain (loss)		(531	)		(78	)		(6,013	)		9,319			2,785			5,482
Fee and other income					994												6,022
					916
Net investment income																	4,521
Net capital gain on investments																	3,879
Income before income taxes																	19,904
Income taxes																	3,619
Net income																	16,285
Net income attributable to non-controlling interest																	93
Net income attributable to NI Holdings, Inc.																$	16,192
Non-GAAP Ratios:
Loss and LAE ratio		72.1%			69.0%			81.4%			50.3%			38.7%			68.8%
Expense ratio		29.0%			31.6%			31.4%			13.1%			30.0%			27.3%
Combined ratio		101.2%			100.6%			112.8%			63.5%			68.7%			96.1%
Balances at September 30, 2018:
Premiums and agents’ balances receivable	$	17,003		$	7,498		$	9,094		$	27,710		$	1,440		$	62,745
Deferred policy acquisition costs		3,663			1,356			5,195			1,001			578			11,793
Reinsurance recoverables		42			—			979			2,425			2,182			5,628
Receivable from Federal Crop Insurance Corporation		—			—			—			29,284			—			29,284
Goodwill and other intangibles		—			7,036			—			—			—			7,036
Unpaid losses and LAE		19,094			48,020			15,536			13,714			9,289			105,653
Unearned premiums		26,363			17,871			36,764			12,509			4,801			98,308

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 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, federal income taxes recoverable or payable, and equity.

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Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Contingencies

17.          Contingencies

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, 2019 or December 31, 2018.

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Benefit Plans

9 Months Ended

Sep. 30, 2019

Compensation Related Costs [Abstract]

Benefit Plans

13.          Benefit Plans

The Company sponsors a money-purchase plan that covers all eligible employees. Plan costs are funded annually as they are earned. The Company’s contribution expense for the money-purchase plan totaled $95 and $196 during the three months ended September 30, 2019 and 2018, respectively, and $493 and $590 during the nine months ended September 30, 2019 and 2018, 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. The Company’s contributions expense to the 401(k) plan totaled $139 and $182 during the three months ended September 30, 2019 and 2018, respectively, and $417 and $421 during the nine months ended September 30, 2019 and 2018, respectively. All fees associated with both plans are deducted from the eligible employee accounts.

Deferred Compensation Plan

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 in a given calendar year by amounts that exceed the maximum contribution allowed by the Employee Retirement Income Security Act (“ERISA”). The Company’s expenses included $14 and $13 during the three months ended September 30, 2019 and 2018, respectively, and $41 and $40 during the nine months ended September 30, 2019 and 2018, respectively.

Employee Stock Ownership Plan

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 primarily 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 initial ESOP participants are employees of Nodak Insurance. The employees of Primero and Direct Auto 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 $104 and $100 during the three months ended September 30, 2019 and 2018, respectively, and $301 and $303 during the nine months ended September 30, 2019 and 2018, respectively.

Through September 30, 2019 and December 31, 2018, 48,630 ESOP shares had been released and allocated to participants, with a remainder of 191,370 ESOP shares in suspense at September 30, 2019 and December 31, 2018. Using the Company’s quarter-end market price of $17.14 per share, the fair value of the unearned ESOP shares was $3,280 at September 30, 2019. 

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Operating Leases (Tables)

9 Months Ended

Sep. 30, 2019

Operating Leases Tables Abstract

Schedule of Minimum Future Commitments Under Non-Cancellable Leases

As of September 30, 2019, we have minimum future commitments under non-cancellable leases as follows:

Year ending December 31,	Estimated Future Minimum Commitments
2019	$	76
2020	121
2021	60
2022	60
2023	30

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of revenue by insurance product line

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, 2019
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	18,256		$	14,167		$	19,844		$	15,943		$	2,271		$	70,481
Assumed premiums earned		(7	)		—			8			(10	)		1,243			1,234
Ceded premiums earned		(933	)		(123	)		(1,944	)		(1,416	)		(183	)		(4,599	)
Net premiums earned		17,316			14,044			17,908			14,517			3,331			67,116
Direct losses and LAE		19,120			8,440			18,639			13,977			2,072			62,248
Assumed losses and LAE		94			—			—			1,316			607			2,017
Ceded losses and LAE		(498	)		—			(41	)		(2,151	)		(17	)		(2,707	)
Net losses and LAE		18,716			8,440			18,598			13,142			2,662			61,558
Gross margin		(1,400	)		5,604			(690	)		1,375			669			5,558
Underwriting and general expenses		4,438			5,207			4,892			1,983			771			17,291
Underwriting gain (loss)		(5,838	)		397			(5,582	)		(608	)		(102	)		(11,733	)
Fee and other income					363												527
					760
Net investment income																	1,983
Net capital gain on investments																	622
Loss before income taxes																	(8,601	)
Income taxes																	(1,642	)
Net loss																	(6,959	)
Net income attributable to non-controlling interest																	20
Net loss attributable to NI Holdings, Inc.																$	(6,979	)
Non-GAAP Ratios:
Loss and LAE ratio		108.1%			60.1%			103.9%			90.5%			79.9%			91.7%
Expense ratio		25.6%			37.1%			27.3%			13.7%			23.1%			25.8%
Combined ratio		133.7%			97.2%			131.2%			104.2%			103.1%			117.5%
Balances at September 30, 2019:
Premiums and agents’ balances receivable	$	18,776		$	8,186		$	9,238		$	39,275		$	1,551		$	77,026
Deferred policy acquisition costs		4,143			4,794			5,945			281			641			15,804
Reinsurance recoverables		377			—			1,330			2,855			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			9,942			117,373
Unearned premiums		28,312			16,723			40,114			11,233			5,035			101,417

