SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period from January 1, 2001 to March 31, 2001
Commission File No. 0-3978
UNICO AMERICAN CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 95-2583928
(State or other jurisdiction of (I.R.S. Employee
incorporation or organization) Identification No.)
23251 Mulholland Drive, Woodland Hills, California 91364
(Address of Principal Executive Offices) (Zip Code)
(818) 591-9800
Registrant's telephone number
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of each class)
Securities registered pursuant to section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
No Change
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
5,453,219
Number of shares of common stock outstanding as of May 11, 2001
1
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31 December 31
2001 2000
---- ----
ASSETS
- ------
Investments
Available for sale:
Fixed maturities, at market value (amortized cost: March 31,
2001 $93,292,723; December 31, 2000 $94,798,077) $95,004,262 $94,982,630
Equity securities at market (cost: March 31, 2001
$2,400; December 31, 2000 $25,920) 2,400 25,920
Short-term investments, at cost 3,314,217 3,355,354
---------- ----------
Total Investments 98,320,879 98,363,904
Cash 166,824 54,806
Accrued investment income 1,528,265 1,908,547
Premiums and notes receivable, net 5,797,833 5,807,731
Reinsurance recoverable:
Paid losses and loss adjustment expenses 673,259 393,198
Unpaid losses and loss adjustment expenses 8,555,399 10,671,343
Prepaid reinsurance premiums 39,674 29,531
Deferred policy acquisition costs 4,615,163 4,500,147
Property and equipment (net of accumulated depreciation) 258,280 114,107
Deferred income taxes 228,964 948,442
Other assets 1,447,965 1,154,064
----------- -----------
Total Assets $121,632,505 $123,945,820
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
- -----------
Unpaid losses and loss adjustment expenses $41,283,546 $45,217,369
Unearned premiums 17,666,077 17,099,927
Advance premium and premium deposits 2,385,567 2,316,016
Accrued expenses and other liabilities 9,207,257 7,899,179
Dividends payable 272,661 -
---------- ----------
Total Liabilities $70,815,108 $72,532,491
---------- ----------
STOCKHOLDERS' EQUITY
- ---------------------
Common stock, no par - authorized 10,000,000 shares; issued and outstanding
shares 5,453,219 at March 31, 2001, and 5,692,699 at December 31, 2000 $2,686,493 $2,789,494
Accumulated other comprehensive income 1,129,616 121,805
Retained earnings 47,001,288 48,502,030
---------- ----------
Total Stockholders' Equity $50,817,397 $51,413,329
---------- ----------
Total Liabilities and Stockholders' Equity $121,632,505 $123,945,820
=========== ===========
See notes to unaudited consolidated financial statements.
2
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31
---------------------------
2001 2000
---- ----
REVENUES
- --------
Insurance Company Revenues
Premium earned $8,309,286 $8,116,552
Premium ceded 1,676,823 1,339,506
--------- ---------
Net premium earned 6,632,463 6,777,046
Net investment income 1,409,016 1,431,490
Net realized investment (losses) (23,520) -
Other income 3,020 5,035
--------- ---------
Total Insurance Company Revenues 8,020,979 8,213,571
Other Revenues from Insurance Operations
Gross commissions and fees 1,360,767 1,414,352
Investment income 58,318 92,667
Finance charges and late fees earned 204,793 207,134
Other income 3,011 1,562
--------- ---------
Total Revenues 9,647,868 9,929,286
--------- ---------
EXPENSES
- --------
Losses and loss adjustment expenses 5,465,895 4,950,539
Policy acquisition costs 2,028,239 2,103,351
Salaries and employee benefits 1,113,705 1,081,561
Commissions to agents/brokers 323,007 333,128
Other operating expenses 728,857 632,392
--------- ---------
Total Expenses 9,659,703 9,100,971
--------- ---------
Income Before Taxes (11,835) 828,315
Income Tax Provision (63,939) 193,306
------ -------
Net Income $52,104 $635,009
====== =======
PER SHARE DATA
- --------------
Basic Shares Outstanding 5,648,380 6,304,965
Basic Earnings Per Share $0.01 $0.10
Diluted Shares Outstanding 5,677,436 6,348,793
Diluted Earnings Per Share $0.01 $0.10
See notes to unaudited consolidated financial statements
3
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended March 31
2001 2000
---- ----
Net income $52,104 $635,009
Other changes in comprehensive income net of tax:
Unrealized gains (losses) on securities classified as available-for-sale
arising during the period (tax impact: 2001, $511,179; 2000, $(107,530)) 992,288 (208,736)
