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 Rules 13a-15(b) and 15d-15(b) under the Exchange Act) as of December 31, 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such material information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosures. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. 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”). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 at December 31, 2022, and that our consolidated financial statements we include in this 2022 Annual Report 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. Mazars USA LLP, our independent registered public accounting firm, has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2022. This audit report appears in Part II, Item 8. Financial Statements and Supplementary Data, of this 2022 Annual Report. Changes in Internal Control over Financial Reporting 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. We continued this initiative during the annual period ending December 31, 2022, in support of the first audit of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, which resulted in various enhancements to our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 96 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 11, 2023 relating to our Annual Meeting of Shareholders that we will hold on May 23, 2023 (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 2022 Annual Report. 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. 97 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 (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) 10.4# Employment Agreement dated as of March 15, 2022, between Seth C. Daggett and Nodak Insurance Company and NI Holdings, Inc. (9) 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) 98 Table of Contents 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) 10.15# Form of NI Holdings, Inc. Growth in Book Value Per Share Performance Share Unit Agreement (10) 10.16# 2022 NI Holdings, Inc. Short-Term Incentive Bonus (11) 21.1* Subsidiaries of NI Holdings, Inc. 23.1* Consent of Mazars USA LLP, Fort Washington, PA, PCAOB ID 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. 99 Table of Contents (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. (9) Filed as an Exhibit to the Company’s Form 8-K (File No. 001-37973) filed with the SEC on March 18, 2022, and incorporated herein by reference. (10) Filed as Exhibit to the Company’s Form 10-K (File No. 001-37973) filed with the SEC on March 9, 2022, and incorporated herein by reference. (11) Filed as Exhibit to the Company’s Form 10-Q (File No. 001-37973) filed with the SEC on May 6, 2022, and incorporated herein by reference. Item 16. Form 10-K Summary None. 100 Table of Contents Schedule I – Condensed financial information of registrant – NI Holdings, Inc. Condensed Balance Sheets December 31, 2022 2021 Assets: Cash and cash equivalents $ 3,791 $ 8,743 Fixed income securities, at fair value 1,013 11,247 Equity securities, at fair value 6,211 8,912 Total cash and investments 11,015 28,902 Income tax recoverable 946 423 Accrued investment income 2 94 Investment in wholly-owned subsidiaries 239,110 327,340 Deferred income taxes 1,088 861 Total assets $ 252,161 $ 357,620 Liabilities: Westminster consideration payable $ — $ 13,020 Accrued expenses and other liabilities 1,184 1,396 Total liabilities 1,184 14,416 Shareholders’ equity 250,977 343,204 Total liabilities and equity $ 252,161 $ 357,620 101 Table of Contents Condensed Statements of Operations Year Ended December 31, 2022 2021 2020 Revenues: Fee and other income $ — $ — $ (31 ) Net investment income 143 396 717 Net investment gains (losses) (492 ) 2,119 425 Total revenues (349 ) 2,515 1,111 Expenses: Other underwriting and general expenses 3,002 4,543 5,711 Total expenses 3,002 4,543 5,711 Income (loss) before income taxes and equity in undistributed net income of subsidiaries (3,351 ) (2,028 ) (4,600 ) Income tax (benefit) expense (1,124 ) (156 ) (1,190 ) Income (loss) before equity in undistributed net income of subsidiaries (2,227 ) (1,872 ) (3,410 ) Equity in undistributed net income (loss) of subsidiaries (50,869 ) 10,288 43,799 Net income (loss) attributable to NI Holdings, Inc. $ (53,096 ) $ 8,416 $ 40,389 Condensed Statements of Comprehensive Income Year Ended December 31, 2022 2021 2020 Net income (loss) attributable to NI Holdings, Inc. $ (53,096 ) $ 8,416 $ 40,389 Other comprehensive income (loss), net of income taxes: Unrealized gain (loss) on investments (165 ) (346 ) 127 Unrealized gain (loss) attributed to subsidiaries (34,358 ) (7,257 ) 7,101 Other comprehensive income (loss), net of income taxes (34,523 ) (7,603 ) 7,228 Comprehensive income (loss) $ (87,619 ) $ 813 $ 47,617 102 Table of Contents Condensed Statements of Cash Flows Year Ended December 31, 2022 2021 2020 Cash flows from operating activities: Net income (loss) attributable to NI Holdings, Inc. $ (53,096 ) $ 8,416 $ 40,389 Adjustments to reconcile net income (loss) attributable to NI Holdings, Inc. to net cash flows from operating activities: Equity in undistributed net income of subsidiaries 50,869 (10,288 ) (43,799 ) Other 359 1,159 1,395 Net adjustments 51,228 (9,129 ) (42,404 ) Net cash flows from operating activities (1,868 ) (713 ) (2,015 ) Cash flows from investing activities: Proceeds from maturities and sales of fixed income securities 9,942 10,103 16,238 Proceeds from sales of equity securities 4,278 7,306 4,174 Purchases of fixed income securities — (808 ) (1,550 ) Purchases of equity securities (2,023 ) (4,512 ) (4,139 ) Acquisition of Westminster American Insurance Company — — (20,000 ) Net cash flows from investing activities 12,197 12,089 (5,277 ) Cash flows from financing activities: Dividend from subsidiaries 3,000 — 6,000 Purchase of treasury stock (4,180 ) (4,316 ) (12,234 ) Installment payment on Westminster consideration payable (13,333 ) (6,667 ) — Issuance of vested award shares (768 ) (488 ) (31 ) Net cash flows from financing activities (15,281 ) (11,471 ) (6,265 ) Net decrease in cash and cash equivalents (4,952 ) (95 ) (13,557 ) Cash and cash equivalents at beginning of period 8,743 8,838 22,395 Cash and cash equivalents at end of period $ 3,791 $ 8,743 $ 8,838 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 cash dividends of $3,000 and $6,000 from Nodak Insurance during the years ended December 31, 2022 and 2020. No dividends from its subsidiaries were received during the year ended December 31, 2021. 103 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 8, 2023. 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 8, 2023, 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 8, 2023 Michael J. Alexander /s/ Seth C. Daggett Chief Financial Officer ( Principal Financial Officer and Principal Accounting Officer ) March 8, 2023 Seth C. Daggett /s/ Eric K. Aasmundstad Director March 8, 2023 Eric K. Aasmundstad /s/ William R. Devlin Director March 8, 2023 William R. Devlin /s/ Duaine C. Espegard Director March 8, 2023 Duaine C. Espegard /s/ Cindy L. Launer Director March 8, 2023 Cindy L. Launer /s/ Stephen V. Marlow Director March 8, 2023 Stephen V. Marlow /s/ Prakash Mathew Director March 8, 2023 Prakash Mathew /s/ Jeffrey R. Missling Director March 8, 2023 Jeffrey R. Missling 104