NI Holdings, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(a)) as of December 31, 2020. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective. Evaluation of Internal Controls over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our management has reviewed and evaluated the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on our evaluation under the COSO Framework, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current internal control over financial reporting is effective, and that our Consolidated Financial Statements we include in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. Changes in Internal Controls There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2020, to which this report relates that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting. Item 9B. Other Information None. 123 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance We incorporate the response to this Item 10 by reference to our proxy statement we will file with the SEC on or about April 13, 2021 relating to our Annual Meeting of Shareholders that we will hold on May 25, 2021 (our “Proxy Statement”). We have posted a copy of our Code of Ethics and Business Conduct on the Governance Highlights page of the Corporate Governance section of our website, www.niholdingsinc.com, which you can access free of charge. Information contained on the website is not incorporated by reference in, or considered part of, this Form 10-K. We intend to disclose on our website any amendments to, or waivers from, our Code of Ethics and Business Conduct that are required to be disclosed by law or NASDAQ Listing Rules. Item 11. Executive Compensation We incorporate the response to this Item 11 by reference to our Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters We incorporate the response to this Item 12 by reference to our Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence We incorporate the response to this Item 13 by reference to our Proxy Statement. Item 14. Principal Accountant Fees and Services We incorporate the response to this Item 14 by reference to our Proxy Statement. 124 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules List of Financial Statements and Financial Statement Schedules (a) The following documents are filed as a part of this report: (1) Financial Statements and (2) Financial Statement schedules required to be filed by Item 8 of this report. Schedule I Condensed financial information of registrant – NI Holdings, Inc. All other financial schedules are not required under the related instructions, as they are inapplicable or the information has been included in the Consolidated Financial Statements, and therefore have been omitted. (3) The following exhibits are required by Item 601 of Regulation S-K and are included as part of this Form 10-K: 2.1 Plan of Mutual Property and Casualty Insurance Company Conversion and Minority Offering of Nodak Mutual Insurance Company, dated as of January 21, 2016 (1) 3.1 Articles of Incorporation of NI Holdings, Inc. (1) 3.2 Bylaws of NI Holdings, Inc. (1) 3.3 Amendment to the Bylaws of NI Holdings, Inc. (4) 3.4 Amendment No. 2 to the Bylaws of NI Holdings, Inc. (6) 4.1 Form of certificate evidencing shares of common stock of NI Holdings, Inc. (1) 4.2* Description of Securities Registered Under Section 12 of the Exchange Act 10.1 2017 NI Holdings, Inc. Equity Incentive Plan (5) 10.2 Nodak Mutual Insurance Company Nonqualified Deferred Compensation Plan (1) 10.3# Employment Agreement dated as of April 28, 2016, between Michael J. Alexander and Nodak Mutual Insurance Company and NI Holdings, Inc. (1) 10.4# Employment Agreement dated as of April 28, 2016, between Brian R. Doom and Nodak Mutual Insurance Company and NI Holdings, Inc. (1) 10.5# Employment Agreement dated as of April 28, 2016, between Patrick W. Duncan and Nodak Mutual Insurance Company and NI Holdings, Inc. (1) 10.6 Trademark License Agreement dated as of October 1, 2016 between North Dakota Farm Bureau and Nodak Mutual Insurance Company (1) 10.7 Multiple Peril Crop/Livestock Insurance Full Service Agency Agreement among American Farm Bureau Insurance Services, Inc. and Nodak Mutual Insurance Company, American West Insurance Company and Battle Creek Mutual Insurance Company for Crop Year 2016 (1) 10.8 Crop Hail Insurance Full Service Agency Agreement among American Farm Bureau Insurance Services, Inc. and Nodak Mutual Insurance Company, American West Insurance Company and Battle Creek Mutual Insurance Company for Crop Year 2016 (1) 10.9# Nodak Mutual Insurance Company Cash Incentive Bonus Plan (3) 10.10# NI Holdings, Inc. Employee Stock Ownership Plan (1) 10.11 Affiliation Agreement dated as of December 30, 2010 between Nodak Mutual Insurance Company and Battle Creek Mutual Insurance Company (2) 125 Table of Contents 10.12 Form of Time-Based Restricted Stock Unit Agreement for Non-Employee Directors (7) 21.1 Subsidiaries of NI Holdings, Inc. (1) 23.1* Consent of Mazars USA LLP 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32* Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS** Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH** Inline XBRL Taxonomy Extension Schema Linkbase Document 101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. ** Inline XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. # Management contract or compensatory plan or arrangement. (1) Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-214057) filed with the SEC on October 11, 2016, and incorporated herein by reference. (2) Filed as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-214057) filed with the SEC on November 14, 2016, and incorporated herein by reference. (3) Filed as an exhibit to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-214057) filed with the SEC on January 12, 2017, and incorporated herein by reference. (4) Filed as Exhibit 3.1 to the Company’s Form 8-K (File No. 001-37973) filed with the SEC on March 2, 2020, and incorporated herein by reference. (5) Filed as Exhibit 10.1 to the Company’s Form 8-K (File No.001-37973) filed with the SEC on September 18, 2017, and incorporated herein by reference. (6) Filed as Exhibit 3.1 to the Company’s Form 8-K (File No. 001-37973) filed with the SEC on April 22, 2020, and incorporated herein by reference. (7) Filed as Exhibit 10.2 to the Company’s Form 8-K (File No. 001-37973) filed with the SEC on May 29, 2020, and incorporated herein by reference. 