Reclassification adjustment for losses included in net income (tax impact:
2001, $7,997; 2000, $0) 15,523 -
--------- -------
Comprehensive Income $1,059,915 $426,273
========= =======
See notes to unaudited consolidated financial statements
4
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
2001 2000
---- ----
Cash Flows from Operating Activities
Net income $52,104 $635,009
Adjustments to reconcile net income to net cash from operations
Depreciation and amortization 21,658 15,647
Bond amortization, net 98,127 150,779
Net realized loss on sale of securities 23,520 -
Changes in assets and liabilities
Premium, notes and investment income receivable 390,180 114,101
Reinsurance recoverable 1,835,883 (2,096,735)
Prepaid reinsurance premiums (10,143) 2,756
Deferred policy acquisitions costs (115,016) (64,997)
Other assets (293,899) 139,846
Reserve for unpaid losses and loss adjustment expenses (3,933,823) 587,748
Unearned premium reserve 566,150 154,662
Advance premium and premium deposits 69,551 (7,473)
Accrued expenses and other liabilities 352,728 * (620,414)
Income taxes current/deferred 200,302 55,130
------- -------
Net Cash (Used) from Operations (742,678) (933,941)
------- -------
Investing Activities
Purchase of fixed maturity investments (2,642,850) (1,954,140)
Proceeds from maturity of fixed maturity investments 4,040,000 2,735,600
Net increase in short-term investments 51,213 286,541
Additions to property and equipment (165,831) (6,537)
--------- ---------
Net Cash Provided by Investing Activities 1,282,532 1,061,464
--------- ---------
Financing Activities
Repurchase of common stock (427,836) * -
-------
Net Cash Used by Financing Activities (427,836) -
Net Increase in Cash 112,018 127,523
Cash at beginning of period 54,806 105,439
------ -------
Cash at End of Period $166,824 $232,962
======= =======
Supplemental Cash Flow Information Cash paid during the period for:
Interest $75 $ -
Income taxes $ - $25
* Does not include $955,351 due on repurchase of common stock settling April 2, 2001.
See notes to unaudited consolidated financial statements
5
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Nature of Business
- ------------------
Unico American Corporation is an insurance holding company that underwrites
property and casualty insurance through its insurance company subsidiary;
provides property, casualty, health and life insurance through its agency
subsidiaries; and provides insurance premium financing, claim administration
services, and membership association services through its other subsidiaries.
Unico American Corporation is referred to herein as the "Company" or "Unico" and
such references include both the corporation and its subsidiaries, all of which
are wholly owned, unless otherwise indicated. Unico was incorporated under the
laws of Nevada in 1969.
Principles of Consolidation
- ---------------------------
The accompanying unaudited consolidated financial statements include the
accounts of Unico American Corporation and its subsidiaries. All significant
inter-company accounts and transactions have been eliminated in consolidation.
Basis of Presentation
- ---------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2001, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001. Quarterly financial statements should be read in conjunction with the
financial statements and related notes in the Company's 2000 Annual Report on
Form 10-K as filed with the Securities and Exchange Commission.
NOTE 2 - INCENTIVE STOCK PLANS
- ------------------------------
The Company's 1985 stock option plan provided for the grant of incentive stock
options to officers and key employees. The plan covers an aggregate of 1,500,000
shares of the Company's common stock (subject to adjustment in the case of stock
splits, reverse stock splits, stock dividends, etc.). As of March 31, 2001,
there were 71,275 options outstanding and all are currently exercisable. There
are no additional options available for future grant under the 1985 plan.
The Company's 1999 Omnibus Stock Plan also provides, among other things, for the
grant of incentive options to officers and key employees. The plan covers an
aggregate of 500,000 shares of the Company's common stock (subject to adjustment
in the case of stock splits, reverse stock splits, stock dividends, etc.). As of
March 31, 2001, there were options covering 110,000 shares of common stock
outstanding under this plan, of which options covering 42,500 shares of common
stock were exercisable.
