Company: NODK
Filing Date: 2025-03-07
Form Type: 10-K
Source: 0001174947-25-000304
Chunk: 1788

Company: NI Holdings, Inc.
Filing Date: 2025-03-07
Form: 10-K
Item: Item 6
Chunk 1788
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 any derivative financial instruments for hedging, trading, or speculative purposes.

Interest Rate Risk

Interest rate risk is the risk that a company
will incur economic losses due to adverse changes in interest rates. Our exposure to interest rate changes primarily results from our
significant holdings of fixed income securities. Fluctuations in interest rates have a direct impact on the fair value of these securities.

We develop our investment strategies based on
a number of factors, including estimated duration of reserve liabilities, short and long-term liquidity needs, general economic conditions,
expected rates of inflation and regulatory requirements. The portfolio duration of the fixed income securities in our investment portfolio
at December 31, 2024 was 4.77 years. These fixed income securities include U.S. government bonds, securities issued by government agencies,
obligations of state and local governments and governmental authorities, and corporate bonds, most of which are exposed to changes in
prevailing interest rates. These fixed income securities may experience significant fluctuations in fair value resulting from changes
in interest rates and are carried as available for sale. We manage the exposure to risks associated with interest rate fluctuations through
active management and consultation with our outside fixed income portfolio manager.

Higher interest rates, oftentimes correlated to
inflation, reduce the carrying value of our fixed income and short-term investments, negatively impacting the Company’s book value
in the short-term. Over the long-term, however, higher interest rates provide an incremental benefit to our net investment income over
time as excess cash and proceeds of maturing bonds are reinvested at higher rates. We manage our exposure to interest rate increases by
monitoring the duration within our investment portfolio and maintaining maturities that minimize forced sales within the portfolio.

Additionally, we hold certain fixed income securities
that have call features. In a potential declining interest rate environment, these securities may be called by their issuer and replaced
with securities bearing lower interest rates.

If we are required to sell fixed income securities
in a rising interest rate environment, we may recognize investment losses.

The table below shows the interest rate sensitivity
of our fixed income securities (including both continuing and discontinued operations) measured in terms of fair value (which is equal
to the carrying value for all of our investment securities that are subject to interest rate changes) at December 31, 2024 and 2023:

    As of December 31, 2024  
    As of December 31, 2023 
  
    Hypothetical Change in Interest Rate 
    Estimated Change