NI Holdings, Inc.

Previous wording

The following discussion is intended to provide a more comprehensive review of our operating results and financial condition than can be obtained from reading the unaudited consolidated financial statements alone. Unless otherwise noted, the information in the following discussion is being presented for our continuing operations. 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 Form 10-Q constitutes forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” included elsewhere in this Form 10-Q. Part I, Item 1A, “Risk Factors” included in our 2024 Annual Report and Part II, Item 1A “Risk Factors” included in this Form 10-Q, should also be reviewed 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.

Current wording

The following discussion is intended to provide a more comprehensive review of our operating results and financial condition than can be obtained from reading the 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 Form 10-Q constitutes forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” included elsewhere in this Form 10-Q. Part I, Item 1A, “Risk Factors” included in our 2025 Annual Report should also be reviewed 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.

Previous wording

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

Current wording

All dollar amounts, except per share data, are in thousands.

Previous wording

2025 Third Quarter Consolidated Results of Operations

Current wording

2026 First Quarter Consolidated Results of Operations

Previous wording

2025 Third Quarter Consolidated Financial Condition

Current wording

2026 First Quarter Consolidated Financial Condition

Previous wording

The major components of our revenues and net loss are shown below:

Current wording

The major components of our revenues and net income for the two periods are shown below:

Previous wording

Private Passenger Auto – Net premiums earned for the third quarter of 2025 increased $594, or 2.6%, compared to the same period in 2024. Net premiums earned for the first nine months of 2025 increased $1,602, or 2.4% from the first nine months of 2024. Results were driven by new business growth in North Dakota as well as significant rate increases in South Dakota and Nebraska, partially offset by lower new business and retention levels in South Dakota and Nebraska as a result of underwriting actions taken.

Current wording

Private Passenger Auto – Net premiums earned for the three months ended March 31, 2026, decreased $362, or 1.6%, compared to the same period in 2025. Results were driven by lower renewal premiums in South Dakota and Nebraska as a result of underwriting actions taken in recent periods, partially offset by new business growth in North Dakota.

Previous wording

Non-Standard Auto – Net premiums earned for the third quarter of 2025 decreased $12,142, or 52.8%, compared to the same period in 2024. Net premiums earned for the first nine months of 2025 decreased $31,116, or 41.6% from the first nine months of 2024. These decreases were driven by strategic decisions to exit Nevada and significantly reduce written premium in the Chicago market. During the third quarter we also made the strategic decision to stop writing non-standard auto business in Illinois, Arizona, and South Dakota, and existing policies will be non-renewed. We anticipate further reductions in net earned premiums over the next twelve months as a result of the decisions to run off these non-standard auto operations.

Current wording

Non-Standard Auto – Net premiums earned for the three months ended March 31, 2026, decreased $15,649, or 85.7%, compared to the same period in 2025. This decrease was driven by strategic decision during the third quarter of 2025 to stop writing non-standard auto business in Illinois, Arizona, and South Dakota, with existing policies being non-renewed. We anticipate further reductions in net earned premiums in the near term as a result of the decisions to run off these non-standard auto operations.

Previous wording

Home and Farm – Net premiums earned for the third quarter of 2025 increased $163, or 0.7%, compared to the same period in 2024. Net premiums earned for the first nine months of 2025 increased $1,856, or 2.8% from the first nine months of 2024. Results were driven by new business growth in North Dakota, rate increases, and increased insured property values, partially offset by lower retention rates and new business levels in Nebraska as a result of underwriting actions taken to improve profitability. In addition, net premiums earned for the second and third quarter of 2025 were impacted by the recognition of higher ceded premiums earned as a result of a significant catastrophe event in North Dakota during the second quarter of 2025.

Current wording

Home and Farm – Net premiums earned for the three months ended March 31, 2026, increased $1,973, or 8.3%, compared to the same period in 2025. Results were driven by new business growth in North Dakota and South Dakota, rate increases, and increased insured property values. These increases were partially offset by lower homeowners renewal premiums in South Dakota and Nebraska as a result of underwriting actions taken to improve profitability.

Previous wording

Our net losses and loss adjustment expenses for the three months ended September 30, 2025, decreased $8,903, or 13.7%, compared to the three months ended September 30, 2024. Our net losses and loss adjustment expenses for the nine months ended September 30, 2025, decreased $13,273, or 7.6%, compared to the nine months ended September 30, 2024.

Current wording

Our net losses and loss adjustment expenses for the three months ended March 31, 2026, decreased $15,169, or 39.4%, compared to the three months ended March 31, 2025.