	Three Months Ended September 30, 2018
	Private Passenger Auto			Non- Standard Auto		Home and Farm			Crop			All Other			Total
Direct premiums earned	$	16,718		$	7,052	$	17,977		$	19,880		$	2,110		$	63,737
Assumed premiums earned		3			—		(4	)		27			1,058			1,084
Ceded premiums earned		(829	)		—		(1,736	)		(7,947	)		(173	)		(10,685	)
Net premiums earned		15,892			7,052		16,237			11,960			2,995			54,136
Direct losses and LAE		11,940			4,387		16,414			4,976			1,502			39,219
Assumed losses and LAE		140			—		(122	)		530			279			827
Ceded losses and LAE		(176	)		—		78			(1,991	)		(501	)		(2,590	)
Net losses and LAE		11,904			4,387		16,370			3,515			1,280			37,456
Gross margin		3,988			2,665		(133	)		8,445			1,715			16,680
Underwriting and general expenses		4,235			2,348		4,678			2,695			782			14,738
Underwriting gain (loss)		(247	)		317		(4,811	)		5,750			933			1,942
Fee and other income					343											5,175
					660
Net investment income																1,629
Net capital gain on investments																3,160
Loss before income taxes																11,906
Income taxes																2,029
Net income																9,877
Net income attributable to non-controlling interest																33
Net income attributable to NI Holdings, Inc.															$	9,844
Non-GAAP Ratios:
Loss and LAE ratio		74.9%			62.2%		100.8%			29.4%			42.7%			69.2%
Expense ratio		26.6%			33.3%		28.8%			22.5%			26.1%			27.2%
Combined ratio		101.6%			95.5%		129.6%			51.9%			68.8%			96.4%
Balances at September 30, 2018:
Premiums and agents’ balances receivable	$	17,003		$	7,498	$	9,094		$	27,710		$	1,440		$	62,745
Deferred policy acquisition costs		3,663			1,356		5,195			1,001			578			11,793
Reinsurance recoverables		42			—		979			2,425			2,182			5,628
Receivable from Federal Crop Insurance Corporation		—			—		—			29,284			—			29,284
Goodwill and other intangibles		—			7,036		—			—			—			7,036
Unpaid losses and LAE		19,094			48,020		15,536			13,714			9,289			105,653
Unearned premiums		26,363			17,871		36,764			12,509			4,801			98,308

	Nine Months Ended September 30, 2019
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	52,792		$	44,029		$	57,592		$	31,159		$	6,661		$	192,233
Assumed premiums earned		—			—			—			2,087			3,146			5,233
Ceded premiums earned		(2,698	)		(123	)		(5,642	)		(5,718	)		(549	)		(14,730	)
Net premiums earned		50,094			43,906			51,950			27,528			9,258			182,736
Direct losses and LAE		41,300			27,416			41,396			23,046			5,323			138,481
Assumed losses and LAE		173			—			—			1,394			1,433			3,000
Ceded losses and LAE		(730	)		—			(1,329	)		(2,558	)		(879	)		(5,496	)
Net losses and LAE		40,743			27,416			40,067			21,882			5,877			135,985
Gross margin		9,351			16,490			11,883			5,646			3,381			46,751
Underwriting and general expenses		14,097			15,845			15,327			3,091			2,565			50,925
Underwriting gain (loss)		(4,746	)		645			(3,444	)		2,555			816			(4,174	)
Fee and other income					1,339												1,637
					1,984
Net investment income																	5,504
Net capital gain on investments																	9,591
Income before income taxes																	12,558
Income taxes																	3,206
Net income																	9,352
Net income attributable to non-controlling interest																	80
Net income attributable to NI Holdings, Inc.																$	9,272
Non-GAAP Ratios:
Loss and LAE ratio		81.3%			62.4%			77.1%			79.5%			63.5%			74.4%
Expense ratio		28.1%			36.1%			29.5%			11.2%			27.7%			27.9%
Combined ratio		109.5%			98.5%			106.6%			90.7%			91.2%			102.3%
Balances at September 30, 2019:
Premiums and agents’ balances receivable	$	18,776		$	8,186		$	9,238		$	39,275		$	1,551		$	77,026
Deferred policy acquisition costs		4,143			4,794			5,945			281			641			15,804
Reinsurance recoverables		377			—			1,330			2,855			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			9,942			117,373
Unearned premiums		28,312			16,723			40,114			11,233			5,035			101,417

