NI Holdings, Inc. (NODK) stock intrinsic value fair value estimate & owner earnings analysis

NI Holdings is the parent of Nodak Insurance, a North Dakota property and casualty insurer formed in 1946 to serve members of the North Dakota Farm Bureau, along with American West, Battle Creek (Nebraska), Primero and Direct Auto. It sells private passenger auto, home and farm, federal crop insurance (underwritten through American Farm Bureau Insurance Services) and smaller commercial and reinsurance lines. Direct premiums written were $289.8 million in 2025, about 61% of it in North Dakota, where the company ranked sixth by premium in 2024. Nodak Mutual Group owns roughly 60% of the shares, so outside shareholders do not control the company. What has changed. Westminster, the commercial insurer bought in 2020, was sold on June 30, 2024. The company then decided to stop writing non-standard auto (Nevada in 2024; Arizona, Illinois and South Dakota in the third quarter of 2025), and existing policies are being non-renewed. That segment lost $12.9 million on underwriting in 2023, $17.6 million in 2024 and $40.8 million in 2025 (a 181.6% combined ratio), with unfavorable development on prior-year bodily injury claim reserves the main driver in 2024 and 2025. Total 2025 results were a net loss of $10.4 million ($0.50 per share), a 109.9% combined ratio and $30.3 million of unfavorable development on prior-year claim reserves. Net earned premium fell from $310.1 million to $270.7 million, and the filing says further declines are expected as the non-standard auto book runs off. The business that remains. Private passenger auto, home and farm, crop and the smaller lines produced combined underwriting gains of $21.5 million in 2023, $15.3 million in 2024 and $14.1 million in 2025 (the sum of those four segments' reported results, before non-standard auto). Net investment income was $11.7 million in 2025 on about $387 million of cash and investments. How we measure earnings. We start from operating cash flow and remove the swings in premiums receivable, claim reserves, unearned premiums, deferred acquisition costs and taxes, which for an insurer are mostly timing, then subtract stock compensation and the equipment spending needed to stay in business. Results for 2022 through 2025 are on a continuing-operations basis (without Westminster); 2017 through 2019 and 2020 through 2021 are as originally filed (Westminster is included from 2020). Owner earnings per share came to $0.52 (2017), $1.16 (2018), $0.73 (2019), $1.63 (2020), -$0.25 (2021), -$1.36 (2022), $0.82 (2023), $0.45 (2024) and -$0.58 (2025). The nine-year median is $0.52. That history includes years of losses on non-standard auto, so it understates the business the company is now choosing to be. The 2025 cash flow was also depressed by a $20.0 million fall in unearned premiums as the non-standard book shrank, which we treat as timing. Earnings level used. For the surviving lines we take the lowest of the three recent underwriting results ($14.1 million), add net investment income ($11.7 million) and fee income ($1.0 million), tax it at 21%, and subtract stock compensation ($0.8 million) and equipment spending ($0.2 million). That gives roughly $0.96 per share; we use $0.90, because costs shared with the exited segment may not fall away in full. For the near term, the trailing actual is a fall in owner earnings from $0.45 per share in 2024 to -$0.58 in 2025, while we assume a recovery to $0.60 in 2026. The reason: the non-standard auto segment that lost $40.8 million in 2025 stopped writing in its remaining states (Arizona, Illinois and South Dakota) in the third quarter of 2025, and the company reported net income of $12.7 million in the first half of 2026 against a loss of $5.6 million in the first half of 2025, although the second quarter alone was only about $0.1 million. From 2027 we hold $0.90 flat. We credit no growth after that: premiums are shrinking and nothing contracted or repeatable supports more. Continuation beyond ten years rests on a record we can point to: Nodak Insurance has operated since 1946 and has held its Farm Bureau name license since then (the license is non-exclusive and non-transferable). Base case: $0.60 in 2026, then $0.90 a year with no growth and continuing indefinitely, discounted at 6%, is worth about $14.7 per share. Bear case: the non-standard run-off produces another year of reserve strengthening in 2026 (-$0.30), 2027 recovers only to $0.20, and the surviving lines then earn about $0.48. That level assumes private passenger auto returns to its 2023 result (a $1.5 million loss), home and farm stays at its 2024 result (a $2.4 million loss), crop earns its 2025 gain ($5.9 million), the smaller lines earn their 2024 result ($0.1 million), and investment income is at its 2024 level ($10.9 million). Worth about $7.0 per share. Bull case: 2026 earns $0.85 and the surviving lines then repeat their 2023 underwriting gain of $21.5 million with 2025 investment income, about $1.24 per share, which is in line with 2018 ($1.16) and 2020 ($1.63). Worth about $20.3 per share. What we left out: growth in North Dakota premiums (direct premiums there rose to $176.3 million in 2025 from $167.7 million), expansion into Minnesota, and acquisitions. None is yet a repeatable, proven source of earnings for this company, and total premiums fell in 2025. What would make this wrong. A further round of unfavorable development on non-standard auto claim reserves, or weather losses and rising claim severity in home and farm (combined ratios of 102.6% in 2024 and 101.6% in 2025). We checked whether the 2025 reserve charge reached the surviving lines and found the filing attributes it to non-standard auto. Unpaid claims totaled $137.9 million at year-end 2025, so the reserves are a meaningful exposure. Shareholder equity was $240.3 million at year-end 2025. Margin-of-safety price: $8.50, about 58% of the base case and about 1.2 times the bear case, reflecting weather-exposed and reserve-sensitive earnings, a short record for the surviving business and a controlling holder. That price applies once the run-off book shows no further unfavorable reserve development and the combined ratio is under 100% for two straight quarters.