Value Investors Club / NI Holdings Inc (NODK)

Description

NI Holdings (NODK) is a conservatively capitalized insurer (less than 1.0x premium to surplus ratio) with a solid underwriting track record (14-year average combined ratio of 93.6%) and unique MHC structure (holding nearly 60% of the shares) that obscures the true value of the company. I estimate the stock is conservatively worth at least $26.50/share (compared to the current price of $19.15) and perhaps much more with multiple possible catalysts on the horizon. The company has been buying back stock (856,499 shares in the last year, 9% of the non-MHC-held float) which should benefit remaining shareholders.

The investment case for NODK is a simple one: the stock trades for about 73% of my estimate of true book value (post-conversion). In the coming years, the MHC will likely convert to full stock ownership, at which point the company should trade up to book value or higher. In time, NODK will likely be acquired at a premium . In the intervening years, the company will continue to grow equity value at a mid to high-single-digit rate while buying back stock, making acquisitions, and paying dividends with excess capital and profits. I believe a mid-teen or better return in the stock with minimal risk is reasonable at the current price.

Average daily volume is about 13,500 shares (about $250,000 at $19/share), too thin for most large-scale institutional managers but highly liquid compared to some other stocks we own. We should be able to buy tens of thousands of shares without much trouble should we want to.

Company Description

Nodak Insurance (a subsidiary of NODK) was founded in 1946 to offer property and casualty (P&C) insurance (mainly home and farm) to members of the North Dakota Farm Bureau Federation (NDFB). Over the decades, the company has added complementary lines of business, acquired new ones, and expanded into new states. Today, NODK is a niche insurer operating in six reportable segments: private passenger auto (25% of net premiums earned), non-standard auto (19%), home and farm (26%), crop (13%), commercial (13%), and other (3%). Below is a breakdown of net premiums earned and underwriting profits by segment in 2020:

USD thousands	Net premiums earned	Underwriting profit
Private passenger auto	72,009	6,512
Non-standard auto	53,737	3,988
Home and farm	74,879	17,260
Crop	35,718	(468)
Commercial	38,288	1,500
Other	9,030	2,665
Total	283,661	31,921

Of course, any single year’s results matter little in insurance (and 2020 was exceptionally profitable due to reduced driving and relatively mild weather in North Dakota). Below is historical data (as available2) showing loss, expense, and combined ratios from 2007 to 2020.

	Loss & LAE	Expense	Combined
2007	66.3	24.3	90.6
2008	72.3	21.9	94.2
2009	69.1	23.8	93.0
2010	67.2	22.5	89.7
2011	87.1	23.2	110.3
2012	61.3	32.3	93.6
2013	71.1	24.7	95.9
2014	64.7	25.7	90.4
2015	56.4	28.6	85.0
2016	70.6	28.8	99.4
2017	65.2	28.3	93.5
2018	60.6	28.7	89.3
2019	68.2	28.3	96.5
2020	59.4	30.0	89.4
AVG	67.1%	26.5%	93.6%

NODK has underwrote a profit in 13 of the last 14 years with a high combined ratio of 110.3% in 2011 (due mainly to abnormally harsh weather in the Midwest), low of 85.0% in 2015, and average of 93.6% Excludes fee income which is an important part of the non-standard auto business and has added on average about 0.7% per year to the underwriting margin.

over the 14-year period. Such results are on par with other large, well-known P&C insurers such as Progressive (92.5% average combined ratio over the last decade), Traveler’s (94.8%), Allstate (94.2%), and Chubb (91.2%), although variability in any given year is much higher at NODK given large exposure to North Dakota weather.

NODK writes the majority of its business in North Dakota (46% of direct premiums written in 2020), with further contribution from Illinois (14%), Nebraska (13%), South Dakota (7%), New Jersey (4%), Maryland (3%), Pennsylvania (3%), Nevada (3%), Virginia (2%), Georgia (2%), District of Columbia (1%), Minnesota (1%), North Carolina (1%), Delaware (1%), South Carolina (<1%), Arizona (<1%), and West Virginia (<1%). NODK has ~5.5% market share in North Dakota (4th largest operator in the state) and less than 1% in all other states. NODK is rated “A” by AM Best (third highest rating out of 15).

Private Passenger Auto (PPA)

PPA insurance is written through Nodak Insurance Company (North Dakota), American West Insurance Company (South Dakota), and Battle Creek Mutual Insurance Company (Nebraska). NODK’s PPA track record is mixed.