	Nine Months Ended September 30, 2018
	Private Passenger Auto			Non- Standard Auto			Home and Farm			Crop			All Other			Total
Direct premiums earned	$	48,436		$	13,519		$	51,840		$	34,963		$	6,158		$	154,916
Assumed premiums earned		11			—			(13	)		2,311			3,263			5,572
Ceded premiums earned		(2,420	)		—			(4,851	)		(11,772	)		(520	)		(19,563	)
Net premiums earned		46,027			13,519			46,976			25,502			8,901			140,925
Direct losses and LAE		33,303			9,324			38,372			15,040			2,938			98,977
Assumed losses and LAE		188			—			(171	)		693			1,193			1,903
Ceded losses and LAE		(290	)		—			18			(2,896	)		(686	)		(3,854	)
Net losses and LAE		33,201			9,324			38,219			12,837			3,445			97,026
Gross margin		12,826			4,195			8,757			12,665			5,456			43,899
Underwriting and general expenses		13,357			4,273			14,770			3,346			2,671			38,417
Underwriting gain (loss)		(531	)		(78	)		(6,013	)		9,319			2,785			5,482
Fee and other income					994												6,022
					916
Net investment income																	4,521
Net capital gain on investments																	3,879
Income before income taxes																	19,904
Income taxes																	3,619
Net income																	16,285
Net income attributable to non-controlling interest																	93
Net income attributable to NI Holdings, Inc.																$	16,192
Non-GAAP Ratios:
Loss and LAE ratio		72.1%			69.0%			81.4%			50.3%			38.7%			68.8%
Expense ratio		29.0%			31.6%			31.4%			13.1%			30.0%			27.3%
Combined ratio		101.2%			100.6%			112.8%			63.5%			68.7%			96.1%
Balances at September 30, 2018:
Premiums and agents’ balances receivable	$	17,003		$	7,498		$	9,094		$	27,710		$	1,440		$	62,745
Deferred policy acquisition costs		3,663			1,356			5,195			1,001			578			11,793
Reinsurance recoverables		42			—			979			2,425			2,182			5,628
Receivable from Federal Crop Insurance Corporation		—			—			—			29,284			—			29,284
Goodwill and other intangibles		—			7,036			—			—			—			7,036
Unpaid losses and LAE		19,094			48,020			15,536			13,714			9,289			105,653
Unearned premiums		26,363			17,871			36,764			12,509			4,801			98,308

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Acquisition of Direct Auto Insurance Company (Schedule of Proforma Information of Business Combination) (Details) - Direct Auto Insurance Company [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Business Acquisition [Line Items]
Revenues	$ 70,248	$ 67,126	$ 199,468	$ 180,323
Net income (loss) attributable to NI Holdings, Inc.	$ (6,970)	$ 5,623	$ 9,386	$ 12,012
Basic earnings (loss) per share attributable to NI Holdings, Inc.	$ (0.31)	$ 0.25	$ 0.42	$ 0.54

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Line of Credit (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Debt Disclosure [Abstract]
Line of credit with Wells Fargo	$ 5,000
Line of credit expiration date	Dec. 31, 2019

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Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Cost:	$ 18,464		$ 18,464		$ 17,622
Accumulated depreciation	(10,862)		(10,862)		(10,643)
Total property and equipment, net	7,602		7,602		6,979
Depreciation expense	129	$ 129	374	$ 372
Real estate [Member]
Cost:	12,565		$ 12,565		11,911
Real estate [Member] | Minimum [Member]
Estimated Useful Life			10 years
Real estate [Member] | Maximum [Member]
Estimated Useful Life			31 years
Electronic data processing equipment [Member]
Cost:	1,349		$ 1,349		1,286
Electronic data processing equipment [Member] | Minimum [Member]
Estimated Useful Life			5 years
Electronic data processing equipment [Member] | Maximum [Member]
Estimated Useful Life			7 years
Furniture and Fixtures [Member]
Cost:	2,856		$ 2,856		2,829
Furniture and Fixtures [Member] | Minimum [Member]
Estimated Useful Life			5 years
Furniture and Fixtures [Member] | Maximum [Member]
Estimated Useful Life			7 years
Automobiles [Member]
Cost:	$ 1,694		$ 1,694		$ 1,596
Automobiles [Member] | Minimum [Member]
Estimated Useful Life			2 years
Automobiles [Member] | Maximum [Member]
Estimated Useful Life			3 years

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Operating Leases

9 Months Ended

Sep. 30, 2019

Leases, Operating [Abstract]

Operating Leases

16.          Operating Leases

Our Primero subsidiary leases a facility in Spearfish, South Dakota under a non-cancellable operating lease expiring in 2023. Our Direct Auto subsidiary leases a facility in Chicago, Illinois under a non-cancellable operating lease expiring in 2020. There were expenses of $76 and $35 related to these leases during the three months ended September 30, 2019 and 2018, respectively, and expenses $227 and $65 during the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, we have minimum future commitments under non-cancellable leases as follows:

Year ending December 31,	Estimated Future Minimum Commitments
2019	$	76
2020	121
2021	60
2022	60
2023	30

We also sub-lease portions of our home office building under non-cancellable operating leases.

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

12.          Related Party Transactions

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 $384 and $383 during the three months ended September 30, 2019 and 2018, respectively. Royalties paid to the NDFB were $1,104 and $1,065 during the nine months ended September 30, 2019 and 2018, respectively. Royalty amounts payable of $17 and $108 were accrued as a liability to the NDFB at September 30, 2019 and December 31, 2018, 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, 2018 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 2019 without the prior approval of the North Dakota Insurance Department is $17,588 based upon the policyholders’ surplus of Nodak Insurance at December 31, 2018. Prior to its payment of any extraordinary dividend, Nodak Insurance will be required to provide notice of the dividend to the North Dakota Insurance Department. This notice must be provided to the North Dakota Insurance Department 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The North Dakota Insurance Department has the power to limit or prohibit dividend payments if Nodak Insurance is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. No dividends were declared or paid by Nodak Insurance during the nine months ended September 30, 2019 or the year ended December 31, 2018.

The amount available for payment of dividends from Direct Auto to NI Holdings during 2019 without the prior approval of the Illinois Department of Insurance is $6,653 based upon the statutory net income of Direct Auto for the year ended December 31, 2018. 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 months ended September 30, 2019 or the year ended December 31, 2018.

