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NI Holdings, Inc. (NODK): Solid Quarterly Results Driven by Premium Growth and Improved Underwriting
Published on September 24, 2024 | Ticker: NODK

NI Holdings, Inc. (NASDAQ:NODK) reported strong financial results for the first quarter of 2024, showcasing the company's ability to navigate the evolving insurance landscape. The quarter was marked by robust premium growth, enhanced underwriting performance, and prudent capital management, positioning NI Holdings for continued success.

Financial Highlights

For the first quarter of 2024, NI Holdings reported net income of $6,419, or $0.31 per share on a basic basis and $0.30 per share on a diluted basis. This represents a significant improvement compared to the net loss of $4,500, or $0.20 per share, reported in the same period of the prior year. The company's annual net income for the full year 2023 was -$5,476,000.

Quarterly net premiums earned increased by 10.2% to $85,557, compared to $77,627 in the first quarter of 2023. This growth was driven by strong performance across the company's business segments, including private passenger auto, non-standard auto, and home and farm. The company's annual revenue for 2023 was $365,695,000.

NI Holdings' underwriting gain for the quarter was $2,387, a significant improvement from the underwriting loss of $9,442 reported in the same period of the prior year. This was primarily attributable to favorable loss experience, reduced unfavorable prior year reserve development, and the company's ongoing efforts to enhance its underwriting practices. The company's annual operating cash flow for 2023 was $25,970,000, and its annual free cash flow was $24,996,000.

The company's combined ratio improved to 97.2% in the first quarter of 2024, compared to 112.2% in the same period of the prior year. This demonstrates NI Holdings' ability to effectively manage its underwriting risks and maintain a disciplined approach to pricing and risk selection.

Business Overview

NI Holdings is a diversified insurance holding company that operates through its subsidiaries, including Nodak Insurance Company, American West Insurance Company, Primero Insurance Company, Battle Creek Insurance Company, Direct Auto Insurance Company, and Westminster American Insurance Company. The company offers a range of insurance products, including private passenger auto, non-standard auto, home and farm, crop, and commercial coverage, primarily in the Midwest and Western regions of the United States.

Nodak Insurance, the company's largest subsidiary, is the largest domestic property and casualty insurance company in North Dakota, offering a comprehensive suite of insurance products to its customers. American West, another key subsidiary, focuses on private passenger auto, homeowners, and farm coverages in South Dakota and North Dakota. Direct Auto, acquired in 2018, provides non-standard auto coverage in Illinois, while Westminster, acquired in 2020, specializes in commercial multi-peril insurance in the Eastern and Mid-Atlantic regions.

The company's diversified business model and geographic footprint have enabled it to navigate the challenges faced by the insurance industry, leveraging its strong market positions and underwriting expertise to deliver consistent financial performance.

Segment Performance

Private Passenger Auto

: Net premiums earned in this segment increased by 12.5% to $22,102, driven by significant rate increases in North Dakota, South Dakota, and Nebraska, partially offset by lower new business levels in certain markets due to underwriting actions.

Non-Standard Auto

: This segment reported a 19.7% increase in net premiums earned to $24,989, benefiting from new business growth in Arizona and Illinois, as well as substantial rate increases in the Chicago market.

Home and Farm

: Net premiums earned in this segment grew by 7.1% to $21,414, primarily due to rate increases and higher insured property values, partially offset by lower retention rates and new business levels in certain states.

Crop

: As is typical for the first quarter, net premiums earned in this segment were primarily the result of prior crop year premium adjustments, with the majority of crop insurance premiums generally written in the second quarter and earned ratably over the remainder of the year.

Commercial

: Net premiums earned in this segment increased by 7.0% to $17,138, driven by significant rate increases, partially offset by lower retention rates and new business levels due to underwriting actions.

All Other

: This segment, which includes the company's assumed reinsurance and excess liability business, reported a 19.3% decrease in net premiums earned to $1,463, primarily due to the continued run-off of the company's participation in an assumed domestic and international reinsurance pool.

Liquidity and Capital Management

NI Holdings maintains a strong liquidity position, with total cash and investments of $449,946 as of March 31, 2024. The company's operating cash flows for the first quarter of 2024 were $16,146, a significant improvement compared to the $4,351 used in the same period of the prior year.

The company's subsidiaries are subject to regulatory capital requirements, and as of December 31, 2023, the company's insurance subsidiaries exceeded the minimum capital and surplus levels required by their respective state insurance departments. NI Holdings' conservative approach to capital management and prudent risk-taking have enabled it to maintain a solid financial position and flexibility to support its growth initiatives.

Risks and Outlook

While NI Holdings has demonstrated its ability to navigate the challenges faced by the insurance industry, the company remains exposed to various risks, including underwriting and pricing risks, investment portfolio performance, regulatory changes, and macroeconomic conditions. The company's management team continues to monitor these risks and implement strategies to mitigate their potential impact.

Looking ahead, NI Holdings remains cautiously optimistic about its future prospects. The company's focus on disciplined underwriting, diversified product offerings, and prudent capital management positions it well to capitalize on growth opportunities and deliver sustainable financial performance for its shareholders.

Conclusion

NI Holdings' strong first-quarter results highlight the company's ability to navigate the evolving insurance landscape. The company's robust premium growth, improved underwriting performance, and prudent capital management have positioned it for continued success. As NI Holdings continues to execute on its strategic initiatives, investors can look forward to the company's ability to deliver consistent financial performance and create long-term value.

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