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, 1999 to March 31, 1999
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.RS. 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
6,224,369
Number of shares of common stock outstanding as of May 12, 1999
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
UNICO AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
---- ----
ASSETS
------
<S> <C> <C>
Investments
Available for sale:
Fixed maturities, at market value (amortized cost: March 31,
1999 $98,673,898; December 31, 1998 $96,358,812 $100,488,578 $ 99,472,720
Equity securities at market (cost: March 31, 1999
$782,249; December 31, 1998 $503,503) 623,894 481,500
Short-term investments, at cost 6,110,286 6,573,862
--------- ---------
Total Investments 107,222,758 106,528,082
Cash 346,010 277,544
Accrued investment income 1,832,853 2,022,197
Premiums and notes receivable, net 6,151,043 5,922,716
Reinsurance recoverable:
Paid losses and loss adjustment expenses 182,935 146,205
Unpaid losses and loss adjustment expenses 2,335,336 1,139,713
Prepaid reinsurance premiums 17,389 19,452
Deferred policy acquisition costs 4,603,662 4,665,772
Property and equipment (net of accumulated depreciation) 189,812 205,369
Deferred income taxes 316,760 208,976
Other assets 570,716 581,617
----------- -----------
Total Assets $123,769,274 $121,717,643
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
- -----------
Unpaid losses and loss adjustment expenses $41,455,649 $41,513,945
Unearned premiums 17,954,466 18,136,895
Advance premium and premium deposits 2,484,460 2,329,356
Accrued expenses and other liabilities 6,142,504 5,418,459
Income taxes payable 437,687 150,906
Dividends payable 1,556,092 -
---------- ----------
Total Liabilities $70,030,858 $67,549,561
---------- ----------
STOCKHOLDERS' EQUITY
- ---------------------
Common stock, no par - authorized 10,000,000 shares; issued and outstanding
shares 6,224,369 at March 31, 1999, and 6,223,424 at December 31, 1998 $2,895,726 $2,895,702
Accumulated other comprehensive income: 1,093,175 1,998,536
Retained earnings 49,749,515 49,273,844
---------- ----------
Total Stockholders' Equity $53,738,416 $54,168,082
---------- ----------
Total Liabilities and Stockholders' Equity $123,769,274 $121,717,643
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE>
UNICO AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1999 1998
---- ----
<S> <C> <C>
REVENUES
- --------
Insurance Company Revenues
Premium earned $8,908,324 $10,554,810
Premium ceded 1,416,796 1,171,028
--------- ---------
Net premium earned 7,491,528 9,383,782
Net investment income 1,416,410 1,309,785
Net realized investment (losses) (625) -
Other income - 958
---------- ---------
Total Insurance Company Revenues 8,907,313 10,694,525
Other Revenues from Insurance Operations
Gross commissions and fees 1,392,421 1,469,245
Investment income 64,849 49,093
Finance charges and late fees earned 232,890 263,153
Other income 3,124 1,528
---------- ----------
Total Revenues 10,600,597 12,477,544
---------- ----------
EXPENSES
- --------
Losses and loss adjustment expenses 3,379,802 4,799,701
Policy acquisition costs 2,217,491 2,629,106
Salaries and employee benefits 1,115,822 1,049,621
Commissions to agents/brokers 318,002 244,927
Other operating expenses 659,852 628,726
--------- ---------
Total Expenses 7,690,969 9,352,081
--------- ---------
Income Before Taxes 2,909,628 3,125,463
Income Tax Provision 877,866 961,753
--------- ---------
Net Income $2,031,762 $ 2,163,710
========= =========
PER SHARE DATA:
Basic Shares Outstanding 6,224,125 6,155,280
Basic Earnings Per Share $0.33 $0.35
Diluted Shares Outstanding 6,353,779 6,424,671
Diluted Earnings Per Share $0.32 $0.34
</TABLE>
See notes to unaudited consolidated financial statements
3
<PAGE>
UNICO AMERICAN CORPORATION AND SUBSIDIARIES
STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1999 1998
---- ----
<S> <C> <C>
Net income $2,031,762 $2,163,710
Other changes in comprehensive income net of tax:
Unrealized (losses) on securities classified as available-for-sale
arising during the period (991,696) (76,237)