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

	September 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents (overdraft)	$	(862	)	$	(818	)
Investments		4,626			4,304
Premiums and agents’ balances receivable		5,158			4,479
Reinsurance recoverables on losses (1)		26,982			21,117
Accrued investment income		33			31
Deferred income tax asset, net		355			414
Property and equipment		353			356
Other assets		44			48
Total assets	$	36,689		$	29,931
Liabilities:
Unpaid losses and loss adjustment expenses	$	10,718		$	6,579
Unearned premiums		16,290			14,538
Notes payable (1)		3,000			3,000
Reinsurance premiums payable (1)		2,026			972
Accrued expenses and other liabilities		1,178			1,579
Total liabilities		33,212			26,668
Equity:
Non-controlling interest		3,477			3,263
Total equity		3,477			3,263
Total liabilities and equity	$	36,689		$	29,931
(1)    Amount eliminated in consolidation.

Total statutory revenues of Battle Creek, after intercompany eliminations, which is limited to net investment income and other income, were $26 and $36, respectively, during the three months ended September 30, 2019 and 2018, respectively.

Total statutory revenues of Battle Creek, after intercompany eliminations, which is limited to net investment income and other income, were $103 and $112, respectively, during the nine months ended September 30, 2019 and 2018, respectively.

There were no statutory-basis expenses reported, after intercompany eliminations, during the three or nine months ended September 30, 2019 and 2018.

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Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

20.          Earnings Per Share

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 22,136,885 and 22,381,344, respectively, during the three months ended September 30, 2019 and 2018, respectively, and 22,194,102 and 22,373,579, respectively, during the nine months ended September 30, 2019 and 2018, 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,
	2019			2018		2019		2018
Basic earnings (loss) per common share:
Numerator:
Net income (loss) attributable to NI Holdings, Inc.	$	(6,979	)	$	9,844	$	9,272	$	16,192
Denominator:
Weighted average shares outstanding		22,136,885			22,381,344		22,194,102		22,373,579
Basic earnings (loss) per common share	$	(0.32	)	$	0.44	$	0.42	$	0.72
Diluted earnings (loss) per common share:
Numerator:
Net income (loss) attributable to NI Holdings, Inc.	$	(6,979	)	$	9,844	$	9,272	$	16,192
Denominator:
Number of shares used in basic computation		22,136,885			22,381,344		22,194,102		22,373,579
Weighted average effect of dilutive securities
Add: RSUs and PSUs		95,189			32,732		75,398		21,598
Number of shares used in diluted computation		22,232,074			22,414,076		22,269,500		22,395,177
Diluted earnings (loss) per common share	$	(0.31	)	$	0.44	$	0.42	$	0.72

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Acquisition of Direct Auto Insurance Company (Schedule of Identified Assets Acquired and Liabilities Assumed) (Details) - Direct Auto Insurance Company [Member] - USD ($) $ in Thousands	1 Months Ended	9 Months Ended
	Aug. 31, 2018	Sep. 30, 2019
Fair Value of Consideration:
Total cash consideration transferred		$ 17,000
Identifiable net assets:
Cash and cash equivalents		44,485
Fixed income securities, at fair value		11,414
Equity securities, at fair value		14,634
Premiums and agents' balances receivable		5,849
Accrued investment income		63
Property and equipment		31
Favorable lease contract (included in goodwill and other intangibles)		20
License (included in goodwill and other intangibles)		100
Trade name (included in goodwill and other intangibles)		248
Value of business acquired (included in goodwill and other intangibles)		5,134
Other assets		107
Unpaid losses and loss adjustment expenses		(40,967)
Unearned premiums		(15,955)
Federal income tax payable		(1,486)
Deferred income taxes, net		(1,442)
Accrued expenses and other liabilities		(657)
Total identifiable net assets		21,578
Gain on bargain purchase	$ 4,578	$ 4,578

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Common Stock (Tables)

9 Months Ended

Sep. 30, 2019

Common Stock Tables Abstract

Schedule of number of common stock shares

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

	Nine Months Ended September 30,
	2019			2018
Shares outstanding, beginning of period		22,192,894			22,337,644
Treasury shares repurchased through stock repurchase authorization		(116,034	)		—
Issuance of treasury shares for vesting of restricted stock units		18,205			22,200
Shares outstanding, end of period		22,095,065			22,359,844

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Organization (Details) - Nodak Insurance [Member]	9 Months Ended
	Sep. 30, 2019
Percentage of shares exchanged	55.00%
Percentage of quota share agreement	100.00%

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Benefit Plans (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Company's Total contribution to the profit sharing plan		$ 95	$ 196	$ 493	$ 590
Company's total contributions to the 401(k) plan		139	182	417	421
Compensation expense		$ 104	100	$ 301	303
ESOP shares were released and allocated		48,630		48,630		48,630
ESOP shares in suspense		191,370		191,370		191,370
Market price				$ 17.14
Fair value of unearned ESOP shares		$ 3,280		$ 3,280
Debt from ESOP	$ 2,400
Debt term	10 years
Interest rate	2.79%
Percentage of ESOP in authorized shares	1.00%
Per share price	$ 10.00
Deferred compensation plan expenses		$ 14	$ 13	$ 41	$ 40
Minimum [Member]
Employee contribution in percentage				3.00%
Maximum [Member]
Employee contribution in percentage				50.00%