NOTE 3 - REPURCHASE OF COMMON STOCK - EFFECT ON STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------
The Company has previously announced that its Board of Directors had authorized
the repurchase in the open market from time to time of up to an aggregate of
945,000 shares of the common stock of the Company. During the quarter ended
March 31, 2001, the Company retired an aggregate of 239,600 shares of its common
stock at a cost of $1,383,187 of which $103,001 was allocated to capital and
$1,280,186 was allocated to retained earnings. As of March 31, 2001, the Company
had purchased and retired an aggregate of 868,200 shares of its common stock.
NOTE 4 - EARNINGS PER SHARE
- ---------------------------
The following table represents the reconciliation of the numerators and
denominators of the Company's basic earnings per share and diluted earnings per
share computations reported on the Consolidated Statements of Operations for the
three months ended March 31, 2001 and 2000:
6
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
Three Months Ended March 31
---------------------------
2001 2000
---- ----
Basic Earnings Per Share
- ------------------------
Net income numerator $52,104 $635,009
Weighted average shares outstanding denominator 5,648,380 6,304,965
Per share amount $0.01 $0.10
Diluted Earnings Per Share
- --------------------------
Net income numerator $52,104 $635,009
Weighted average shares outstanding 5,648,380 6,304,965
Effect of diluted securities 29,056 43,828
--------- ---------
Diluted shares outstanding denominator 5,677,436 6,348,793
--------- ---------
Per share amount $0.01 $0.10
NOTE 5 - SEGMENT REPORTING
- --------------------------
Statement of Financial Accounting Standards No. 131 (SFAS No. 131), Disclosures
about Segments of an Enterprise and Related Information, became effective for
fiscal years beginning after December 15, 1997. SFAS No. 131 establishes
standards for the way information about operating segments is reported in
financial statements. The Company has adopted SFAS No. 131 and has identified
its insurance company operation, Crusader Insurance Company ("Crusader"), as its
primary reporting segment. Revenues from this segment comprise 83% of
consolidated revenues. The Company's remaining operations constitute a variety
of specialty insurance services, each with unique characteristics and
individually insignificant to consolidated revenues.
Three Months Ended March 31
---------------------------
2001 2000
---- ----
Revenues
- --------
Insurance company operation $8,020,979 $8,213,571
Other insurance operations 4,277,853 4,183,349
Intersegment elimination (1) (2,650,964) (2,467,634)
--------- ---------
Total other insurance operations 1,626,889 1,715,715
--------- ---------
Total Revenues $9,647,868 $9,929,286
========= =========
Income (Loss) Before Income Taxes
- ---------------------------------
Insurance company operation $(173,296) $750,517
Other insurance operations 161,461 77,798
------ -------
Total Income (Loss) Before Income Taxes $ (11,835) $828,315
====== =======
Assets
- ------
Insurance company operation $105,456,436 $101,776,571
Intersegment eliminations (2) (1,312,089) (162,406)
----------- -----------
Total insurance company operation 104,144,347 101,614,165
Other insurance operations 17,488,158 20,905,387
----------- -----------
Total Assets $121,632,505 $122,519,552
=========== ===========
(1) Intersegment revenue eliminations reflect commission paid by Crusader to
Unifax Insurance Systems, Inc., ("Unifax") a wholly owned subsidiary of the
Company.
(2) Intersegment asset eliminations reflect the elimination of Crusader
receivables and Unifax payables.
7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
(a) Liquidity and Capital Resources:
- -----------------------------------
Due to the nature of the Company's business (insurance and insurance services)
and whereas Company growth does not normally require material reinvestments of
profits into property or equipment, the cash flow generated from operations
usually results in improved liquidity for the Company.
Crusader generates a significant amount of cash as a result of its holdings of
unearned premium reserves, reserves for loss payments, and its capital and
surplus. Crusader's loss and loss adjustment expense payments are the most
significant cash flow requirement of the Company. These payments are continually
monitored and projected to ensure that the Company has the liquidity to cover
these payments without the need to liquidate its investments. As of March 31,
2001, the Company had cash and cash investments of $96,776,164 (at amortized
cost) of which $89,409,687 (92%) were investments of Crusader.