Previous wording

Private Passenger Auto – The net loss and loss adjustment expense ratio decreased 1.4 percentage points and 7.3 percentage points in the three- and nine-month periods ended September 30, 2025, respectively, compared to the same periods in 2024. These decreases in the current year were driven by improved loss severity on physical damage claims and rate increases impacting net premiums earned.

Current wording

Home and Farm – The net loss and loss adjustment expense ratio decreased 1.0 percentage point in the three-month period ended March 31, 2026, compared to the same period in 2025. This decrease in the current year quarter was driven by favorable prior year development on loss reserves and rate increases impacting net premiums earned.

Previous wording

The expense ratio is calculated by dividing other underwriting and general expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company’s operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio decreased 1.9 percentage points and increased 0.3 percentage points in the three-and nine-month periods ended September 30, 2025, respectively, compared to the same periods in 2024. The decrease in the amortization of deferred policy acquisition costs is due to lower deferrable costs resulting from the strategic reduction in premium for the Non-Standard Auto segment, which generally pays higher agent commissions than our other segments. Other underwriting and general expenses are generally consistent year-over-year, with the elevated expenses during the third quarter of 2024 being the result of the costs associated with the execution of an executive separation agreement.

Current wording

The expense ratio is calculated by dividing other underwriting and general expenses and amortization of deferred policy acquisition costs by net premiums earned. The expense ratio measures a company’s operational efficiency in producing, underwriting, and administering its insurance business. The overall expense ratio remained consistent in the three-month period ended March 31, 2026, compared to the same period in 2025. The decrease in the amortization of deferred policy acquisition costs is due to lower deferrable costs resulting from the strategic reduction in premium for the Non-Standard Auto segment, which generally pays higher agent commissions than our other segments. Other underwriting and general expenses were consistent with the prior year quarter and reflect strategic investments in human capital and technology during the current year.

Previous wording

The total underwriting loss decreased $2,649 for the three-month period ended September 30, 2025, compared to the same period in 2024. The total underwriting loss increased $4,425 for the nine-month period ended September 30, 2025, compared to the same period in 2024. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses as well as the Underwriting and General Expenses and Expense Ratio sections above.

Current wording

The total underwriting gain increased $7,409 to a gain of $11,221 for the three-month period ended March 31, 2026, from a gain of $3,812 for the three-month period ended March 31, 2025. These results were driven by the factors discussed in the Net Premiums Earned, Loss and Loss Adjustment Expenses, and the Underwriting and General Expenses and Expense Ratio sections above.

Previous wording

The overall combined ratio decreased 1.9 percentage points in the three-month period ended September 30, 2025, compared to the same period in 2024. The overall combined ratio increased 3.0 percentage points in the nine-month period ended September 30, 2025, compared to the same period in 2024. These results were driven by the factors discussed in the Loss and Loss Adjustment Expenses as well as the Underwriting and General Expenses and Expense Ratio sections above.

Current wording

The overall combined ratio decreased 14.7 percentage points in the three-month period ended March 31, 2026, compared to the same period in 2025. These results were driven by the factors discussed in the Net Premiums Earned, Loss and Loss Adjustment Expenses, and the Underwriting and General Expenses and Expense Ratio sections above.

Previous wording

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

Current wording

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

Previous wording

Gross and net return on average cash and invested assets increased year-over-year, primarily driven by the favorable interest rate environment that resulted in higher net investment income on an increased average fixed income securities balance (measured at fair value), partially offset by lower interest rates in the current year periods for cash and cash equivalents. The increase in average cash and invested assets was driven by changes in the fair value of fixed income securities due to the interest rate environment as well as positive operating cash flows during the first six months of 2025.

Current wording

Gross and net return on average cash and invested assets decreased year-over-year, primarily driven by consistent yields on a lower average fixed income securities balance (measured at fair value) and lower returns on cash and other short-term investments, partially offset by lower investment expenses. The decrease in average cash and invested assets was driven by a decrease in the fixed income securities balance in 2026 as proceeds from maturities and sales were used to fund operating cash needs.

Previous wording

Net investment gains consisted of the following:

Current wording

Net investment gains (losses) consisted of the following:

Previous wording

We had net realized gains of $811 and $1,244 for the three and nine months ended September 30, 2025, respectively, compared to net realized gains of $45 and losses of $37 for the three and nine months ended September 30, 2024, respectively. The elevated net realized gains in the nine months ended September 30, 2025, were driven by sales of equity securities that were executed as part of the strategic management of our investment portfolio. No credit impairment losses were reported during any of the periods presented.

Current wording

We had net realized gains of $141 for the three months ended March 31, 2026, compared to net realized gains of $326 for the three months ended March 31, 2025, which were the result of routine portfolio management decisions. No credit impairment losses were reported during any of the periods presented.

