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 (“DCPs”),
as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, as of December 31, 2024. 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, 2024, and that our consolidated financial statements we include in this 2024 Annual Report present
fairly, in all material respects, our financial position, results of operations, and cash flows in accordance with accounting principles
generally accepted in the United States of America.
Forvis Mazars, 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, 2024. This audit report appears in Part II, Item 8 “Financial Statements and Supplementary Data” of this 2024 Annual Report.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies,
in internal control over financial reporting (“ICFR”), such that there is a reasonable possibility that a material misstatement
of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
As previously disclosed in our Quarterly Report on Form 10-Q/A for
the quarter ended June 30, 2024, the Company did not design and maintain effective controls over its accounting for intercompany reinsurance
pooling activity. Specifically, it lacked an effectively designed internal control related to the evaluation of pooling payable/receivable
balances, including when a pool member is sold. This material weakness resulted in a material error and the restatement of the Company's
consolidated financial statements for the three- and six-month periods ended June 30, 2024. Additionally, this material weakness could
result in misstatements of the aforementioned accounts or disclosures that would result in a material misstatement to the annual or interim
consolidated financial statements that would not be prevented or detected.
Remediation Plan for Material Weakness
Upon identification of the material weakness, management developed
a remediation plan, which included designing and implementing a new quarterly intercompany pooling reconciliation and review process to
fully evaluate pooling payable/receivable balances in support of financial reporting for GAAP purposes. The material weakness is considered
remediated as of the end of the period covered by this report as the remediation plan has been implemented and there has been sufficient
time for the Company to conclude through testing that the controls are operating effectively. As the Company's management, under the oversight
of the Audit Committee, continues to evaluate and improve the Company's ICFR, management may decide to take additional measures to address
103
control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures identified.
We can offer no assurance that these initiatives will ultimately have the intended effects.
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. Except for the identified material weakness above, 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 annual period covered by this report that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
10b5-1 Trading Plans
During the fourth quarter of
2024, none of our directors or executive officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408(a)
of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
104
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 9, 2025 relating to our Annual Meeting of Shareholders that
we will hold on May 20, 2025 (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 2024
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 SEC rules 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.
105
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:
EXHIBIT NO.
DESCRIPTION OF EXHIBIT
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 (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).
2.2
Stock Purchase Agreement, dated May 7, 2024 (filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 8, 2024, and incorporated herein by reference).
3.1
Articles of Incorporation of NI Holdings, Inc. (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).
3.2
Articles of Amendment to the Articles of Incorporation, dated May 24, 2023. (filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 25, 2023, and incorporated herein by reference).
3.3
Amended and Restated Bylaws of NI Holdings, Inc., dated May 24, 2023. (filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 25, 2023, and incorporated herein by reference).
4.1
Form of certificate evidencing shares of common stock of NI Holdings, Inc. (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).
4.2
Description of Securities Registered Under Section 12 of the Exchange Act (filed as an exhibit to the Company’s Form 10-K filed with the SEC on March 10, 2021, and incorporated herein by reference).
10.1
2017 NI Holdings, Inc. Equity Incentive Plan (filed as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on September 18, 2017, and incorporated herein by reference).
10.2
Nodak Mutual Insurance Company Nonqualified Deferred Compensation Plan (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).
10.3#
Employment Agreement dated as of April 28, 2016, between Michael J. Alexander and Nodak Mutual Insurance Company and NI Holdings, Inc. (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).
10.4#*
Amended and Restated Employment Agreement dated as of December 1, 2024, between Seth C. Daggett and Nodak Insurance Company and NI Holdings, Inc.
106
10.5#
Employment Agreement dated as of April 28, 2016, between Patrick W. Duncan and Nodak Mutual Insurance Company and NI Holdings, Inc. (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).
10.6
Trademark License Agreement dated as of October 1, 2016 between North Dakota Farm Bureau and Nodak Mutual Insurance Company (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).
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 (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).
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 (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).
10.9#
Nodak Mutual Insurance Company Cash Incentive Bonus Plan (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).