Less: reclassification adjustment for gains included in net income 86,335 -
--------- ---------
Comprehensive Income $1,126,401 $2,087,473
========= =========
</TABLE>
See notes to unaudited consolidated financial statements
4
<PAGE>
UNICO AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $2,031,762 $2,163,710
Adjustments to reconcile net income to net cash from operations
Depreciation and amortization 18,696 25,604
Bond amortization, net 188,439 167,899
Net realized loss on sale of securities 625 -
Changes in assets and liabilities
Premium, notes and investment income receivable (38,983) 217,364
Reinsurance recoverable (1,232,353) (55,627)
Prepaid reinsurance premiums 2,063 691,155
Deferred policy acquisitions costs 62,110 (471,392)
Other assets 10,904 336,655
Reserve for unpaid losses and loss adjustment expenses (58,296) 719,286
Unearned premium reserve (182,429) (241,067)
Advance premium and premium deposits 155,104 (27,147)
Accrued expenses and other liabilities 741,279 656,628
Income taxes current/deferred 691,980 867,233
---------- ----------
Net Cash Provided from Operations 2,390,901 5,050,301
--------- ---------
Investing Activities
Purchase of fixed maturity investments (4,021,750) (8,467,945)
Proceeds from maturity of fixed maturity investments 1,510,000 2,630,000
Purchase of equity securities - cost (3,176,206) -
Proceeds from sale of equity securities 2,896,835 -
Net increase in short-term investments 471,801 836,106
Additions to property and equipment (3,139) (48,163)
--------- ---------
Net Cash (Used) by Investing Activities (2,322,459) (5,050,002)
--------- ---------
Financing Activities
Proceeds from issuance of common stock 24 17,155
--- ------
Net Cash Provided by Financing Activities 24 17,155
--- ------
Net Increase in Cash 68,466 17,454
Cash at beginning of period 277,544 55,768
------- ------
Cash at End of Period $346,010 $73,222
======= ======
Supplemental Cash Flow Information
Cash paid during the period for:
Interest $1,338 $121
Income taxes $175,000 $93,336
</TABLE>
See notes to unaudited consolidated financial statements
5
<PAGE>
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Nature of Business
- ------------------
Unico American Corporation ("Unico") is an insurance holding company. Unico and
its subsidiaries, all of which are wholly owned (the "Company"), provide,
primarily in California, property, casualty, health and life insurance, and
related premium financing.
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, 1999, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. Quarterly financial statements should be read in conjunction with the
financial statements and related notes in the Company's 1998 Annual Report on
Form 10-K as filed with the Securities and Exchange Commission.
Recently Issued Accounting Standards
- ------------------------------------
Statement of Position 98-1 (SOP 98-1), Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, is effective for financial
statements beginning after December 15, 1998. SOP 98-1 requires that certain
costs of internally developed software be capitalized. There were no costs
incurred for software purchase or development in the quarter ended March 31,
1999, that were required to be capitalized.
Statement of Position 97-3 (SOP 97-3), Accounting by Insurance and Other
Enterprises for Insurance Related Assessments, is effective for financial
statements beginning after December 15, 1998. SOP 97-3 requires that liability
for insurance related assessments be recognized when an assessment is probable,
the event obligating the assessment has occurred and the assessment can be
reasonably estimated. The adoption has no material effect on the financial
statements.
NOTE 2 - INCENTIVE STOCK OPTION PLAN
- ------------------------------------
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, 1999, 193,546 options were outstanding and all are currently exercisable.
During the quarter ended March 31, 1999, options on 1,300 shares of common stock
were exercised. There are no additional options available for future grant under
the 1985 plan.
