NI Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. NI Holdings is a property-and-casualty insurance holding company operating through subsidiaries across auto, home and farm, crop, commercial and other insurance lines. Dollar amounts below are in millions unless otherwise stated.
Financial results and condition
| Metric | Q1 2024 | Q1 2023 / prior period |
|---|---|---|
| Total revenue | $91.4 | $81.6 |
| Net premiums earned | $85.6 | $77.6 |
| Net investment income | $3.6 | $2.2 |
| Net income (loss) | $6.4 | $(4.5) |
| Basic / diluted EPS | $0.31 / $0.30 | $(0.20) / $(0.20) |
| Underwriting gain (loss) | $2.4 | $(9.4) |
| Combined ratio | 97.2% | 112.2% |
| Operating cash flow | $16.1 | $(4.4) |
- Net premiums earned rose 10.2%. Growth reflected rate increases across major lines, along with non-standard auto growth; management noted lower new business or retention in some markets following underwriting actions.
- Net losses and loss adjustment expenses fell 11.2% to $52.2 million. The loss ratio improved to 61.0% from 75.8%; the expense ratio was 36.2% versus 36.4%.
- Pre-tax income was $8.2 million, compared with a $5.5 million loss. Net investment gains were $1.8 million versus $1.4 million, but their composition differed: Q1 2023 included significant realized equity gains from a portfolio liquidation, while Q1 2024 gains principally reflected unrealized equity appreciation.
- At March 31, cash and investments were $449.9 million, total assets $674.5 million, liabilities $418.7 million and shareholders’ equity $255.8 million. Cash and investments increased from $434.2 million at December 31, 2023.
- Cash and cash equivalents were $68.5 million, up from $56.7 million at year-end. Investing activities used $4.1 million, as excess cash was invested.
- The company reported no borrowings on its $3.0 million Wells Fargo line of credit; it expires December 13, 2024. Lease liabilities totaled approximately $2.0 million.
Material changes and notable items
- Results improved substantially year over year, driven by premium growth, higher investment income, lower losses and less unfavorable prior-year reserve development. Q1 2024 included $1.3 million of net unfavorable prior-year reserve development, versus $10.0 million in Q1 2023.
- Management attributed improved auto and commercial results partly to rate increases and underwriting actions, and to milder winter weather than in the prior-year quarter. Home and farm losses increased, particularly due to elevated farm fire losses. Non-standard auto and commercial underwriting remained loss-making, with combined ratios of 108.6% and 110.8%, respectively.
- On January 2, 2024, Battle Creek converted from mutual to stock form and became a wholly owned subsidiary of Nodak Insurance. Its former $3.0 million surplus note was considered paid in full; non-controlling interest was eliminated. This change affects presentation and comparability.
- Fixed-income securities had $31.6 million of gross unrealized losses at March 31, 2024, including $30.7 million on securities continuously in a loss position for over 12 months. The company reported no expected-credit-loss allowance on fixed-income securities or reinsurance recoverables.
Outlook, risks and contingencies
- The filing provides no specific earnings or premium guidance. Management said it expects operating cash flows and liquidity in its investment portfolio to meet claims and operating expenses for the foreseeable future; interim results may not indicate full-year results.
- Insurance-subsidiary dividends are subject to regulatory limits. No Nodak Insurance dividends were available to NI Holdings in 2024 without prior regulatory approval; Direct Auto and Westminster had approximately $0.09 million and $1.2 million, respectively, available without prior approval.
- On May 7, 2024, the company agreed to sell Westminster for $10.5 million in cash, with proceeds intended for general corporate purposes. Closing was expected in 2024, subject to regulatory approval and other conditions.
- Risks highlighted include claims severity and reserve-estimation uncertainty, weather and catastrophe losses, inflation, interest-rate and investment-market changes, reinsurance recoverability, regulation and competition. Management said there were no material changes to the risk factors in its 2023 Form 10-K. Litigation is in the ordinary course and was not considered material, though outcomes cannot be assured.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the improved loss experience and 97.2% combined ratio persist, especially given adverse results in non-standard auto and commercial and the role of milder winter weather.
- Subsequent development of reserves, including the $1.3 million unfavorable prior-year development in Q1, and trends in loss severity and farm fire claims.
- Regulatory approval, closing conditions, timing and final proceeds from the planned Westminster sale, and the subsidiary’s contribution to future earnings and premiums.
- Investment portfolio exposure to interest rates and equity markets, including the substantial unrealized fixed-income losses and the composition of reported investment gains.
- Availability of subsidiary dividends and the parent company’s liquidity if regulatory restrictions limit upstream cash.