As of the quarter ended March 31, 2001, the Company had invested $93,292,723 (at
amortized cost) or 97% of its invested assets in fixed maturity obligations. In
accordance with Statement of Financial Accounting Standard No. 115, Accounting
for Certain Investments in Debt and Equity Securities, the Company is required
to classify its investments in debt and equity securities into one of three
categories: held-to-maturity, available-for-sale or trading securities. Although
all of the Company's investments are classified as available-for-sale, the
Company's investment guidelines place primary emphasis on buying and holding
high-quality investments.
The Company's investments in fixed maturity obligations of $93,292,723 (at
amortized cost) include $17,684,089 (19%) of pre-refunded state and municipal
tax-exempt bonds, $7,986,572 (9%) of U.S. treasury securities, $67,222,062 (72%)
of high-quality industrial and miscellaneous bonds, and $400,000 of certificates
of deposit. The tax-exempt interest income earned for the three months ended
March 31, 2001 and 2000 was $233,163 and $332,395, respectively.
The balance of the Company's investments are in equity securities and
high-quality, short-term investments that include a U.S. treasury bill, bank
money market accounts, certificates of deposit, commercial paper and a
short-term treasury money market fund.
The Company's investment policy limits investments in any one company to
$2,000,000. This limitation excludes bond premiums paid in excess of par value
and U.S. government or U.S. government guaranteed issues. The Company's
investment guidelines on equity securities limit investments in equity
securities to an aggregate maximum of $2,000,000. All of the Company's
investments are high-grade investment quality, all state and municipal
tax-exempt fixed maturity investments are pre-refunded issues, and all
certificates of deposits are FDIC insured.
On March 1, 2001, the Board of Directors declared a five-cent ($0.05) per share
cash dividend payable on May 18, 2001, to shareholders of record at the close of
business on April 27, 2001.
The Company has previously announced that its Board of Directors had authorized
the repurchase in the open market from time to time of up to an aggregate of
945,000 shares of the common stock of the Company (See Note 3). During the
quarter ended March 31, 2001, the Company retired an aggregate of 239,600 shares
of its common stock at a cost of $1,383,187. Of this amount, $427,836 came from
cash on hand and the proceeds from the maturities of short-term investments, and
$955,351 (which settled on April 2, 2001 with the proceeds of the sale of US
Treasury notes) is included in accrued expenses and other liabilities.
Although material capital expenditures may also be funded through borrowings,
the Company believes that its cash and short-term investments at year end, net
of trust restriction of $2,797,729, statutory deposits of $2,725,000, and the
dividend restriction between Crusader and Unico plus the cash to be generated
from operations, should be sufficient to meet its operating requirements during
the next twelve months without the necessity of borrowing funds.
The Company has initiated an upgrade and replacement of computer systems and has
spent approximately $140,000 of an estimated cost of $150,000 to complete this
project. The Company expects the project to be completed by December 31, 2001.
There are no other material commitments for capital expenditures as of the date
of this report.
8
City of Los Angeles Business License
- ------------------------------------
On September 13, 2000, the City of Los Angeles audited Unico (parent company
only) for the years 1997, 1998 and 1999 with respect to its Los Angeles business
license gross receipts tax. The audit resulted in an assessment of $97,681 in
gross receipts tax, interest of $24,196, and penalties of $39,072, resulting in
a total amount claimed due of $160,949. The assessment was based on the city's
position that expenses of Unico's subsidiaries that are paid by Unico (parent
company) are subject to the gross receipts business tax when those expenses are
reimbursed by the subsidiaries to Unico. The Company disagreed with the audit
findings and has appealed the matter. A formal hearing was held on January 3,
2001 that resulted in a reduction in the gross receipts tax due from $97,681 to
$32,636. The Company has also requested that all penalties be waived and that
interest be adjusted to reflect the decrease in tax due. As of March 31, 2001,
the Company has expensed the revised tax due.
(b) Results of Operations:
- -------------------------
All comparisons made in this discussion are comparing the quarter ended March
31, 2001, to the quarter ended March 31, 2000, unless otherwise indicated.