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Unpaid Losses and Loss Adjustment Expenses (Schedule of liability for unpaid losses and loss adjustment expenses) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract]
Liability for unpaid losses and loss adjustment expense	$ 87,121	$ 45,890
Reinsurance recoverables on losses	2,232	4,128
Net balance at beginning of period	84,889	41,762
Acquired unpaid losses and loss adjustment expenses related to:
Current year		17,795
Prior year		23,172
Total incurred		40,967
Incurred related to:
Current year	142,428	100,191
Prior years	(6,443)	(3,165)
Total Incurred	135,985	97,026
Paid related to:
Current year	73,974	59,708
Prior years	35,280	20,022
Total paid	109,254	79,730
Liability for unpaid losses and loss adjustment expenses	117,373	105,653
Reinsurance recoverables on losses	5,753	5,628
Net balance at end of period	$ 111,620	$ 100,025

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Investments (Schedule of aggregate fair value and unrealized loss) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Less than 12 months Fair Value	$ 23,994	$ 79,681
Less than 12 months Unrealized Losses	(1,525)	(4,358)
Greater than 12 months Fair Value	17,578	115,232
Greater than 12 months Unrealized Losses	(422)	(2,865)
Fair Value, Total	41,572	194,913
Unrealized Losses, Total	(1,947)	(7,223)
Fixed income securities [Member]
Less than 12 months Fair Value	14,739	60,066
Less than 12 months Unrealized Losses	(107)	(688)
Greater than 12 months Fair Value	15,364	114,626
Greater than 12 months Unrealized Losses	(205)	(2,714)
Fair Value, Total	30,103	174,692
Unrealized Losses, Total	(312)	(3,402)
Fixed income securities [Member] | U.S. Government and agencies [Member]
Less than 12 months Fair Value		2,593
Less than 12 months Unrealized Losses		(3)
Greater than 12 months Fair Value		7,523
Greater than 12 months Unrealized Losses		(130)
Fair Value, Total		10,116
Unrealized Losses, Total		(133)
Fixed income securities [Member] | Obligations of states and political subdivisions [Member]
Less than 12 months Fair Value	5,894	8,467
Less than 12 months Unrealized Losses	(55)	(119)
Greater than 12 months Fair Value		18,218
Greater than 12 months Unrealized Losses		(440)
Fair Value, Total	5,894	26,685
Unrealized Losses, Total	(55)	(559)
Fixed income securities [Member] | Corporate securities [Member]
Less than 12 months Fair Value	1,841	24,793
Less than 12 months Unrealized Losses	(6)	(266)
Greater than 12 months Fair Value	2,707	45,033
Greater than 12 months Unrealized Losses	(4)	(1,147)
Fair Value, Total	4,548	69,826
Unrealized Losses, Total	(10)	(1,413)
Fixed income securities [Member] | Residential mortgage-backed securities [Member]
Less than 12 months Fair Value	1,524	10,325
Less than 12 months Unrealized Losses	(7)	(62)
Greater than 12 months Fair Value	2,706	26,459
Greater than 12 months Unrealized Losses	(22)	(667)
Fair Value, Total	4,230	36,784
Unrealized Losses, Total	(29)	(729)
Fixed income securities [Member] | Commercial mortgage-backed securities [Member]
Less than 12 months Fair Value	3,424	5,980
Less than 12 months Unrealized Losses	(31)	(55)
Greater than 12 months Fair Value	368	7,117
Greater than 12 months Unrealized Losses	(11)	(215)
Fair Value, Total	3,792	13,097
Unrealized Losses, Total	(42)	(270)
Fixed income securities [Member] | Asset backed securities [Member]
Less than 12 months Fair Value	2,056	7,908
Less than 12 months Unrealized Losses	(8)	(183)
Greater than 12 months Fair Value	9,583	10,276
Greater than 12 months Unrealized Losses	(168)	(115)
Fair Value, Total	11,639	18,184
Unrealized Losses, Total	(176)	(298)
Equity Securities [Member]
Less than 12 months Fair Value	9,255	19,615
Less than 12 months Unrealized Losses	(1,418)	(3,670)
Greater than 12 months Fair Value	2,214	606
Greater than 12 months Unrealized Losses	(217)	(151)
Fair Value, Total	11,469	20,221
Unrealized Losses, Total	(1,635)	(3,821)
Equity Securities [Member] | Basic materials [Member]
Less than 12 months Fair Value	719	1,340
Less than 12 months Unrealized Losses	(99)	(187)
Greater than 12 months Fair Value
Greater than 12 months Unrealized Losses
Fair Value, Total	719	1,340
Unrealized Losses, Total	(99)	(187)
Equity Securities [Member] | Communications [Member]
Less than 12 months Fair Value	451	2,001
Less than 12 months Unrealized Losses	(55)	(378)
Greater than 12 months Fair Value	1,356	167
Greater than 12 months Unrealized Losses	(195)	(46)
Fair Value, Total	1,807	2,168
Unrealized Losses, Total	(250)	(424)
Equity Securities [Member] | Consumer, cyclical [Member]
Less than 12 months Fair Value	1,491	1,237
Less than 12 months Unrealized Losses	(139)	(167)
Greater than 12 months Fair Value
Greater than 12 months Unrealized Losses
Fair Value, Total	1,491	1,237
Unrealized Losses, Total	(139)	(167)
Equity Securities [Member] | Consumer, non-cyclical [Member]
Less than 12 months Fair Value	1,867	4,781
Less than 12 months Unrealized Losses	(384)	(899)
Greater than 12 months Fair Value	410	316
Greater than 12 months Unrealized Losses	(15)	(17)
Fair Value, Total	2,277	5,097
Unrealized Losses, Total	(399)	(916)
Equity Securities [Member] | Energy [Member]
Less than 12 months Fair Value	1,602	1,041
Less than 12 months Unrealized Losses	(508)	(289)
Greater than 12 months Fair Value
Greater than 12 months Unrealized Losses
Fair Value, Total	1,602	1,041
Unrealized Losses, Total	(508)	(289)
Equity Securities [Member] | Financial [Member]
Less than 12 months Fair Value	1,553	3,722
Less than 12 months Unrealized Losses	(32)	(549)
Greater than 12 months Fair Value
Greater than 12 months Unrealized Losses
Fair Value, Total	1,553	3,722
Unrealized Losses, Total	(32)	(549)
Equity Securities [Member] | Industrial [Member]
Less than 12 months Fair Value	1,112	2,281
Less than 12 months Unrealized Losses	(59)	(368)
Greater than 12 months Fair Value
Greater than 12 months Unrealized Losses
Fair Value, Total	1,112	2,281
Unrealized Losses, Total	(59)	(368)
Equity Securities [Member] | Technology [Member]
Less than 12 months Fair Value	460	3,212
Less than 12 months Unrealized Losses	(142)	(833)
Greater than 12 months Fair Value	448	123
Greater than 12 months Unrealized Losses	(7)	(88)
Fair Value, Total	908	3,335
Unrealized Losses, Total	$ (149)	$ (921)