NOTE 3 - 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, 1999 and 1998:
6
<PAGE>
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
Three Months Ended March 31
---------------------------
1999 1998
---- ----
Basic Earnings Per Share
- ------------------------
Net income numerator $2,031,762 $2,163,710
Weighted average shares outstanding denominator 6,224,125 6,155,280
Per share amount $0.33 $0.35
Diluted Earnings Per Share
- --------------------------
Net income numerator $2,031,762 $2,163,710
Weighted average shares outstanding 6,224,125 6,155,280
Effect of diluted securities 129,654 269,391
---------- ----------
Diluted shares outstanding denominator 6,353,779 6,424,671
--------- ---------
Per share amount $0.32 $0.34
NOTE 4 - 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 effective 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 84% 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
---------------------------
1999 1998
---- ----
Revenues
- --------
Insurance company operation $8,907,313 $10,694,525
Other insurance operations 4,301,613 4,865,373
Intersegment elimination (1) (2,608,329) (3,082,354)
--------- ---------
Total other insurance operations 1,693,284 1,783,019
--------- ---------
Total Revenues $10,600,597 $12,477,544
========== ==========
Income (Loss) Before Income Taxes
- ---------------------------------
Insurance company operation $2,952,107 $2,768,542
Other insurance operations (42,479) 356,919
--------- ---------
Total Income Before Income Taxes $2,909,628 $3,125,463
========= =========
Assets
- ------
Insurance company operation $105,239,708 $ 98,042,859
Intersegment eliminations (2) (210,274) (1,503,878)
----------- ----------
Total insurance company operation 105,029,434 96,538,981
Other insurance operations 18,739,840 20,205,293
----------- -----------
Total Assets $123,769,274 $116,744,274
=========== ===========
(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
<PAGE>
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,
1999, the Company had cash and cash investments of $105,912,443 (at amortized
cost) of which $98,563,508 (93%) were investments of Crusader.
As of the quarter ended March 31, 1999, the Company had invested $98,673,898 (at
amortized cost) or 93% 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 $98,673,898 (at
amortized cost) include $33,486,161 (34%) of pre-refunded state and municipal
tax exempt bonds, $8,597,926 (9%) of U.S. treasury securities, $56,389,811 (57%)
of high quality industrial and miscellaneous bonds, and $200,000 of certificates
of deposit. The tax exempt interest income earned for the three months ended
March 31, 1999 and 1998 was $407,965 and $446,747, 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
$1,500,000. This limitation excludes bond premiums paid in excess of par value
and U.S. government or U.S. government guaranteed issues. The Company also
limits its holdings of equity securities to no greater than five percent of
stockholders' equity. 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 12, 1999, the Board of Directors declared a twenty-five cents ($0.25)
per share cash dividend payable on July 15, 1999, to shareholders of record at
the close of business on July 1, 1999.
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 $2,816,380, 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.
YEAR 2000
- --------
The Company has initiated a review of all computer programs to ensure that all
computer systems will function properly with respect to dates in the year 2000
and thereafter. The Year 2000 issue is the result of computer programs being
written utilizing two digits rather than four digits to define a year. Any
computer programs which have date sensitive software utilizing a two digit year
would recognize a year of "00" as 1900 rather than 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar activities. The Company has assessed its Year
2000 issues and has made and tested the necessary modifications to its computer
system. The project to review and correct all programs was completed and tested
at December 31, 1998, prior to any anticipated impact on its operating systems.
The
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS (continued)
- -------------------------
costs of the project has been charged to current operations as incurred and did
not have a material effect on the Company's results of operations or financial
position.
Crusader anticipates that any claims from its policyholders due to Year 2000
events will not be material. Any business interruption losses resulting from
Year 2000 events which Crusader policyholders may incur, would not be provided
any coverage unless such events also caused physical damage to the insureds
property, which the Company believes is not a material exposure.
