Market Overview

Unico American Corporation Reports Second Quarter 2018 Financial Results

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Unico American Corporation (NASDAQ:UNAM) ("Unico," the "Company"),
announced today its consolidated financial results for the three and six
months ended June 30, 2018. For the three months ended June 30, 2018,
revenues were $8.6 million and net income was $0.2 million ($0.03
diluted income per share) compared with revenues of $9.2 million and net
loss of $0.9 million ($0.17 diluted loss per share) for the three months
ended June 30, 2017. For the six months ended June 30, 2018, revenues
were $17.5 million and net loss was $2.0 million ($0.38 diluted loss per
share) compared with revenues of $18.2 million and net loss of $3.0
million ($0.57 diluted loss per share) for the six months ended June 30,
2017.

Stockholders' equity was $56.8 million as of June 30, 2018, or $10.70
per common share, including unrealized after-tax investment losses of
$1.4 million, compared to stockholders' equity of $59.9 million as of
December 31, 2017, or $11.30 per common share, including unrealized
after-tax investment losses of $0.2 million.

"Our top priority remains the achievement of sustainable growth in
profits. Our loss ratio and investment yields improved during the second
quarter of 2018 compared to the first quarter of 2018 and the second
quarter of 2017. Our immediate focus remains on premium adequacy, risk
selection and expense control," said Cary L. Cheldin, Unico's President
and Chief Executive Officer. "I believe our quarterly results
demonstrate that the changes we made during the past 18 months are
making a positive difference. We intend to continue making such changes."

About Unico

Headquartered in Calabasas, California, Unico is an insurance holding
company that underwrites property and casualty insurance through its
insurance company subsidiary; provides property, casualty and health
insurance through its agency subsidiaries; and through its other
subsidiaries provides insurance premium financing and membership
association services. Unico has conducted the majority of its operations
through its subsidiary, Crusader Insurance Company, since 1985. For more
information concerning Crusader Insurance Company, please visit the
Crusader's Web site at www.crusaderinsurance.com.

Forward-Looking Statements

This press release may contain "forward-looking statements" within
the meaning of the federal securities laws, including Section 27A of the
Securities Act of 1933, as amended (or "the Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (or "the
Exchange Act"). In this context, forward-looking statements are not
historical facts and include statements about the Company plans,
objectives, beliefs and expectations. Forward-looking statements include
statements preceded by, followed by, or that include the words
"believes," "expects," "anticipates," "seeks," "plans," "estimates,"
"intends," "projects," "targets," "should," "could," "may," "will,"
"can," "can have," "likely," the negatives thereof or similar words and
expressions.

Forward-looking statements are only predictions and are not
guarantees of future performance. These statements are based on current
expectations and assumptions involving judgments about, among other
things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the Company's control. These
predictions are also affected by known and unknown risks, uncertainties
and other factors that may cause the Company's actual results to be
materially different from those expressed or implied by any
forward-looking statement. Many of these factors are beyond the
Company's ability to control or predict. The Company's actual results
could differ materially from the results contemplated by these
forward-looking statements due to a number of factors. Such factors
include, but are not limited to, failure to meet minimum capital and
surplus requirements; vulnerability to significant catastrophic property
loss; a change in accounting standards issued by the Financial
Accounting Standards Board; ability to adjust claims
accurately; insufficiency of loss and loss adjustment expense reserves
to cover future losses; changes in federal or state tax laws; ability to
realize deferred tax assets; ability to accurately underwrite risks and
charge adequate premium; ability to obtain reinsurance or collect from
reinsurers and or losses in excess of reinsurance limits; extensive
regulation and legislative changes; reliance on subsidiaries to satisfy
obligations; downgrade in financial strength rating by A.M.
Best; changes in interest rates; investments subject to credit,
prepayment and other risks; geographic concentration; reliance on
independent insurance agents and brokers; insufficient reserve for
doubtful accounts; litigation; enforceability of exclusions and
limitations in policies; reliance on information technology
systems; ability to prevent or detect acts of fraud with disclosure
controls and procedures; change in general economic
conditions; dependence on key personnel; ability to attract, develop and
retain employees and maintain appropriate staffing levels; insolvency,
financial difficulties, or default in performance of obligations by
parties with significant contracts or relationships; ability to
effectively compete; maximization of long-term value and no focus on
short-term earnings expectations; control by a small number of
shareholders; failure to maintain effective system of internal controls;
and difficulty in effecting a change of control or sale of any
subsidiaries.

Please see Part I - Item 1A – "Risk Factors" in the Company's 2017
Annual Report on Form 10-K as filed with the U.S. Securities and
Exchange Commission ("SEC"), as well as other documents the Company
files with the SEC from time-to-time, for other important factors that
could cause the Company's actual results to differ materially from its
current expectations and from the forward-looking statements discussed
herein. Because of these and other risks, uncertainties and assumptions,
you should not place undue reliance on these forward-looking statements.
In addition, these statements speak only as of the date of this press
release and, except as may be required by law, the Company undertakes no
obligation to revise or update publicly any forward-looking statements
for any reason.

