NI Holdings, Inc. Releases 2023 10-K Report Highlighting Financial and Operational Performance
NI Holdings, Inc., a leading property and casualty insurance company, has released its Form 10-K report for the fiscal year ending December 31, 2023. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment.
Financial Highlights
- Total Revenues: $365.695 million, reflecting an increase driven by higher net premiums earned and net investment income.
- Net Income (Loss): $(5.226) million, showing an improvement from the previous year's loss, largely due to reduced catastrophe losses and investment losses.
- Net Income (Loss) Attributable to NI Holdings, Inc.: $(5.476) million, indicating a continued focus on improving profitability despite challenging market conditions.
- Basic Earnings (Loss) Per Common Share: $(0.26), reflecting the net loss attributable to shareholders.
- Diluted Earnings (Loss) Per Common Share: $(0.26), consistent with basic earnings per share due to the net loss.
Business Highlights
Revenue Segments
- Private Passenger Auto: Significant growth in net premiums earned.
- Non-standard Auto: 31.2% increase in net premiums earned due to new business growth and rate increases in the Chicago market.
- Home and Farm: 6.4% increase driven by rate hikes and higher insured property values due to inflationary factors.
- Crop: 25.6% decrease in net premiums earned due to lower commodity prices and fewer acres insured.
- Commercial: 5.0% increase due to prior period new business growth and increased insured values.
- All Other: 31.4% decrease due to the decision to non-renew participation in an assumed reinsurance pool of business as of January 1, 2022.
Geographical Performance
- The company operates in various states with different market shares. In North Dakota, it is the largest domestic property and casualty insurance company, offering a range of coverages through captive agents. The company also operates in Illinois, Nebraska, South Dakota, Maryland, North Carolina, Virginia, New Jersey, Georgia, Pennsylvania, South Carolina, the District of Columbia, Arizona, Minnesota, Nevada, Tennessee, Delaware, Kentucky, and West Virginia.
- The company ranks 6th in market size in North Dakota with direct premiums written of $163,505 for the year ended December 31, 2023. In Illinois, the company ranks 63rd with direct premiums written of $86,348.
Sales Units
- Nodak Insurance uses exclusive agents in North Dakota.
- American West, Battle Creek, Primero, Direct Auto, and Westminster rely on independent agents.
- As of December 31, 2023:
- Nodak Insurance had 66 exclusive agents.
- American West had 71 contracted agencies.
- Primero had 313 contracted agencies.
- Battle Creek had 114 contracted agencies.
- Direct Auto had 153 contracted agencies primarily in the Chicago area.
- Westminster had 53 contracted agencies.
Future Outlook
The company plans to continue its organic growth strategy by emphasizing its relationship with the North Dakota Farm Bureau (NDFB), expanding independent agency relationships with technology enhancements like mobile apps and online quoting, capitalizing on excellent claims service, and selectively expanding insurance products in existing and licensed states. The company also intends to pursue external growth through strategic investments and acquisitions that enhance business diversification geographically and by product line.
Strategic Initiatives
The company focused on improving liquidity by reducing outstanding debt by $200 million and announced new capital expenditure plans aimed at expanding manufacturing capabilities.
Capital Management
- The company repurchased $50 million of its own shares under the authorized buyback program and increased its quarterly dividend by 5%.
- The company completed a 2-for-1 stock split to enhance liquidity.
Future Outlook
The company plans to continue its debt reduction strategy while exploring new opportunities for capital investment, with an emphasis on sustainable growth initiatives.
Challenges and Risks
The company's reliance on a single supplier for key raw materials presents a significant risk, as any disruption in the supply chain could adversely affect production and financial performance. Additionally, the company's operations are heavily concentrated in North Dakota, making it vulnerable to adverse weather events and economic conditions specific to that region.
The company faces significant risks from catastrophic natural events, such as hurricanes and earthquakes, which can lead to substantial claims and financial losses. Climate change is an emerging risk that may increase the frequency and severity of these events, impacting insurability and reinsurance costs. The company also relies on catastrophe models that may produce unreliable outputs due to data inaccuracies. Regulatory risks include potential changes to the federal crop insurance program, which could reduce government subsidies and adversely affect revenues. The company is also subject to extensive state regulations that could limit its operational flexibility and profitability.
Management has identified increased competition in the insurance industry as a primary challenge, with potential impacts on pricing and market share. The company plans to address these challenges through strategic acquisitions and expanding its product offerings in existing markets. Additionally, the company is focused on enhancing its technological capabilities to improve customer service and operational efficiency.
The company is exposed to interest rate fluctuations, which can affect the valuation of its investment portfolio and financial results. A rise in interest rates could lead to a decrease in the carrying value of fixed income investments, impacting short-term financial performance. However, over the long term, higher interest rates may benefit investment income as funds are reinvested at higher yields.