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Recent Accounting Pronouncements (Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Recent Accounting Pronouncements Narrative
Income tax effects from accumulated other comprehensive income to retained earnings	$ 2,717
Pre-tax unrealized net capital gains	$ 8,184

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Organization

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

1. Organization

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

These consolidated financial statements of NI Holdings include the financial position and results of NI Holdings and six other entities:

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

· Nodak Agency, Inc. (“Nodak Agency”);

· American West Insurance Company (“American West”);

· Primero Insurance Company (“Primero”);

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

· Direct Auto Insurance Company (“Direct Auto”).

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 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 is controlled by Nodak Insurance via a surplus note and 100% quota-share agreement. 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. 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 and Direct Auto 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.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 31, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	NI Holdings, Inc.
Entity Central Index Key	0001681206
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		22,095,065
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity File Number	001-37973
Entity Incorporation, State or Country Code	ND
Document Quarterly Report	true
Document Transition Report	false

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Reinsurance (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2017
Reinsurance Disclosures [Abstract]
Reinsurance Retention Policy, Amount Retained	$ 10,000	$ 10,000	$ 10,000
Reinsurance Retention Policy, Excess Retention, Amount Reinsured	78,600	$ 74,600	74,600
Retained risk amount	$ 10,000		$ 5,000
Ceded reinsurance commission percentage	100.00%

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Unaudited Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net income (loss)	$ (6,959)	$ 9,877	$ 9,352	$ 16,285
Other comprehensive income loss, before income taxes:
Holding gains (losses) on investments	2,054	2,773	10,048	(495)
Reclassification adjustment for net realized capital (gain) loss included in net income	(12)	(3,160)	19	(3,879)
Other comprehensive income, before income taxes	2,042	(387)	10,067	(4,374)
Income tax expense related to items of other comprehensive income (loss)	(429)	81	(2,114)	918
Other comprehensive income (loss), net of income taxes	1,613	(306)	7,953	(3,456)
Comprehensive income (loss)	(5,346)	9,571	17,305	12,829
Attributable to NI Holdings, [Member]
Net income (loss)	(6,979)	9,844	9,272	16,192
Other comprehensive income loss, before income taxes:
Holding gains (losses) on investments	2,018	2,787	9,876	(375)
Reclassification adjustment for net realized capital (gain) loss included in net income	(12)	(3,160)	22	(3,879)
Other comprehensive income, before income taxes	2,006	(373)	9,898	(4,254)
Income tax expense related to items of other comprehensive income (loss)	(422)	78	(2,079)	893
Other comprehensive income (loss), net of income taxes	1,584	(295)	7,819	(3,361)
Comprehensive income (loss)	(5,395)	9,549	17,091	12,831
Attributable to Non-Controlling Interest [Member]
Net income (loss)	20	33	80	93
Other comprehensive income loss, before income taxes:
Holding gains (losses) on investments	36	(14)	172	(120)
Reclassification adjustment for net realized capital (gain) loss included in net income			(3)
Other comprehensive income, before income taxes	36	(14)	169	(120)
Income tax expense related to items of other comprehensive income (loss)	(7)	3	(35)	25
Other comprehensive income (loss), net of income taxes	29	(11)	134	(95)
Comprehensive income (loss)	$ 49	$ 22	$ 214	$ (2)

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Stock Based Compensation (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-Based Compensation	$ 1,274	$ 990
All award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share issued	500,000
Shares granted	100,000
Outstanding, Aggregate Intrinsic Value	$ 1,000
All award [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share granted not exceed	$ 100
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted	57,100		40,000
Vesting period	5 years
Total unrecognized compensation cost	$ 940
Total unrecognized compensation cost, weighted average period	3 years 7 days
Percentage of RSU granted to employees per year	20.00%
Percentage of RSU granted to non-employee directors per year	100.00%
Performance Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted	62,400		48,600
Total unrecognized compensation cost	$ 1,169
Total unrecognized compensation cost, weighted average period	1 year 9 months 29 days

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Stock Based Compensation (Schedule of PSU Activity) (Details) - Performance Stock Units [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
PSU compensation expense	$ 175	$ 70	$ 647	$ 163
Income tax benefit	(37)	(14)	(136)	(34)
PSU compensation expense, net of income taxes	$ 138	$ 56	$ 511	$ 129

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Reinsurance

9 Months Ended

Sep. 30, 2019

Reinsurance Disclosures [Abstract]

Reinsurance

8.             Reinsurance

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

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

As a group, during the three and nine month periods ended September 30, 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. During the years ended December 31, 2018 and 2017, the catastrophic retention amount was $10,000 while the catastrophic reinsurance was $74,600. Prior to January 1, 2017, the group collectively retained the first $5,000 of weather-related losses.