The Company's net income for the quarter ended March 31, 2001, decreased
$582,905 (92%) to $52,104 compared to $635,009 for the quarter ended March 31,
2000. Revenues for the quarter ended March 31, 2001, decreased $281,418 (3%) to
$9,647,868, compared to $9,929,286 for the quarter ended March 31, 2000.
PREMIUM WRITTEN before reinsurance increased $604,222 (7%) to $8,875,435 for the
quarter ended March 31, 2001, compared to the three months ended March 31, 2000.
The Company believes that the growth in written premium in the current quarter
is the result of a continued subsidence in the intensity of price-based
competition in the property casualty insurance market. The increase in written
premium in California accounted for $438,730 (73%) of this increase. Crusader's
written premium by state is as follows:
Three Months Ended March 31 Increase
State 2001 2000 (Decrease)
----- ---- ---- --------
California $7,490,151 $7,051,421 $438,730
Ohio 311,151 116,146 195,005
Arizona 280,631 360,498 (79,867)
Pennsylvania 243,777 217,153 26,624
Texas 162,656 49,065 113,591
Oregon 133,036 149,629 (16,593)
Montana 116,275 81,222 35,053
Washington 115,474 216,419 (100,945)
Nevada 12,595 22,573 (9,978)
Idaho 9,689 - 9,689
Kentucky - 7,087 (7,087)
--------- --------- -------
Total $8,875,435 $8,271,213 $604,222
========= ========= =======
PREMIUM EARNED before reinsurance increased $192,734 (2%) to $8,309,286 for the
quarter ended March 31, 2001, compared to $8,116,552 for the quarter ended March
31, 2000. The Company writes annual policies and therefore earns written premium
over the one-year policy term.
PREMIUM CEDED increased $337,317 (25%) to $1,676,823 for the quarter ended March
31, 2001, compared to $1,339,506 for the quarter ended March 31, 2000. The ratio
of earned premium ceded to earned premium increased to 20% of earned premium
from 17% of earned premium in the quarter ended March 31, 2000. Earned premium
ceded consists of both premium ceded under the Company's current reinsurance
contracts and premium ceded to the Company's provisionally rated reinsurance
contract. Premium ceded under the provisionally rated contract, which was
canceled on a runoff basis effective December 31, 1997, is subject to adjustment
based on the amount of losses ceded, limited by a maximum percentage that can be
charged by the reinsurer. The change in premium ceded between the quarter ended
March 31, 2001 and 2000 is as follows:
Increase in ceded premium ceded under current reinsurance contracts $22,264
Increase in provisionally rated premium ceded 315,053
-------
Net increase in premium ceded $337,317
=======
9
INVESTMENT INCOME, excluding realized investment losses, decreased $56,823 (4%)
to $1,467,334 for the quarter ended March 31, 2001, compared to $1,524,157 for
the quarter ended March 31, 2000. The decrease in investment income is primarily
due to a 3% decrease in average invested assets for the quarter ending March
31,2001, compared to the prior year.
The Company continually evaluates the recoverability of its investment holdings.
When a decline in value of fixed maturities or equity securities is considered
other than temporary, a loss is recognized in the consolidated statement of
operations. During the quarter ended March 31, 2001, the Company realized a loss
of $23,520 on one equity security where a decline in market value was considered
other than temporary.
COMMISSION AND FEE INCOME decreased $53,585 (4%) to $1,360,767 for the three
months ended March 31, 2001, compared to the three months ended March 31, 2000.
This decrease consisted of the following:
Other commission and fee income $ 4,122
Service fee income (9,100)
Workers' compensation program (12,731)
Health and life insurance program (13,859)
Daily automobile rental insurance program (22,017)
------
Net decrease in commission and fee income $(53,585)
======
LOSSES AND LOSS ADJUSTMENT EXPENSES were $5,465,895 or 82% of net premium earned
for the quarter ended March 31, 2001, compared to $4,950,539 or 73% of net
premium earned for the quarter ended March 31, 2000. This increase was primarily
due to an increase in incurred losses of prior years of approximately $885,000
(adverse development) in the quarter ended March 31, 2001, compared to an
increase in incurred losses of prior years of approximately $503,000 (adverse
development) in the quarter ended March 31, 2000.
