EXHIBIT 99.1
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NEWS RELEASE
CONTACT: Lester A. Aaron
Chief Financial Officer
(818) 591-9800
UNICO AMERICAN CORPORATION REPORTS
AN INCREASE IN UNDERWRITING INCOME FROM ITS
INSURANCE COMPANY OPERATION
Woodland Hills, California, March 2, 2007 - Unico American Corporation (NASDAQ -
"UNAM") (the Company) announced today that based upon unaudited and preliminary
results of operations for the fourth quarter of 2006 and the year ended December
31, 2006, the underwriting income of its Crusader Insurance Company subsidiary
increased significantly for such periods as compared to the corresponding
periods of 2005. The increase in underwriting income is primarily a result of a
decrease in the provision for losses and related loss adjustment expenses of
prior accident years. That decrease, also called favorable development, was
caused by actual development of losses and loss adjustment expenses being less
than anticipated in the reserves recorded in prior periods.
Crusader's underwriting income is a non-GAAP term which consists of net earned
premium less policy acquisition costs and net incurred losses and loss
adjustment expenses. The net incurred losses and loss adjustment expenses
consist of the provision for insured events of the current year and the increase
or decrease in the provision for events of prior years, net of reinsurance.
Crusader's underwriting income represents a significant part of all the revenues
and expenses that are included in the Company's consolidated income before
income taxes. The Company anticipates that as a result of the increase in
Crusader's underwriting income for the three months and year ended December 31,
2006, the Company's consolidated income before income taxes for such periods
will increase as compared to the same periods of the prior year.
The increase in Crusader's underwriting income is primarily due to the favorable
development of prior accident years' losses and loss adjustment expenses as
follows:
Year Ended December 31 Three Months Ended December 31
---------------------- ------------------------------
2006 2005 2006 2005
---- ---- Increase ---- ---- Increase
Unaudited (Decrease) Unaudited Unaudited (Decrease)
--------- -------- --------- --------- --------
Net earned premium $42,933,789 $50,477,920 $(7,544,131) $10,237,432 $12,122,421 $(1,884,989)
Net losses and loss adjustment expenses
Provision for insured events of current year 29,997,662 35,338,196 (5,340,534) 7,236,001 8,496,689 (1,260,688)
Increase (decrease)in provision for
events of prior years (12,170,683) (3,824,464) (8,346,219) (7,699,017) (1,439,190) (6,259,827)
---------- ---------- ---------- --------- --------- ---------
Total net losses and loss adjustment expenses 17,826,979 31,513,732 (13,686,753) (463,016) 7,057,499 (7,520,515)
Policy acquisition costs 9,250,989 10,512,688 (1,261,699) 2,232,459 2,565,584 (333,125)
---------- ---------- ---------- --------- --------- ---------
Total underwriting expenses 27,077,968 42,026,420 (14,948,452) 1,769,443 9,623,083 (7,853,640)
---------- ---------- ---------- --------- --------- ---------
Underwriting income $15,855,821 $8,451,500 $7,404,321 $8,467,989 $2,499,338 $5,968,651
========== ========= ========= ========= ========= =========
Losses and loss adjustment expense reserves represent an estimate of amounts
needed to settle and administer claims with respect to insured events that have
occurred, including events that have been incurred which have not yet been
reported to the Company. There is a high level of uncertainty inherent in the
evaluation of the required losses and loss adjustment expense reserves for the
Company.
The favorable development by accident year is as follows:
Year Ended Three Months Ended
December 31, 2006 December 31, 2006
----------------- -----------------
Favorable % of Favorable % of
Accident Year Development Total Development Total
- ------------- ----------- ---- ----------- -----
Prior to 2001 $701,989 6% 24,340 0%
2001 754,141 6% 118,061 2%
2002 819,572 7% 137,345 2%
2003 1,744,350 14% 1,108,801 14%
2004 7,524,447 62% 6,275,602 82%
2005 626,184 5% 34,868 0%
---------- --- --------- ---
Total Prior Accident Years $12,170,683 100% $7,699,017 100%
========== === ========= ===
As reflected in the above table, the increase in the favorable development is
primarily due to a substantial decrease in the provision for losses and loss
adjustment expenses for accident year 2004 during the calendar year 2006. During
the fourth quarter the Company determined that the favorable development of
accident year 2004, which developed during 2006, was sufficient to warrant a
reduction in the ultimate expected losses and loss adjustment expenses for that
accident year. During the first three quarters of 2006, the Company determined
that the development during that period was not sufficient to warrant reducing
accident year 2004 reserves further than previously recorded.
The adjustment of prior accident year reserves discussed above is not
necessarily indicative of the results that may be expected in future periods.
The foregoing statements concerning the underwriting income and the anticipated
increase in the Company's consolidated income before income taxes for the fourth
quarter of 2006 and the year ended December 31, 2006, are forward looking
statements which involve risks and uncertainties which could cause actual
results to differ materially from the forward looking statements. The statements
are based on unaudited information which is in the process of being audited and
may change from that presently anticipated.