The Company does business with thousands of licensed agents and brokers and does
not anticipate it would be materially adversely affected if some of them are
temporarily unable to function due to Year 2000 problems. The Company has
requested and received information from its bank and reinsurers as to their Year
2000 readiness. Based on the information received to date, the Company believes
that it will not be materially adversely affected by its bank or its reinsurers.
Due to the nature of the Company's business, it is not dependent on any specific
suppliers, and therefore, does not expect to be adversely materially affected by
them.
Due to the unusual nature of the problem and lack of historical experience with
Year 2000 issues, it is difficult to predict with certainty what will happen
after December 31, 1999. As stated above, the Company does not anticipate it
will be adversely materially affected by Year 2000 events from its internal
operations or from others with whom the Company directly or indirectly does
business. However, other events such as general public infrastructure failures,
may adversely materially affect the Company's ability to operate during such
failures. The Company has no formal contingency plans for Year 2000.
There are no material commitments for capital expenditures as of the date of
this report.
(b) Results of Operations:
- --------------------------
All comparisons made in this discussion are comparing the three months ended
March 31, 1999, to the three months ended March 31, 1998, unless otherwise
indicated.
The Company's net income for the quarter ended March 31, 1999, decreased
$131,948 (6%) to $2,031,762 compared to $2,163,710 for the quarter ended March
31, 1999. Revenues for the quarter ended March 31, 1999, decreased $1,876,947
(15%) to $10,600,597 compared to $12,477,544 for the quarter ended March 31,
1998.
PREMIUM EARNED before reinsurance decreased $1,646,486 (16%) to $8,908,324 for
the quarter ended March 31, 1999, compared to $10,554,810 for the quarter ended
March 31, 1998. In 1998, the Company changed its marketing strategy in the
states of Washington and Oregon by discontinuing marketing through an exclusive
agent in those states and commenced marketing directly to all retail agents and
brokers. This change resulted in a decrease of $1,224,602, or 74% of the total
decrease in earned premium. The Company anticipates that the long-term results
of this change will be increased revenues with reduced acquisition expense and
less dependence on any one large producer. In addition, intense price
competition adversely affected the premium written and earned in all states in
which the Company does business. Although the Company attempts to be competitive
on price, it believes that maintaining adequate rates and a favorable loss ratio
is a better business strategy than increasing premium writings at inadequate
rates. The Company cannot determine how long this "soft market" condition will
continue.
Premium written before reinsurance decreased $1,587,846 (15%) to $8,725,897 for
the quarter ended March 31, 1999, compared to the three months ended March 31,
1998. The decrease in written premium in Oregon and Washington accounted for
$1,371,777 (86%) of this decrease. Crusader's written premium by state is as
follows:
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS (continued)
- ------------------------
Three Months Ended March 31
--------------------------- Increase
State 1999 1998 (Decrease)
- ----- ---- ---- ----------
California $7,406,664 $7,887,528 $(480,864)
Pennsylvania 282,302 82,477 199,825
Arizona 270,517 358,690 (88,173)
Washington 263,878 1,172,332 (908,454)
Oregon 220,824 684,147 (463,323)
Ohio 120,570 113,396 7,174
Montana 87,032 - 87,032
Texas 58,846 - 58,846
Kentucky 14,123 - 14,123
Nevada 1,141 15,173 (14,032)
--------- ---------- ---------
Total $8,725,897 $10,313,743 $(1,587,846)
========= ========== =========
INVESTMENT INCOME, excluding realized investment losses, increased $122,381 (9%)
to $1,481,259 for the quarter ended March 31, 1999, compared to $1,358,878 for
the quarter ended March 31, 1998. This increase was primarily due to an 8%
increase (at amortized cost) in invested assets.
COMMISSION AND FEE INCOME decreased $76,824 (5%) to $1,392,421 for the three
months ended March 31, 1999, compared to the three months ended March 31, 1998.
This decrease consisted of the following:
Health and life insurance program $104,381
Daily automobile rental insurance program 12,868
Service fee income (107,982)
Workers' compensation program (86,091)
-------
Net decrease in commission and fee income $(76,824)
=======
The decrease in the service fee income for the three months ended March 31,
1999, was primarily related to the decrease in written premium.