The Company's incurred losses and loss adjustment expenses continued to be
negatively impacted by higher than anticipated claim cost from business outside
of California (principally from liquor liability exposure and longer statutes of
limitation), the effect on settlements of escalating jury awards, and continued
losses due to the impact of changes in California law that expanded coverage and
increased loss exposure (Montrose Chemical Corp. v. Admiral Insurance Co. (1995)
and Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co. (1996)).
POLICY ACQUISITION COSTS consist of commissions, premium taxes, inspection fees,
and certain other underwriting costs, which are directly related to the
production of Crusader insurance policies. These costs include both Crusader
expenses and allocated expenses of other Unico subsidiaries. Crusader's
reinsurers pay Crusader a ceding commission, which is primarily a reimbursement
of the acquisition cost related to the ceded premium. Policy acquisition costs,
net of ceding commission, are deferred and amortized as the related premiums are
earned. These costs were 31% of net premium earned for both the quarter ended
March 31, 2001, and for the quarter ended March 31, 2000.
SALARIES AND EMPLOYEE BENEFITS increased $32,144 (3%) to $1,113,705 for the
quarter ended March 31, 2001, compared to $1,081,561for the quarter ended March
31, 2000.
COMMISSIONS TO AGENTS/BROKERS decreased $10,121 (3%) to $323,007 in the quarter
ended March 31, 2001, compared to the quarter ended March 31, 2000.
OTHER OPERATING EXPENSES increased $96,465 (15%) during the quarter ended March
31, 2001, compared to the quarter ended March 31, 2000. The increase was
primarily the result of increased advertising expenses of $28,642, an increase
in legal expenses of $24,555 and increase in general office expenses of $31,064.
INCOME TAX PROVISION provided a benefit of $63,939 for the quarter ended March
31, 2001, compared to income tax expense of $193,306 (23% of income before
taxes) in the quarter ended March 31, 2000. This change was primarily due to a
pre tax loss of $11,835 (including tax exempt investment income of $198,188) in
the quarter ended March 31, 2001, compared to pretax income of $828,315
(including tax exempt investment income of $282,535) in the quarter ended March
31, 2000.
The effect of inflation on net income of the Company during the three months
ended March 31, 2001, and 2000 was not significant.
10
Forward looking statements
- --------------------------
Certain statements contained herein, including the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," that are not historical facts are forward looking. These
statements, which may be identified by forward-looking words or phrases such as
"anticipate," "believe," "expect," "intend," "may," "should," and "would,"
involve risks and uncertainties, many of which are beyond the control of the
Company. Such risks and uncertainties could cause actual results to differ
materially from these forward-looking statements. Factors which could cause
actual results to differ materially include premium rate adequacy relating to
competition or regulation, actual versus estimated claim experience, regulatory
changes or developments, unforeseen calamities, general market conditions, the
Company's ability to introduce new profitable products, and the Company's
ability to expand geographically.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The Company's consolidated balance sheet includes a substantial amount of
invested assets whose fair values are subject to various market risk exposures
including interest rate risk and equity price risk.
The Company's invested assets consist of the following:
March 31 December 31
2001 2000
---- ----
Fixed maturity bonds (at amortized value) $92,892,723 $94,398,077
Short-term cash investments (at cost) 3,314,217 3,355,354
Equity securities (at cost) 2,400 25,920
Certificates of deposit (over 1 year, at cost) 400,000 400,000
---------- ----------
Total invested assets $96,609,340 $98,179,351
========== ==========
There have been no material changes in the composition of the Company's invested
assets or market risk exposures since the end of the preceding fiscal year end.
PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES
- ------------------------------
(c) None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
None
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto authorized.
UNICO AMERICAN CORPORATION
Date: May 11, 2001 By: /s/ ERWIN CHELDIN
------------------
Erwin Cheldin
Chairman of the Board, President and Chief
Executive Officer, (Principal Executive Officer)
Date: May 11, 2001 By: /s/ LESTER A. AARON
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Lester A. Aaron
Treasurer, Chief Financial Officer, (Principal
Accounting and Principal Financial Officer)
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