 
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
 
  June 30   December 31

2018

2017

(Unaudited)

ASSETS

Investments
Available-for-sale:

Fixed maturities, at fair value (amortized cost: June 30, 2018
$66,514; and December 31, 2017 $58,153)

$ 64,768 $ 57,849
Held-to-maturity:

Fixed maturities, at amortized cost (fair value: June 30, 2018
$20,602; December 31, 2017 $28,098)

20,602 28,098
Short-term investments, at fair value   200     1,848  
Total Investments 85,570 87,795
Cash, cash equivalents, and restricted cash 7,835 9,367
Accrued investment income 320 491
Receivables, net 4,550 6,006
Reinsurance recoverable:
Paid losses and loss adjustment expenses 94 127
Unpaid losses and loss adjustment expenses 8,805 8,394
Deferred policy acquisition costs 3,718 4,163
Property and equipment, net 9,818 10,015
Deferred income taxes 4,178 3,381
Other assets   611     560  
Total Assets $ 125,499   $ 130,299  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

LIABILITIES

Unpaid losses and loss adjustment expenses $ 50,066 $ 49,077
Unearned premiums 16,824 18,768
Advance premium and premium deposits 240 208
Accrued expenses and other liabilities   1,602     2,301  
Total Liabilities $ 68,732   $ 70,354  
 
Commitments and contingencies
 

STOCKHOLDERS' EQUITY

Common stock, no par – authorized 10,000,000 shares; issued and
outstanding shares 5,307,133 at June 30, 2018, and December 31,
2017

$ 3,773 $ 3,773
Accumulated other comprehensive loss (1,379 ) (240 )
Retained earnings   54,373     56,412  
Total Stockholders' Equity $ 56,767   $ 59,945  
 
Total Liabilities and Stockholders' Equity $ 125,499   $ 130,299  
 
 
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in thousands, except per share)
 
  Three Months Ended   Six Months Ended

June 30

June 30

2018

 

2017

2018

 

2017

REVENUES

Insurance company operation:
Net earned premium $ 7,363 $ 8,220 $ 15,045 $ 16,141
Investment income 453 264 897 476
Other income   112   68     168     136  
Total Insurance Company Operation 7,928 8,552 16,110 16,753
 
Other insurance operations:
Gross commissions and fees 671 671 1,278 1,413
Finance charges and fees earned 34 18 52 36
Other income   10   -     10     -  
Total Revenues   8,643   9,241     17,450     18,202  
 

EXPENSES

Losses and loss adjustment expenses 4,929 5,909 12,731 14,434
Policy acquisition costs 1,515 1,591 3,137 3,089
Salaries and employee benefits 1,127 1,965 2,415 3,313
Commissions to agents/brokers 41 45 82 87
Other operating expenses   744   1,082     1,610     1,897  
Total Expenses   8,356   10,592     19,975     22,820  
 
Income (loss) before taxes 287 (1,351 ) (2,525 ) (4,618 )
Income tax expense (benefit)   119   (460 )   (486 )   (1,580 )
Net Income (Loss) $ 168 $ (891 ) $ (2,039 ) $ (3,038 )
 
 
 
PER SHARE DATA:
Basic
Earnings (loss) per share $ 0.03 $ (0.17 ) $ (0.38 ) $ (0.57 )
Weighted average shares 5,307,133 5,307,133 5,307,133 5,307,133
Diluted
Earnings (loss) per share $ 0.03 $ (0.17 ) $ (0.38 ) $ (0.57 )
Weighted average shares 5,307,133 5,307,133 5,307,133 5,307,133
 
 
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in thousands)
 
  Six Months Ended

June 30

2018

 

2017

Cash flows from operating activities:
Net Loss $ (2,039 ) $ (3,038 )
Adjustments to reconcile net loss to net cash from operations:
Depreciation and amortization 282 265
Bond amortization, net 129 (426 )
Bad debt expense - 15
Non-cash stock based compensation - 12
Changes in assets and liabilities:
Net receivables and accrued investment income 1,627 (318 )
Reinsurance recoverable (378 ) (2,791 )
Deferred policy acquisitions costs 445 9
Other assets (47 ) 416
Unpaid losses and loss adjustment expenses 989 4,883
Unearned premium (1,944 ) 502
Advance premium and premium deposits 32 161
Accrued expenses and other liabilities (699 ) 47
Income taxes current/deferred   (498 )   (1,584 )
Net Cash Used by Operating Activities   (2,101 )   (1,847 )
 
Cash flows from investing activities:
Purchase of fixed maturity investments (10,735 ) (29,348 )
Proceeds from maturity of fixed maturity investments 8,741 25,218
Proceeds from sale or call of fixed maturity investments 1,000 1,050
Net decrease (increase) in short-term investments 1,648 (2,101 )
Additions to property and equipment   (85 )   (95 )
Net Cash Provided (Used) by Investing Activities   569     (5,276 )
 
Cash flows from financing activities:
Net Cash Used by Financing Activities   -     -  
 
Net decrease in cash, cash equivalents, and restricted cash (1,532 ) (7,123 )
Cash, cash equivalents, and restricted cash at beginning of period   9,367     22,603  
Cash, Cash Equivalents, and Restricted Cash at End of Period $ 7,835   $ 15,480  
 
Supplemental Cash Flow Information
Cash paid during the period for:
Interest - -
Income taxes $ 9 $ 9
 

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