2020 was the best year on recent record, mainly due to reduced driving during the pandemic and the resulting decline in losses (weather was also more favorable in the Midwest in 2020, leading to fewer accidents and hail damage). The combined ratio has averaged 99.1% since 2015 (100.7% excluding the favorable result of 2020). PPA is NODK’s toughest line of business due to formidable competition from heavyweights like GEICO, Progressive, State Farm, and Allstate. NODK, through its three regional brands, attempts to attract local auto business in combination with home, farm, and crop insurance. I expect the PPA business to continue to produce slim to no underwriting profits in the future given heavy competition from larger peers.

Non-Standard Auto (NSA)

NSA business is written through Primero Insurance Company (primarily in Nevada with small contributions from Arizona, North Dakota, and South Dakota) and Direct Auto Insurance Company (Illinois), both of which target high-risk Spanish-speaking populations. Primero was acquired by NODK in 2014 and Direct Auto in 2018. Underwriting results at Primero have been unsatisfactory, showing a loss in five of the last six years (2020 being the exception). If we add fee and other income, an important element of profitability for the non-standard auto business, Primero has had an underwriting profit in three of the last six years.

Management attributes the poor underwriting results at Primero primarily to inadequate pricing in Nevada, where minimum coverage limits have risen and rates have lagged. Pricing improved in 2020 which, combined with less miles driven during the pandemic, resulted in an underwriting profit even though earned premiums declined 37% as fewer customers renewed their coverage.

Direct Auto, on the other hand, has reported strong underwriting results in recent years, growing premiums at 7% per year from 2015 to 2020 (despite a 16% drawdown in 2020) while earning a profit in each year and posting an average combined ratio below 90% (before fee and other income). Such results are attributed to sound leadership, niche focus, and strong relationships with local agents.

The NSA business competes mainly with other regional carriers in Chicago, Nevada, and Arizona. This segment tends to be less competitive than the PPA business due to the smaller presence of large players; competition comes mainly from weaker local NSA insurers. Such niche dynamics can be seen in underwriting results as NODK’s NSA combined ratio has averaged 95.9% since 2015 and 88.0% since 2018. I expect the NSA segment to continue to produce underwriting profits in the low to mid-90s percentage range (coming mainly from Direct Auto) due to the aforementioned weaker and more

fragmented competition.

Home and Farm (H&F)

NODK writes home and farm insurance through Nodak Insurance Company (North Dakota), American West (South Dakota), and Battle Creek (Nebraska). Home and farm insurance provides coverage for damage to buildings, equipment, and other contents in the event of fire, lightning, wind, hail, and theft. It also provides coverage for liabilities arising from injury on the insured's property. The H&F business dates back to the company’s founding in 1946; it has produced lumpy but satisfactory results over time.

The average combined ratio since 2015 is 96.5%, skewed on both ends by an especially bad 2016 (heavy hail and other inclimate weather) and good 2020 (unusually favorable weather). Nodak has a strong market position in the H&F business due to its longstanding connection with the North Dakota Farm Bureau (NDFB), which originally established Nodak in 1946 to provide P&C insurance to members. To this day, the NDFB markets Nodak as its exclusive insurer of choice to members. In exchange for this promotion/accreditation, the NDFB receives a royalty based on premium volume (amounting to about $1.4 million in 2020). All customers of Nodak Insurance are members of the NDFB.

Nodak also has a network of exclusive agents to sell and service its policies. The situation works well for all involved, as members of the NDFB receive reasonably priced insurance, the NDFB collects a royalty for its low-effort marketing, and Nodak maintains its list of high-quality customers while keeping costs down. As such, I expect NODK’s H&F business to continue to produce attractive underwriting results on average over time.

Competitors in the H&F business include Farmers Union Mutual, North Star Mutual, American Family, and Nationwide Mutual. While these companies may have greater resources and deeper penetration in other markets, none have the same established presence and trust in North Dakota and the closely surrounding Midwest.

Crop

NODK provides crop hail and multi-peril crop insurance through Nodak (North Dakota), American West (South Dakota), and Battle Creek (Nebraska). “Crop hail insurance” is a private insurance product that provides protection against losses to farmers’ crops due to hail damage. “Multi-peril crop insurance”, on the other hand, is a federal program that protects against crop yield losses from all types of natural causes including drought, excessive moisture, freeze, and disease. Most crop insurance sold includes a “crop-yield” and “crop-revenue” element, protecting against both reduced land productivity (yield) and a decline in crop prices (revenue).