10.10#
NI Holdings, Inc. Employee Stock Ownership Plan (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).
10.11
Affiliation Agreement dated as of December 30, 2010 between Nodak Mutual Insurance Company and Battle Creek Mutual Insurance Company (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).
10.12
Form of Time-Based Restricted Stock Unit Agreement for Non-Employee Directors (filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 29, 2020, and incorporated herein by reference).
10.13
NI Holdings, Inc. 2020 Stock and Incentive Plan (filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 29, 2020, and incorporated herein by reference).
10.14#
Form of Time-Based Restricted Stock Unit Agreement for Executives (filed as an exhibit to the Company’s Form 10-K filed with the SEC on March 9, 2022, and incorporated herein by reference).
10.15#
Form of NI Holdings, Inc. Growth in Book Value Per Share Performance Share Unit Agreement (filed as an exhibit to the Company’s Form 10-K filed with the SEC on March 9, 2022, and incorporated herein by reference).
10.16#
2022 NI Holdings, Inc. Short-Term Incentive Bonus (filed as an exhibit to the Company’s Form 10-Q filed with the SEC on May 6, 2022, and incorporated herein by reference).
10.17#
Form of NI Holdings, Inc. Adjusted Return on Equity Performance Share Unit Agreement (filed as an exhibit to the Company’s Form 10-K filed with the SEC on March 15, 2024, and incorporated herein by reference).
10.18#
2024 NI Holdings, Inc. Short-Term Incentive Bonus (filed as an exhibit to the Company’s Form 10-K filed with the SEC on March 15, 2024, and incorporated herein by reference).
10.19#
Employment Agreement dated August 26, 2024, between the Company and Cindy L. Launer (filed as an exhibit to the Company’s Current Report on Form 8-K/A filed August 26, 2024).
10.20#
Separation Agreement, dated September 16, 2024, between NI Holdings, Inc. and Michael J. Alexander (filed as an exhibit to the Company’s Current Report on Form 8-K filed September 19, 2024).
107
10.21#
Separation Agreement, dated November 27, 2024, between NI Holdings, Inc. and Patrick W. Duncan (filed as an exhibit to the Company’s Current Report on Form 8-K filed December 3, 2024).
19*
NI Holdings, Inc. Policy on Insider Trading, adopted August 20, 2024.
21.1*
Subsidiaries of NI Holdings, Inc.
23.1*
Consent of Forvis Mazars, LLP, New York, NY, PCAOB ID 686
23.2*
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.
97
NI Holdings, Inc. Incentive Compensation Recovery Policy, adopted December 1, 2023 ( Filed as an exhibit to the Company’s Form 10-K filed with the SEC on March 15, 2024, and incorporated herein by reference. )
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.
** Furnished 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.
Item 16.
Form 10-K Summary
None.
108
Schedule I – Condensed financial information of registrant
– NI Holdings, Inc.
Condensed Balance Sheets
December 31,
2024
2023
Assets:
Cash and cash equivalents
$ 3,345
$ 308
Fixed income securities, at fair value (net of allowance for expected credit losses of $0 at December 31, 2024 and 2023)
3,999
810
Equity securities, at fair value
14
13
Total cash and investments
7,358
1,131
Income tax recoverable
7,126
844
Accrued investment income
60
1
Investment in wholly-owned subsidiaries
230,311
246,360
Deferred income taxes
476
427
Total assets
$ 245,331
$ 248,763
Liabilities:
Accrued expenses and other liabilities
$ 700
$ 1,122
Total liabilities
700
1,122
Shareholders’ equity
244,631
247,641
Total liabilities and shareholders’ equity
$ 245,331
$ 248,763
109
Condensed Statements of Operations
Year Ended December 31,
2024
2023
2022
Revenues:
Net investment income (loss)
$ (223 )
$ (122 )
$ 143
Net investment gains (losses)
1
(217 )
(492 )
Total revenues
(222 )
(339 )
(349 )
Expenses:
Other underwriting and general expenses
6,460
4,612
3,002
Total expenses
6,460
4,612
3,002
Loss before income taxes and equity in undistributed net income (loss) of subsidiaries
(6,682 )
(4,951 )
(3,351 )
Income tax benefit
(665 )
(111 )
(1,124 )
Loss before equity in undistributed net income (loss) of subsidiaries
(6,017 )
(4,840 )
(2,227 )
Equity in undistributed net income (loss) of subsidiaries
11,105
(636 )
(50,869 )
Loss on sale of discontinued operations, net of tax
(11,148 )
—
—
Net loss attributable to NI Holdings, Inc.
