Item 9A. Controls and Procedures
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, 2021. 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
In the ordinary course of business, we periodically review our system of internal control over financial reporting to identify opportunities to improve our controls and increase efficiency, while ensuring that we maintain an effective internal control environment. In addition, when we acquire new businesses, we incorporate our controls and procedures into the acquired business as part of our integration activities. Since 2018, we have invested significant resources to comprehensively document and analyze our system of internal control over financial reporting. We have identified areas requiring improvement, and continue to make selected improvements to processes and controls to address issues identified through this review. These improvements may include such activities as implementing new, more efficient systems, automating manual processes, formalizing policies and procedures, increasing monitoring controls, and updating existing systems. We plan to continue this initiative as well as prepare for the first audit of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002 for the annual period ending December 31, 2022, which may result in changes to our internal control over financial reporting.
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, 2021, 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
On March 7, 2022, the Board of Directors of the Company appointed Seth Daggett as the Company's Principal Accounting Officer. Mr. Daggett will replace Timothy Milius as the Company's Principal Accounting officer. Mr. Daggett will continue to serve as the Company's Chief Financial Officer and Treasurer. Mr. Milius will continue to serve as the Secretary of the Company. Further information about Mr. Daggett may be found in the Company's Proxy Statement and Form 8-K filed on November 13, 2020, as amended on March 4, 2021.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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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 12, 2022 relating to our Annual Meeting of Shareholders that we will hold on May 24, 2022 (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.
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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 (8)
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)
10.5# 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)
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10.12 Form of Time-Based Restricted Stock Unit Agreement for Non-Employee Directors (7)
10.13 NI Holdings, Inc. 2020 Stock and Incentive Plan (7)
10.14* Form of Time-Based Restricted Stock Unit Agreement for Executives
10.15* Form of NI Holdings, Inc. Growth in Book Value Per Share Performance Share Unit Agreement
21.1* Subsidiaries of NI Holdings, Inc.
23.1* Consent of Mazars USA LLP, Fort Washington, PA, PCAOB 339
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 an Exhibit to the Company’s Form 8-K (File No. 001-37973) filed with the SEC on May 29, 2020, and incorporated herein by reference.
(8) Filed as an Exhibit to the Company’s Form 10-K (File No. 001-37973) filed with the SEC on March 10, 2021, and incorporated herein by reference.
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Item 16. Form 10-K Summary
None.
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Schedule I – Condensed financial information of registrant – NI Holdings, Inc.
Condensed Balance Sheets
December 31,
2021
2020
Assets:
Cash and cash equivalents
$
8,743
$
8,838
Fixed income securities, at fair value
11,247
20,979
Equity securities, at fair value
8,912
9,646
Total cash and investments
28,902
39,463
 
Income tax recoverable
423
1,036
Accrued investment income
94
134
Investment in wholly-owned subsidiaries
327,340
324,305
Deferred income taxes
861
529
Total assets
$
357,620
$
365,467
 
Liabilities:
Westminster consideration payable
$
13,020
$
19,287
Accrued expenses and other liabilities
1,396
1,853
Total liabilities
14,416
21,140
Commitments and contingencies
-
-
 
Shareholders’ equity
343,204
344,327
Total liabilities and equity
$
357,620
$
365,467
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Condensed Statements of Operations
Year Ended December 31,
2021
2020
2019
Revenues:
Fee and other income
$
-
$
(31
)
$
2
Net investment income
396
717
1,342
Net capital gain on investments
2,119
425
3,067
Total revenues
2,515
1,111
4,411
 
Expenses:
Other underwriting and general expenses
4,543
5,711
3,383
Total expenses
4,543
5,711
3,383
 
Income (loss) before income taxes and equity in undistributed net income of subsidiaries
(2,028
)
(4,600
)
1,028
Income tax (benefit) expense
(156
)
(1,190
)
163
Income (loss) before equity in undistributed net income of subsidiaries
(1,872
)
(3,410
)
865
Equity in undistributed net income of subsidiaries
10,288
43,799
25,536
Net income attributable to NI Holdings, Inc.
$
8,416
$
40,389
$
26,401
Condensed Statements of Comprehensive Income
Year Ended December 31,
2021
2020
2019
Net income attributable to NI Holdings, Inc.
$
8,416
$
40,389
$
26,401
Other comprehensive income (loss), net of income taxes:
Unrealized gain (loss) on investments
(346
)
127
846
Unrealized gain (loss) attributed to subsidiaries
(7,257
)
7,101
6,574
Other comprehensive income (loss), net of income taxes
(7,603
)
7,228
7,420
Comprehensive income
$
813
$
47,617
$
33,821
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Condensed Statements of Cash Flows
Year Ended December 31,
2021
2020
2019
Cash flows from operating activities:
Net income attributable to NI Holdings, Inc.
$
8,416
$
40,389
$
26,401
Adjustments:
Equity in undistributed net income of subsidiaries
(10,288
)
(43,799
)
(25,536
)
Other
1,159
1,395
(1,079
)
Net adjustments
(9,129
)
(42,404
)
(26,615
)
Net cash flows from operating activities
(713
)
(2,015
)
(214
)
 
Cash flows from investing activities:
Proceeds from maturities and sales of fixed income securities
10,103
16,238
26,612
Proceeds from sales of equity securities
7,306
4,174
9,672
Purchases of fixed income securities
(808
)
(1,550
)
(12,918
)
Purchases of equity securities
(4,512
)
(4,139
)
(4,618
)
Acquisition of Westminster American Insurance Company
—
(20,000
)
—
Net cash flows from investing activities
12,089
(5,277
)
18,748
 
Cash flows from financing activities:
Dividend from subsidiaries
—
6,000
—
Purchase of treasury stock
(4,316
)
(12,234
)
(2,006
)
Installment payment on Westminster consideration payable
(6,667
)
—
—
Issuance of restricted stock awards
(488
)
(31
)
(19
)
Net cash flows from financing activities
(11,471
)
(6,265
)
(2,025
)
 
Net (decrease) increase in cash and cash equivalents
(95
)
(13,557
)
16,509
 
Cash and cash equivalents at beginning of period
8,838
22,395
5,886
 
Cash and cash equivalents at end of period
$
8,743
$
8,838
$
22,395
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, 2021 or 2019.
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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 9, 2022.
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 9, 2022, 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 9, 2022
Michael J. Alexander
 
 
/s/ Seth C. Daggett
Chief Financial Officer ( Principal Financial Officer and Principal Accounting Officer )
March 9, 2022
Seth C. Daggett
 
 
/s/ Eric K. Aasmundstad
Director
March 9, 2022
Eric K. Aasmundstad
 
 
/s/ William R. Devlin
Director
March 9, 2022
William R. Devlin
 
 
/s/ Duaine C. Espegard
Director
March 9, 2022
Duaine C. Espegard
 
 
/s/ Cindy L. Launer
Director
March 9, 2022
Cindy L. Launer
 
 
/s/ Stephen V. Marlow
Director
March 9, 2022
Stephen V. Marlow
 
 
/s/ Jeffrey R. Missling
Director
March 9, 2022
Jeffrey R. Missling
107