In 1980, Congress expanded the federal crop insurance program to cover more crops and regions of the country, and it permitted private sector insurers to market and administer federal insurance policies in exchange for the opportunity to earn a profit while bearing a portion of the insurance risk. Congress also authorized a premium subsidy for farmers and ranchers. In combination, these actions led to rapid and widespread adoption of crop insurance (acres insured grew from 26 million in 1980 to 100 million in 1990 and 380 million in 2019).

Federally-run multi-peril crop insurance is a complicated business. Simply stated, the price for multi-peril policies is fixed by the Risk Management Agency (a division of the USDA), and private insurance companies (like NODK) market the product, manage the policies, and share a portion of the risk/reward on a sliding scale. NODK and other private insurers who market and service the policies are reimbursed by the government for a portion of their costs (around 12-13% in NODK’s case).

The Federal Crop Insurance Corporation (FCIC) provides reinsurance for the industry should extreme losses occur. NODK also maintains additional reinsurance on top of the FCIC’s. NODK’s max loss ratio on crop insurance is 105%, a level which has only been reached once since 2003 (in 2011). NODK retains weather-related losses from catastrophic events of $10 million, with reinsurance coverage in excess of retention of $117 million. Due to extensive reinsurance protection, both from the federally-supported FCIC and private third-parties, I believe catastrophic tail risk is minimal.

The government’s expense reimbursement program combined with risk-management reinsurance support has historically made crop insurance a low risk, high return business. A change in government policy, although not predicted, could dampen the attractiveness of this segment and is a risk to consider (although a small one for NODK in my view as further explained below).

2019 and 2020 were both higher loss years than average due mainly to a wet spring and cool summer in 2019, resulting in a delay for crops to mature, combined with a wet fall causing delayed harvest of those crops. Such developments lead to a higher than normal number of prevented planting claims in 2020 due

to fields not being harvested in 2019. These events illustrate the inherent uncertainty of North Dakota crop insurance in any given year; specific results in any year shouldn’t have a large impact on long-term value.

Competitors in crop insurance include Chubb, QBE Insurance Group, Rural Community Insurance Services, CGB Enterprises, and Great American Insurance Group. I believe it likely NODK will continue to earn underwriting profits on its crop insurance, but the company is much less dependent on this line of business now than in the past as other segments have grown to represent larger portions of earnings. A loss of business or government support would not spell doom for NODK.

Commercial

NODK writes commercial insurance primarily through Westminster American Insurance Company (acquired January 1, 2020) throughout the Eastern and parts of the Southeastern US. Westminster has a history of success as the company has grown earned premiums from $3.6 million in 2007 to $25.5 million in 2020 (16.2% CAGR) while achieving an average combined ratio of 82.1% over the same time frame with no loss years.

Westminster’s growth and profitability can be attributed to its focus on commercial habitational insurance in the Northeast. Management has shown a solid aptitude for taking such risk and has built strong relationships among local agents and brokers. I expect the commercial segment to continue to grow and add profits over time as it continues to gain share in the Northeast and permeate further south.

Other

The “all other” segment consists mainly of excess liability coverages and reinsurance assumed. This segment is small and volatile (subject to current market pricing and risk/opportunity) but has historically been highly profitable.

Total Underwriting

Put together, NODK makes up a collection of niche underwriters that have collectively achieved solid growth and profits in the past and should continue to do so in the future. Below is the 10-year pro-forma underwriting record including all acquired lines (as if such acquirees have always been part of NODK).

Based on historical performance, forward estimates, and current activity levels, I believe NODK’s “normalized” pre-tax underwriting earning power is around $17.5 million (94% combined ratio on about $285 million of net premiums earned).

Investment Portfolio

NODK’s investment portfolio is nothing particularly special or interesting. The company has hired independent investment advisors Conning Inc., Disciplined Growth Investors, and CIBC Personal Wealth Management to manage conservative portfolios. While I don’t see any huge upside in the investment portfolio, I also don't see any big risks. Fixed-income securities (all of which are investment-grade) make up about 65% of the total, while cash and equivalents contribute another 20%. The remaining 15% resides in equities and other investments.