LOSSES AND LOSS ADJUSTMENT EXPENSES were 45% of net premium earned for the
quarter ended March 31, 1999, compared to 51% of net premium earned for the
quarter ended March 31, 1998. This decrease was primarily due to the favorable
development of prior period losses.
POLICY ACQUISITION COSTS consist of commissions, premium taxes, inspection fees,
and certain other underwriting costs which are directly or indirectly 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 30% of net premium earned for the three months ended
March 31, 1999, compared to 28% for the three months ended March 31, 1998.
SALARIES AND EMPLOYEE BENEFITS increased $66,201 (6%) to $1,115,822 for the
quarter ended March 31, 1999, compared to $1,049,621 for the quarter ended March
31, 1998.
COMMISSIONS TO AGENTS/BORKERS increased $73,075 (30%) to $318,002 in the quarter
ended March 31, 1999, compared to the quarter ended March 31, 1998, primarily
due to the related revenue increases in the health and life program.
OTHER OPERATING EXPENSES increased $31,126 (5%) during the quarter ended March
31, 1999, compared to the quarter ended March 31, 1998.
The effect of inflation on net income of the Company during the three months
ended March 31, 1999, and 1998 was not significant.
10
<PAGE>
Forward looking statements
- --------------------------
Information contained in this discussion, other than historical information, are
considered "forward looking statements" and may be subject to change based on
various important factors and uncertainties. Some, but not all, of the factors
and uncertainties that may cause actual results to differ significantly from
those expected in any forward looking statements are disclosed in the Company's
1998 Form 10-K as filed with the Securities and Exchange Commission. Further,
the statements herein concerning the effects of the Company's stated expectation
as to the long-term results of marketing in the states of Washington and Oregon
directly to retail agents and brokers rather than through the Company's former
general agent are forward looking statements which involve risks and
uncertainties that could cause actual results to differ materially from these
forward looking statements. With respect to the statement concerning the effects
of the change in marketing in the states of Washington and Oregon, factors which
would cause the actual results to differ materially include the Company's
ability to effectively market to retail agents and brokers in those states, the
willingness of the retail agents and brokers in those states to deal directly
with the Company, and general economic conditions and competition in those
states.
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:
<TABLE>
<CAPTION>
March 31 December 31 Increase
1999 1998 (Decrease)
---- ---- --------
<S> <C> <C> <C>
Fixed maturity bonds (at amortized value) $98,473,898 $96,158,812 $2,315,086
Short-term cash investments (at cost) 6,110,286 6,573,862 (463,576)
Equity securities (at cost) 782,249 503,503 278,746
Certificates of deposit (over 1 year, at cost) 200,000 200,000 -
----------- ----------- ---------
Total invested assets $105,566,433 $103,436,177 $2,130,256
=========== =========== =========
</TABLE>
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) During the quarter ended March 31, 1999, the Company issued 1,300 shares
of its common stock upon exercise of employee stock options granted under
the Unico American Corporation Employee Incentive Stock Option Plan. These
shares were issued to one employee of the Company. These shares were
issued in exchange for 355 shares of common stock and $23.75 of cash.
These shares were acquired for investment and without a view to the public
distribution or resale thereof, and the issuance thereof was exempt from
the registration requirements under the Securities Act of 1933, as
amended, under Section 4 (2) thereof, as transactions not involving a
public offering.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
11
<PAGE>
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 13, 1999 By: /s/ Erwin Cheldin
-----------------
Erwin Cheldin
Chairman of the Board, President and Chief
Executive Officer, (Principal Executive Officer)
Date: May 13, 1999 By: /s/ LESTER A. AARON
--------------------
Lester A. Aaron
Treasurer, Chief Financial Officer, (Principal
Accounting and Principal Financial Officer)
12
<PAGE>
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0
0
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7,491,528
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