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-” 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, 2019						Nine Months Ended September 30, 2019
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	49,984		$	70,481		$	208,880		$	192,233
Assumed premium		1,203			1,234			5,235			5,233
Ceded premium		(4,599	)		(4,599	)		(14,730	)		(14,730	)
Net premiums	$	46,588		$	67,116		$	199,385		$	182,736
Percentage of assumed earned premium to net earned premium					1.8%						2.9%

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	46,220		$	63,737		$	174,074		$	154,916
Assumed premium		974			1,084			5,506			5,572
Ceded premium		(10,685	)		(10,685	)		(19,563	)		(19,563	)
Net premiums	$	36,509		$	54,136		$	160,017		$	140,925
Percentage of assumed earned premium to net earned premium					2.0%						4.0%

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Direct losses and loss adjustment expenses	$	62,248		$	39,219		$	138,481		$	98,977
Assumed losses and loss adjustment expenses		2,017			827			3,000			1,903
Ceded losses and loss adjustment expenses		(2,707	)		(2,590	)		(5,496	)		(3,854	)
Net losses and loss adjustment expenses	$	61,558		$	37,456		$	135,985		$	97,026

If 100% of our ceded reinsurance was cancelled as of September 30, 2019 or December 31, 2018, no ceded commissions would need to be returned to the reinsurers. Reinsurance contracts are typically effective from January 1 through December 31 each year.

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Acquisition of Direct Auto Insurance Company

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisition of Direct Auto Insurance Company

4.            Acquisition of Direct Auto Insurance Company

On August 31, 2018, the Company completed the acquisition of 100% of the common stock of Direct Auto from the private shareholders of Direct Auto, and Direct Auto became a consolidated subsidiary of the Company. Direct Auto is a property and casualty insurance company specializing in non-standard automobile insurance in the state of Illinois. The Company realized a $4,578 gain on the purchase of Direct Auto due to the use of applicable purchase accounting guidance (known as a “bargain purchase”).

Direct Auto remains headquartered in Chicago, Illinois and the current president (who was also one of the principal shareholders) of Direct Auto continues to manage the Direct Auto insurance operations along with the current staff and management team. The results of Direct Auto are included as part of the Company’s non-standard auto 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 Direct Auto transaction. During the measurement period, adjustments to provisional purchase price allocations are recognized if new information is obtained about the facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as it is determined that no more information is obtainable, but in no case shall the measurement period exceed one year from the acquisition date. The Company did not make any adjustments during this period.

The acquired Direct Auto business contributed revenues of $12,082 and net income of $2,067 to the Company for the three months ended September 30, 2019, and revenues of $36,924 and net income of $6,166 for the nine months ended September 30, 2019. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2017:

	Pro forma Three Months Ended September 30,					Pro forma Nine Months Ended September 30,
	2019			2018		2019		2018
Revenues	$	70,248		$	67,126	$	199,468	$	180,323
Net income (loss) attributable to NI Holdings, Inc.		(6,970	)		5,623		9,386		12,012
Basic earnings (loss) per share attributable to NI Holdings, Inc.		(0.31	)		0.25		0.42		0.54

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 Direct Auto 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, 2017, with the related income tax effects.

In 2018, the Company incurred $118 of acquisition-related costs. These expenses did not impact the pro forma amounts presented above.

The Company paid $17,000 in cash consideration to the private shareholders of Direct Auto. The acquisition of Direct Auto did not include any contingent consideration. The following table summarizes the consideration transferred to acquire Direct Auto and the amounts of identified assets acquired and liabilities assumed at the acquisition date:

Fair Value of Consideration:
Total cash consideration transferred	$	17,000
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Identifiable net assets:
Cash and cash equivalents	$	44,485
Fixed income securities, at fair value		11,414
Equity securities, at fair value		14,634
Premiums and agents' balances receivable		5,849
Accrued investment income		63
Property and equipment		31
Favorable lease contract (included in goodwill and other intangibles)		20
License (included in goodwill and other intangibles)		100
Trade name (included in goodwill and other intangibles)		248
Value of business acquired (included in goodwill and other intangibles)		5,134
Other assets		107
Unpaid losses and loss adjustment expenses		(40,967	)
Unearned premiums		(15,955	)
Federal income tax payable		(1,486	)
Deferred income taxes, net		(1,442	)
Accrued expenses and other liabilities		(657	)
Total identifiable net assets	$	21,578
Gain on bargain purchase	$	4,578

The fair value of the assets acquired includes premiums and agents’ balances receivable of $5,849. This is the gross amount due from policyholders and agents, none of which is anticipated to be uncollectible. The Company did not acquire any other material class of receivable as a result of the acquisition of Direct Auto.

We have completed our final analysis of the assets and liabilities acquired and assigned fair values to the acquired intangibles consisting of favorable lease contract, state insurance license, Direct Auto trade name, and VOBA intangible assets of $20, $100, $248, and $5,134, respectively. The state insurance license has an indefinite life, while the other intangible assets will be amortized over useful lives of up to five years.