Credit/default risk is low given concentration in high-grade bonds and cash. Interest rate risk is moderate as the average maturity of the fixed-income portfolio is 4.65 years and the average duration is 3.57 years. This is comparable to other large insurers like Progressive (duration of 2.9 years), Allstate (5.0), and Chubb (4.0). For NODK, a 1% increase in interest rates would result in an estimated reduction of $11.4 million in the fixed income portfolio. A dramatic 5% rise in interest rates would likely result in post-conversion book value declining to around $22/share from the current $26.50/share estimate. Given the shares trade at a meaningful discount to book value in all but the most extreme interest rate scenarios, I am not overly concerned with interest rate risk/sensitivity. Rising rates would of course decrease current equity value but would also result in greater investment income going forward.

I expect the investment portfolio as it stands today to throw off about $9 million in annual pre-tax income, for a net return on average cash/investments of about 1.8% (consistent with the last few years). This could increase should rates rise and/or more of the cash be invested (pre-IPO in 2017 cash made up only 9% compared to the current 20% of invested assets).

Competitive Positioning and Growth

NODK has three main subsidiaries (discussed above) which drive the majority of its profits: Nodak Insurance (North Dakota), Direct Auto (Illinois), and Westminster (Eastern seaboard). These three companies have carved out profitable niches that allow them to make more money than the average small

P&C insurer.

Nodak has a 60+ year established track record in North Dakota, which comes with brand recognition, loyalty, trust, and long-standing relationships. In addition, Nodak is endorsed by the NDFB and maintains a network of exclusive agents which are paid lower commissions than their independent counterparts. For these reasons, Nodak is able to make smart, selective risks, charge fair prices, and keep costs down.

Direct Auto has grown from a startup with $2.4 million in capital in 2007 to a legitimate insurance player in Illinois with $35.8 million in capital in 2020. They have done this by focusing almost exclusively on high-risk Hispanic drivers in the Chicago area, developing a deep understanding of the risks these policies present and prices they warrant, and building solid relationships with local independent agents. Direct Auto pays more commission to agents (nearly 25%) than their counterparts which has allowed them to be more selective in the business they take (resulting in lower than average loss rates).

Similarly, Westminster has targeted a specialized niche--commercial habitational insurance in the Northeast (now moving south). They understand the market well, know the risks, and price accordingly. Unlike many P&C peers, they have not strayed from their competency into new, unknown business segments in an effort to grow. Moving south presents added risks but there have yet to be any signs of trouble.

Given NODK’s comparatively small market share (< 5% in most markets outside of North Dakota) and attractive operating metrics, I believe the company will be able to grow faster than the industry in the coming years. Management is implementing multiple strategies in pursuit of this growth, including continued emphasis on Nodak’s relationship with the North Dakota Farm Bureau, using the relative cost advantage created by their low expense ratio to selectively expand share in primary markets, leverage their improved AM Best rating and larger size to grow Westminster’s commercial business, expand and enhance agency relationships in Nebraska and South Dakota, and expand the NSA business taking share from weaker fragmented competitors. This growth should be funded primarily from internally-generated operating cash flows and investment income, as well as from the proceeds from a possible (and I believe likely) second-step IPO.

These strike me as logical growth objectives with at least reasonable odds of success. Importantly, in buying at a meaningful discount to TBV, we are not dependent on strong future growth for our return, although such a result would be an added delight. A doubling of equity in the next decade (conservative) combined with a doubling of the P/B multiple (also reasonable) would result in a four-bagger (15% CAGR).

Insiders

NODK is led by CEO Jim Alexander, an insurance veteran who has been with the company since 2003. Over his tenure, NODK has produced profits in all but two years and has grown equity from $60.8 million in 2007 to $344.3 million in 2020 (including the first-step IPO in 2017 which raised about $90 million). I have spoken on the phone with Jim three times and I find him to be sincere, honest, and helpful. Jim is 54-years-old, owns 78,802 shares ($1.5 million at $19/share), and earns a salary of $800,000 (total comp in 2020 was $2.7 million including bonuses).

Executives earn short-term bonuses (paid in cash) which are based on four factors: statutory surplus growth (3% minimum for any bonuses to be paid), combined ratio, direct premiums, and ROE. The company targets a 94% combined ratio, 4% growth in direct premiums written, and 10% pre-tax return on equity, with different bonus payouts above and below these targets. The long-term incentive is based solely on 3-year BVPS growth and is paid in the form of stock. The company targets a 7% BVPS CAGR.

