10-Q 1 unam0301.txt FORM 10-Q 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 ------------------- Lester A. Aaron Treasurer, Chief Financial Officer, (Principal Accounting and Principal Financial Officer) 12