$ (6,060 )
$ (5,476 )
$ (53,096 )
Condensed Statements of Comprehensive Income
Year Ended December 31,
2024
2023
2022
Net loss attributable to NI Holdings, Inc.
$ (6,060 )
$ (5,476 )
$ (53,096 )
Other comprehensive income (loss), net of income taxes:
Unrealized gain (loss) on investments
7
15
(165 )
Unrealized gain (loss) attributed to subsidiaries
(160 )
7,887
(34,358 )
Other comprehensive income (loss), net of income taxes
(153 )
7,902
(34,523 )
Comprehensive income (loss)
$ (6,213 )
$ 2,426
$ (87,619 )
110
Condensed Statements of Cash Flows
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net income (loss) attributable to NI Holdings, Inc.
$ (6,060 )
$ (5,476 )
$ (53,096 )
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
(11,105 )
636
50,869
Loss on sale of Westminster
17,479
—
—
Other
(6,220 )
2,603
359
Net adjustments
154
3,239
51,228
Net cash flows from operating activities
(5,906 )
(2,237 )
(1,868 )
Cash flows from investing activities:
Proceeds from maturities and sales of fixed income securities
789
223
9,942
Proceeds from sales of equity securities
—
6,863
4,278
Purchases of fixed income securities
(3,960 )
—
—
Purchases of equity securities
—
(882 )
(2,023 )
Proceeds from disposition of Westminster
12,272
—
—
Net cash flows from investing activities
9,101
6,204
12,197
Cash flows from financing activities:
Dividend from subsidiaries
—
—
3,000
Purchase of treasury stock
—
(7,278 )
(4,180 )
Installment payment on Westminster consideration payable
—
—
(13,333 )
Issuance of vested award shares
(158 )
(172 )
(768 )
Net cash flows from financing activities
(158 )
(7,450 )
(15,281 )
Net decrease in cash and cash equivalents
3,037
(3,483 )
(4,952 )
Cash and cash equivalents at beginning of period
308
3,791
8,743
Cash and cash equivalents at end of period
$ 3,345
$ 308
$ 3,791
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 no cash dividends from its subsidiaries during
the years ended December 31, 2024 and 2023. A cash dividend of $3,000 was received from Nodak Insurance during the year ended December
31, 2022.
111
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 7, 2025.
NI HOLDINGS, INC.
/s/ Seth C. Daggett
Seth C. Daggett
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 7, 2025, by the following persons on behalf of the registrant and in the capacities indicated.
Signature
Capacity
Date
/s/ Seth C. Daggett
President and Chief Executive Officer ( Principal Executive Officer ), Director
March 7, 2025
Seth C. Daggett
/s/ Matthew J. Maki
Chief Financial Officer ( Principal Financial Officer and Principal Accounting Officer )
March 7, 2025
Matthew J. Maki
/s/ Eric K. Aasmundstad
Director
March 7, 2025
Eric K. Aasmundstad
/s/ William R. Devlin
Director
March 7, 2025
William R. Devlin
/s/ Duaine C. Espegard
Director
March 7, 2025
Duaine C. Espegard
/s/ Cindy L. Launer
Director
March 7, 2025
Cindy L. Launer
/s/ Stephen V. Marlow
Director
March 7, 2025
Stephen V. Marlow
/s/ Prakash Mathew
Director
March 7, 2025
Prakash Mathew
/s/ Jeffrey R. Missling
Director
March 7, 2025
Jeffrey R. Missling