I find these incentives to be reasonable but not perfect (growth in premiums should be based on capital availability and attractiveness of pricing, not some arbitrary “goal”), and I think they are a bit conservative. Historically, NODK has outperformed all of these hurdles. In my conversations with Jim I believe he is focused on safely growing NODK without sacrificing strength or profitability to meet short-term financial goals. For example, NODK could easily write more premiums and achieve faster growth given their conservative level of capital, but Jim refuses to do so as it would hurt the combined ratio, ROE, AM Best rating, and ultimately result in loss of shareholder’s capital.

Eric Aasmunstad is the Chairman of the board and has been a director of Nodak since 1997. He owns 17,814 shares ($338,466 at $19/share). A product of North Dakota, Eric graduated from North Dakota State University. He farms approximately 4,000 acres, owns a metalworking company, and operated a custom harvesting business until 2012. In addition, Eric was President of the North Dakota Farm Bureau from 1999 to 2011.

Six board members were paid an average of $69,333 in cash and $55,692 in stock each in 2020 for total director compensation of $750,150. This isn’t the cheapest board nor the most egregious. Of course, I’d rather they be paid little to nothing. In the case of NODK, the board does have the important responsibility of risk oversight and capital allocation, crucial to an insurer with excess capital. Board members and executives are all required to own no less than two times their base salary in NODK common stock in an effort to align their own interests with those of shareholders. This can be achieved through the awarding of stock units or open market purchases. Five years are given for insiders to meet this ownership minimum. As NODK went public in 2017, all executives and directors must meet the requirement beginning in 2022.

The largest shareholder (outside the MHC) is Jeff Thorp (son of Ed Thorp) who holds 1,110,263 shares ($21.1 million at $19/share), representing 5.2% of the total shares outstanding and 12.8% of the non-MHC-held float. Jim tells me there are a few small institutions who hold shares, but none in large amounts (post-second-step IPO, I imagine there may be more institutional buyers which could serve as a catalyst to push the price up). Other notable shareholders include the firms of Michael Price and Joseph Stilwell, both adept fundamental value investors.

Overall, I believe management is competent and conservative, as evidenced by the solid operating track record and strong balance sheet, and the shareholder base includes a handful of intelligent, value-focused owners (which management trusts and listens to) of which we may become another. I see no big red flags from insiders.

Valuation

There are multiple ways to value a partially-public mutual insurance company. My method of choice is to value the stock as if the conversation were to take place at the current price under reasonable assumptions, illustrated as follows:

Current equity (as of 12/31/20)	$344.3 million
Offering price	$19.15/share
Leakage	10%
Capital raised	$218 million
Shares	21.3 million
BVPS	$26.38
Current multiple	0.7x
Conservative multiple	1.1x
Fair value	$29/share
Current price	$19.15/share
Discount	34%

We can also measure value by examining the normalized earning power of the company. Net earned premiums are around $290 million. A normalized combined ratio of 94% results in underwriting profit of $17.6 million. On the investment side, NODK has cash and invested assets of $494 million which should generate an additional $9 million of income (1.8% net return). This gives us total pre-tax profit of about $26.5 million. With the current 22% tax rate, we get net earning power of $20.7 million. If we assume the additional capital from the second-step (about $218 million ) returns a modest 8% (around $17.4 million), we get total income of about $38 million. This is a 9.3% earnings yield based on the current market capitalization of $408 million (10.7x P/E ratio). I believe this initial yield, coupled with modest growth and multiple expansion, is likely to produce teens or better returns going forward.

Finally, I present a high-level view of a boring but plausible scenario. Let’s say in the next decade NODK doubles shareholder’s equity (an undemanding 7% per year). Over this period, the company completes its second step IPO, gains the attention of institutional managers, and earns a valuation more in line with

peers and recent transaction multiples of around 1.4x book (to be further discussed below). In such a case, the stock would be worth about $73/share, 281% above its current price. Indeed, a doubling of equity and a doubling of the multiple paid for that equity results in a four-bagger which, over the course of a decade,

equates to a 15% CAGR. Of course this analysis is far from perfect, but I think it is reasonable and perhaps conservative, as timing could be faster (resulting in a higher CAGR) or equity growth could be stronger (7% is a low bar).

All of this is to say that I believe NODK is worth at least book value and possibly significantly more. Comparative figures for larger peers support this view:

NODK is under-levered compared to most P&C insurers. Increasing underwriting leverage (by either writing more premiums or reducing equity), would boost the ROE to a double-digit percentage, supporting my belief that NODK is worth at least book value and likely more. As can be seen above, NODK trades at a significant discount compared to other well-known peers despite similar operating metrics and arguably better growth prospects given their smaller market share.