126 Table of Contents Item 16. Form 10-K Summary None. 127 Table of Contents Schedule I – Condensed financial information of registrant – NI Holdings, Inc. NI Holdings, Inc. was formed on March 13, 2017. The following condensed financial information begins with that date. Condensed Balance Sheets December 31, 2020 2019 Assets: Cash and cash equivalents $ 8,838 $ 22,395 Fixed income securities, at fair value 20,979 35,381 Equity securities, at fair value 9,646 9,454 Total cash and investments 39,463 67,230   Income tax recoverables 1,036 — Accrued investment income 134 198 Investment in wholly-owned subsidiaries 324,305 240,619 Deferred income tax asset, net 529 138 Total assets $ 365,467 $ 308,185   Liabilities: Westminster consideration payable $ 19,287 $ — Accrued expenses and other liabilities 1,853 1,842 Federal income tax payable — 39 Commitments and contingencies — — Total liabilities 21,140 1,881   Shareholders’ equity 344,327 306,304 Total liabilities and equity $ 365,467 $ 308,185 128 Table of Contents Condensed Statements of Operations Year Ended December 31, 2020 2019 2018 Revenues: Fee and other income $ (31 ) $ 2 $ 4,580 Net investment income 717 1,342 1,481 Net capital gain on investments 425 3,067 1,190 Total revenues 1,111 4,411 7,251   Expenses: Other underwriting and general expenses 5,711 3,383 2,574 Total expenses 5,711 3,383 2,574   Income (loss) before income taxes and equity in undistributed net income of subsidiaries (4,600 ) 1,028 4,677 Income tax (benefit) expense (1,190 ) 163 98 Income (loss) before equity in undistributed net income of subsidiaries (3,410 ) 865 4,579 Equity in undistributed net income of subsidiaries 43,799 25,536 26,502 Net income attributable to NI Holdings, Inc. $ 40,389 $ 26,401 $ 31,081   Condensed Statements of Comprehensive Income Year Ended December 31, 2020 2019 2018 Net income attributable to NI Holdings, Inc. $ 40,389 $ 26,041 $ 31,081 Other comprehensive income (loss), net of income taxes: Unrealized gain (loss) on investments 127 846 (745 ) Unrealized gain (loss) on subsidiaries 7,101 6,574 (8,877 ) Other comprehensive income (loss), net of income taxes 7,228 7,420 (9,622 ) Comprehensive income $ 47,617 $ 33,821 $ 21,459 129 Table of Contents Condensed Statements of Cash Flows Year Ended December 31, 2020 2019 2018 Cash flows from operating activities: Net income attributable to NI Holdings, Inc. $ 40,389 $ 26,401 $ 31,081 Adjustments: Equity in undistributed net income of subsidiaries (43,799 ) (25,536 ) (26,502 ) Gain on acquisition of Direct Auto Insurance Company — — (4,578 ) Other 1,395 (1,079 ) 1,109 Net adjustments (42,404 ) (26,615 ) (29,971 ) Net cash flows from operating activities (2,015 ) (214 ) 1,110   Cash flows from investing activities: Net sale of fixed income and equity securities 14,723 18,748 17,941 Acquisition of Direct Auto Insurance Company — — (17,000 ) Acquisition of Westminster American Insurance Company (20,000 ) — — Net cash flows from investing activities (5,277 ) 18,748 941   Cash flows from financing activities: Dividend from subsidiaries 6,000 — — Purchase of treasury stock (12,234 ) (2,006 ) (2,996 ) Issuance of restricted stock awards (31 ) (19 ) — Net cash flows from financing activities (6,265 ) (2,025 ) (2,996 )   Net (decrease) increase in cash and cash equivalents (13,557 ) 16,509 (945 )   Cash and cash equivalents at beginning of period 22,395 5,886 6,831   Cash and cash equivalents at end of period $ 8,838 $ 22,395 $ 5,886 Note A – Basis of presentation In the parent-company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since inception. The parent-company-only financial statements should be read in conjunction with the Company’s Consolidated Financial Statements. Note B – Dividends from subsidiaries The Company received a cash dividend of $6,000 from Nodak Insurance during the year ended December 31, 2020. No dividends from its subsidiaries were received during the years ended December 31, 2019 or 2018. 130 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 10, 2021. NI HOLDINGS, INC.   /s/ Michael J. Alexander Michael J. Alexander President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 10, 2021, by the following persons on behalf of the registrant and in the capacities indicated. Signature Capacity Date /s/ Michael J. Alexander President and Chief Executive Officer ( Principal Executive Officer ), Director March 10, 2021 Michael J. Alexander     /s/ Brian R. Doom Chief Financial Officer ( Principal Financial and Accounting Officer ) March 10, 2021 Brian R. Doom     /s/ Eric K. Aasmundstad Director March 10, 2021 Eric K. Aasmundstad     /s/ William R. Devlin Director March 10, 2021 William R. Devlin     /s/ Duaine C. Espegard Director March 10, 2021 Duaine C. Espegard     /s/ Cindy L. Launer Director March 10, 2021 Cindy L. Launer     /s/ Stephen V. Marlow Director March 10, 2021 Stephen V. Marlow     /s/ Jeffrey R. Missling Director March 10, 2021 Jeffrey R. Missling 131