The gain realized on bargain purchase of $4,578 from the Direct Auto acquisition is included in fee and other income in the Company’s Consolidated Statements of Operations during the three months ended September 30, 2018.

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Schedule of illustrates the impact of consolidating Battle Creek into our consolidated balance sheets prior to intercompany eliminations

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

	September 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents (overdraft)	$	(862	)	$	(818	)
Investments		4,626			4,304
Premiums and agents’ balances receivable		5,158			4,479
Reinsurance recoverables on losses (1)		26,982			21,117
Accrued investment income		33			31
Deferred income tax asset, net		355			414
Property and equipment		353			356
Other assets		44			48
Total assets	$	36,689		$	29,931
Liabilities:
Unpaid losses and loss adjustment expenses	$	10,718		$	6,579
Unearned premiums		16,290			14,538
Notes payable (1)		3,000			3,000
Reinsurance premiums payable (1)		2,026			972
Accrued expenses and other liabilities		1,178			1,579
Total liabilities		33,212			26,668
Equity:
Non-controlling interest		3,477			3,263
Total equity		3,477			3,263
Total liabilities and equity	$	36,689		$	29,931
(1)    Amount eliminated in consolidation.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates:

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.

Variable-Interest Entities

Variable-Interest Entities:

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 two-thirds of the Board of Directors of Battle Creek via a 100% quota-share reinsurance agreement between Nodak Insurance and Battle Creek and a surplus note issued by Battle Creek to Nodak Insurance. Through the effects of the 100% quota-share agreement with Battle Creek, we are considered the primary beneficiary of Battle Creek’s operating results excluding investment income, bad debt expense, and income taxes. Therefore, 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 Equity in our Consolidated Balance Sheet.

Cash and Cash Equivalents

Cash and Cash Equivalents:

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.

Investments

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 in unrealized gains and losses on equity securities are reported as a component of net capital gain on investments in our operating results.

Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Amortization of premium and accretion of discount are computed using an effective interest method. Net investment income includes interest and dividend income together with amortization of purchase premiums and discounts, and is net of investment management and custody fees. Realized gains and losses on investments are determined using the specific identification method and are included in net capital gain on investments, along with the change in unrealized gains and losses on equity securities after January 1, 2019.

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.

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.

Fair Value of Other Financial Instruments

Fair Value of Other Financial Instruments:

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. The carrying value of these other invested assets was $1,914 at September 30, 2019 and $1,954 at December 31, 2018.

Reclassifications

Reclassifications:

Certain amounts in the 2018 consolidated financial statements have been reclassified to conform to the 2019 presentation.

Revenue Recognition

Revenue Recognition:

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 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.

Policy Acquisition Costs

Policy Acquisition Costs:

We defer our policy acquisition costs, consisting primarily of commissions, 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.

Property and Equipment

Property and Equipment:

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.

Losses and Loss Adjustment Expenses

Losses and Loss Adjustment Expenses:

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 reserving function through analysis of costs and trends and reviews of historical reserving results. 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.

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.

Income Taxes

Income Taxes:

With the exception of Battle Creek, which files a stand-alone federal income tax return, we currently file a consolidated federal income tax return. For the year ended December 31, 2016, the consolidated federal income tax return included Nodak Mutual Insurance Company and its wholly-owned subsidiaries. For the year ended December 31, 2017 and thereafter, the consolidated federal income tax return included and will include thereafter NI Holdings and its wholly-owned subsidiaries. Direct Auto became part of the consolidated federal income tax return as of its acquisition date.

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 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.

The Company reports tax-related interest and penalties, if any, as part of income tax expense in the year such amounts are determinable.

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 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 also requires 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 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.

Credit Risk

Credit Risk:

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 investment staff and 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 operating areas. All business is billed directly to policyholders.

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

Reinsurance

Reinsurance:

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 and Other Intangibles

Goodwill and Other Intangibles:

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 intangible assets with an indefinite useful life for impairment annually. We also assess goodwill and other intangible assets 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 intangible assets could result from changes in economic and operating conditions in future periods. We did not record any impairments of goodwill or other intangible assets during the three or nine month periods ended September 30, 2019 and 2018.

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 intangible assets 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.

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Reinsurance (Tables)

9 Months Ended

Sep. 30, 2019

Reinsurance Disclosures [Abstract]

Schedule of reconciliation of direct to net premiums on both a written and an earned basis

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

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	49,984		$	70,481		$	208,880		$	192,233
Assumed premium		1,203			1,234			5,235			5,233
Ceded premium		(4,599	)		(4,599	)		(14,730	)		(14,730	)
Net premiums	$	46,588		$	67,116		$	199,385		$	182,736
Percentage of assumed earned premium to net earned premium					1.8%						2.9%

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	46,220		$	63,737		$	174,074		$	154,916
Assumed premium		974			1,084			5,506			5,572
Ceded premium		(10,685	)		(10,685	)		(19,563	)		(19,563	)
Net premiums	$	36,509		$	54,136		$	160,017		$	140,925
Percentage of assumed earned premium to net earned premium					2.0%						4.0%

Schedule of reconciliation of direct to net losses and loss adjustment expenses

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Direct losses and loss adjustment expenses	$	62,248		$	39,219		$	138,481		$	98,977
Assumed losses and loss adjustment expenses		2,017			827			3,000			1,903
Ceded losses and loss adjustment expenses		(2,707	)		(2,590	)		(5,496	)		(3,854	)
Net losses and loss adjustment expenses	$	61,558		$	37,456		$	135,985		$	97,026