In addition, a profitable, growing, overcapitalized insurer is likely worth a significant premium to a handful of would-be acquirers. Recent acquisition multiples for small P&C insurers have been considerably above book value, averaging around 1.4x and going as high as 3x+.

That said, I don’t believe we are dependent on a sale of the business to realize investment gains in NODK. The company will continue to build equity and value. I think long-term holders will do well buying at the current price. The sale of the company at a full multiple would simply be an added cherry on top.

Risks

● Limited track record for acquired businesses: NODK has made two sizable acquisitions (Direct auto in 2018 and Westminster in 2020) since its IPO in an effort to diversify its business and reduce exposure to the unpredictable and volatile North Dakota climate. These acquisitions have only recently been consolidated in NODK’s financials, and there is a chance that their recent strong performance proves the exception rather than the rule. I have reviewed statutory filings for both companies prior to their acquisition and both have had strong underwriting results for more than a decade. In addition, management of these companies has remained in-place post-acquisition, so I have little reason to believe the happy results won’t continue.

● Poor future acquisitions: Direct Auto and Westminster both appear to be reasonable purchases by NODK. Both companies have sound operating histories; DA was purchased at a discount to book value (what looks like a great deal based on DA’s underwriting record) while Westminster was purchased around an 80% premium to book (perhaps expensive but hard to say). Management would like to make additional acquisitions and further diversify the business. Despite a track record of reasonable deals, there is always the chance they do something dumb.

● Over-conservatism reduces returns: CEO Jim Alexander says he is comfortable operating NODK around 1.0x premiums to surplus. In 2020 the figure was 0.87x (indicating there is still some excess capital in the holding company). I think NODK could realistically go up to 1.5x without losing sleep at night. Such leverage would increase ROE from high-single-digits to low-teens. It is unlikely Jim runs the company at this level and therefore ROE will likely remain at or below 10% on average over time.

● Time to second step conversion: NODK is likely to experience a quick rise in price on announcement of a second-step conversion. I believe such an event will occur sooner rather than later (in the next couple of years) because management has stated their desire to make further acquisitions and will need additional capital to do so in the not-too-distant future, and there is a group of value-conscious shareholders known for playing the conversion game who are sure to provide pressure. However, there is always a chance management chooses to kick the can down the road, and the longer it takes for a second-step the less our rate of return will be. This risk is somewhat mitigated as NODK continues to buy back its own shares which will ultimately result in better value for remaining holders when the second-step does occur.

● Increases in interest rates: As previously discussed, a rise in rates will have a material impact on the value of NODK’s fixed income portfolio which will reduce equity value and therefore fair value of the stock. Conversely, a rise in rates will also result in higher future earnings from the investment portfolio.

● Reputation risk, especially non-standard and social inflation: Non-standard auto insurance is notorious for terrible reviews and NODK is not immune. Direct Auto has a 1.2 star rating on Google with 300+ scathing reviews. These angry customers claim fraud and demand justice. I spoke with Jim about this and he attributes these comments to the nature of the high-risk auto insurance market and the need for Direct Auto and others to “play hardball” in certain cases given the pervasiveness of customer fraud (people keying their own cars in Chicago or burning their vehicles in Las Vegas). He says they are working to improve customer relations but the NSA business will likely never have the same goodwill as Nodak, American West, or Battle Creek. Jim assures me all insurance subsidiaries have regular inspection by governing bodies and NODK faces no threat to its operational integrity in any segment. In any line of insurance, there is risk of “social inflation” where courts give increasing power to the consumer in insurance cases.

● Discontinued government support of crop insurance: Without premium subsidies, it is likely less acreage would be insured resulting in a decline of business for NODK. In addition, without FCIC reinsurance and government-supplied expense reimbursement, NODK would have to rely solely on third-party reinsurance and fund all costs itself, which would reduce the attractiveness of the crop segment and may make it undesirable to continue. Government policy predictions are difficult to make, but there is a multi-decade track record of federal support for crop insurance. If for some reason this support should decline (I don’t think it likely), NODK now has many other lines of business in which it can focus its capital.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

* Sale of the business

* continue to build equity and value

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			2021	2022
Price:	18.92	EPS	0	0
Shares Out. (in M):	21	P/E	0	0
Market Cap (in $M):	404	P/FCF	0	0
Net Debt (in $M):	0	EBIT	0	0
TEV (in $M):	0	TEV/EBIT	0	0