Previous wording

We experienced an increase of $551 and $577 in net unrealized gains on equity securities during the three and nine months ended September 30, 2025, respectively. We experienced an increase in net unrealized gains on equity securities of $2,367 and $3,325 during the three and nine months ended September 30, 2024, respectively. These results were driven by the impact of changes in fair value attributable to overall favorable equity markets during those periods.

Current wording

We experienced an increase in net unrealized gains on equity securities of $1,563 and $543 during the three months ended March 31, 2026 and 2025, respectively, driven by the impact of changes in fair value attributable to favorable equity markets during these periods.

Previous wording

Our fixed income securities are classified as available for sale because we will, from time to time, execute sales of securities that are not impaired, consistent with our investment goals and policies. The fixed income portion of the portfolio experienced net unrealized gains of $3,895 and $8,677 during the three and nine months ended September 30, 2025, respectively, compared to net unrealized gains of $11,138 and $8,848 during the three and nine months ended September 30, 2024, respectively. The changes were primarily the result of changes in U.S. interest rates. The change in the fair value of fixed income securities is not reflected in net income; rather it is reflected as a separate component (net of income taxes) of other comprehensive income.

Current wording

Our fixed income securities are classified as available for sale because we will, from time to time, execute sales of securities that are not impaired, consistent with our investment goals and policies. The fixed income portion of the portfolio experienced net unrealized losses of $2,411 during the three months ended March 31, 2026, compared to net unrealized gains of $3,313 during the three months ended March 31, 2025. The change was primarily the result of changes in U.S. interest rates. The change in the fair value of fixed income securities is not reflected in net income; rather it is reflected as a separate component (net of income taxes) of other comprehensive income.

Previous wording

We had fee and other income of $261 and $807 for the three and nine months ended September 30, 2025, respectively, compared to $491 and $1,590 for the three and nine months ended September 30, 2024, respectively. These decreases were driven by strategic reductions in the premiums that generate fee income and write-offs of uncollectable premiums receivable.

Current wording

We had fee and other income of $130 for the three months ended March 31, 2026, compared to $230 for the three months ended March 31, 2025. The decrease in the current year was driven by strategic reductions in non-standard auto premiums that typically generate the majority of the fee income.

Previous wording

For the three months ended September 30, 2025, we had annualized return on average equity of (2.7)% compared to (4.5)% for the three months ended September 30, 2024.

Current wording

For the three months ended March 31, 2026, we had annualized return on average equity of 20.4% compared to 10.4% for the three months ended March 31, 2025.

Previous wording

We also have a $3,000 line of credit with Wells Fargo Bank, N.A. The terms of the line of credit include a floating interest rate of 2.50% above the daily simple secured overnight financing rate. There were no outstanding amounts during the nine months ended September 30, 2025, or the year ended December 31, 2024. This line of credit is scheduled to expire on December 13, 2025.

Current wording

We also have a $3,000 line of credit with Wells Fargo Bank, N.A. The terms of the line of credit include a floating interest rate of 2.25% above the daily simple secured overnight financing rate. There were no outstanding amounts during the three months ended March 31, 2026, or the year ended December 31, 2025. This line of credit is scheduled to expire on December 11, 2026.

Previous wording

The change in cash and cash equivalents for continuing and discontinued operations for the nine months ended September 30, 2025 and 2024, were as follows:

Current wording

The change in cash and cash equivalents for the three months ended March 31, 2026 and 2025, were as follows:

Previous wording

The amount available for payment of dividends from Nodak Insurance to NI Holdings during 2025 without the prior approval of the North Dakota Insurance Department is approximately $8,273 as of December 31, 2024. No dividends were declared or paid by Nodak Insurance during the nine months ended September 30, 2025, or the year ended December 31, 2024.

Current wording

The amount available for payment of dividends from Nodak Insurance to NI Holdings during 2026 without the prior approval of the North Dakota Insurance Department is approximately $6,730 as of December 31, 2025. No dividends were declared or paid by Nodak Insurance during the three months ended March 31, 2026, or the year ended December 31, 2025.

Previous wording

The amount available for payment of dividends from Direct Auto to NI Holdings during 2025 without the prior approval of the North Dakota Insurance Department is approximately $3,146 as of December 31, 2024. No dividends were declared or paid by Direct Auto during the nine months ended September 30, 2025, or the year ended December 31, 2024.

Current wording

The amount available for payment of dividends from Direct Auto to NI Holdings during 2026 without the prior approval of the North Dakota Insurance Department is approximately $3,829 as of December 31, 2025. No dividends were declared or paid by Direct Auto during the three months ended March 31, 2026, or the year ended December 31, 2025.

Previous wording

Prior to the payment of any dividend, we 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.

Current wording

Prior to its payment of any 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.