-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C/Xv5QxjtrA9wq+AV5DXbBAzQF95mWOpXMO32VIdv9xHye62yrOYu8J+lOG1Greh xDPKqqsA49wG5WAjf5hI4g== 0000100716-04-000005.txt : 20040513 0000100716-04-000005.hdr.sgml : 20040513 20040513140936 ACCESSION NUMBER: 0000100716-04-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNICO AMERICAN CORP CENTRAL INDEX KEY: 0000100716 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 952583928 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03978 FILM NUMBER: 04802332 BUSINESS ADDRESS: STREET 1: 23251 MULHOLLAND DR CITY: WOODLAND HILLS STATE: CA ZIP: 91364 BUSINESS PHONE: 8185919800 MAIL ADDRESS: STREET 1: 23251 MULHOLLAND DRIVE CITY: WOODLAND HILLS STATE: CA ZIP: 91364 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL COVERAGE CORP DATE OF NAME CHANGE: 19730823 10-Q 1 unam0304.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2004 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 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, Including Area Code) 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 --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- 5,489,815 Number of shares of common stock outstanding as of May 10, 2004 1 PART 1 - FINANCIAL INFORMATION ------------------------------ ITEM 1 - FINANCIAL STATEMENTS - ----------------------------- UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31 December 31 2004 2003 ---- ---- ASSETS - ------ Investments Available for sale: Fixed maturities, at market value (amortized cost: March 31, 2004 $115,760,743; December 31, 2003 $111,325,592) $119,173,214 $114,524,046 Short-term investments, at cost 3,915,187 7,229,315 ----------- ----------- Total Investments 123,088,401 121,753,361 Cash 44,490 37,988 Accrued investment income 1,178,384 1,251,126 Premiums and notes receivable, net 8,576,981 8,290,169 Reinsurance recoverable: Paid losses and loss adjustment expenses 1,451,401 622,964 Unpaid losses and loss adjustment expenses 21,148,927 19,255,229 Prepaid reinsurance premiums 70,648 81,872 Deferred policy acquisition costs 8,012,388 8,054,363 Property and equipment (net of accumulated depreciation) 330,241 323,090 Deferred income taxes 471,037 975,701 Other assets 300,995 847,832 ----------- ----------- Total Assets $164,673,893 $161,493,695 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ LIABILITIES - ----------- Unpaid losses and loss adjustment expenses $81,436,518 $78,139,090 Unearned premiums 34,350,273 34,675,180 Advance premium and premium deposits 1,057,076 1,118,618 Income taxes payable 498,210 614,662 Notes payable-related parties 1,500,000 1,500,000 Accrued expenses and other liabilities 5,961,710 6,975,288 ----------- ----------- Total Liabilities $124,803,787 $123,022,838 ----------- ----------- STOCKHOLDERS' EQUITY - -------------------- Common stock, no par - authorized 10,000,000 shares; issued and outstanding shares 5,489,815 at March 31, 2004, and 5,489,815 at December 31, 2003 $2,700,272 $2,700,272 Accumulated other comprehensive income 2,252,231 2,110,979 Retained earnings 34,917,603 33,659,606 ---------- ---------- Total Stockholders' Equity $39,870,106 $38,470,857 ---------- ---------- Total Liabilities and Stockholders' Equity $164,673,893 $161,493,695 =========== ===========
See notes to unaudited consolidated financial statements. 2 UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31 -------- 2004 2003 ---- ---- REVENUES - -------- Insurance Company Revenues Premium earned $16,474,958 $11,424,920 Premium ceded 3,888,639 3,464,096 ---------- --------- Net premium earned 12,586,319 7,960,824 Net investment income 1,091,591 1,266,918 Other income 30,291 18,770 ---------- --------- Total Insurance Company Revenues 13,708,201 9,246,512 Other Revenues from Insurance Operations Gross commissions and fees 1,710,597 1,937,509 Investment income 9,827 13,085 Finance charges and fees earned 246,965 220,178 Other income 4,601 (693) ---------- ---------- Total Revenues 15,680,191 11,416,591 ---------- ---------- EXPENSES - -------- Losses and loss adjustment expenses 8,956,987 6,680,163 Policy acquisition costs 2,478,410 1,783,891 Salaries and employee benefits 1,216,119 1,193,410 Commissions to agents/brokers 271,123 402,578 Other operating expenses 789,108 996,469 ---------- ---------- Total Expenses 13,711,747 11,056,511 ---------- ---------- Income Before Taxes 1,968,444 360,080 Income Tax Provision 710,447 126,997 --------- ------- Net Income $1,257,997 $233,083 ========= ======= PER SHARE DATA - -------------- Basic Shares Outstanding 5,489,815 5,489,533 Basic Earnings Per Share $0.23 $0.04 Diluted Shares Outstanding 5,577,686 5,506,962 Diluted Earnings Per Share $0.23 $0.04
See notes to unaudited consolidated financial statements. 3 UNICO AMERICAN CORPORATION AND SUBSIDIARIES STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended March 31 -------- 2004 2003 ---- ---- Net Income $1,257,997 $233,083 Other changes in comprehensive income, net of tax: Unrealized gains (losses) on securities classified as available-for-sale arising during the period 141,252 (24,570) --------- -------- Comprehensive Income $1,399,249 $208,513 ========= =======
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,
2004 2003 ---- ---- Cash Flows from Operating Activities: Net Income $1,257,997 $233,083 Adjustments to reconcile net income to net cash from operations Depreciation 23,139 20,986 Bond amortization, net 81,500 80,076 Changes in assets and liabilities Premium, notes and investment income receivable (214,070) (232,969) Reinsurance recoverable (2,722,135) 2,394,940 Prepaid reinsurance premiums 11,224 22,501 Deferred policy acquisitions costs 41,975 (122,663) Other assets 546,837 310,386 Reserve for unpaid losses and loss adjustment expenses 3,297,428 (1,137,065) Unearned premium reserve (324,907) 534,777 Funds held as security and advanced premiums (61,542) 64,052 Accrued expenses and other liabilities (1,013,578) 2,250,898 Income taxes current/deferred 315,446 219,000 Federal income tax recoverable - (92,065) ---------- ---------- Net Cash Provided from Operations 1,239,314 4,545,937 --------- --------- Investing Activities Purchase of fixed maturity investments (20,987,800) (7,117,250) Proceeds from maturity of fixed maturity investments 16,470,000 9,640,000 Net (increase) decrease in short-term investments 3,315,278 (7,029,371) Additions to property and equipment (30,290) (12,346) --------- --------- Net Cash (Used) by Investing Activities (1,232,812) (4,518,967) --------- --------- Net increase in cash 6,502 26,970 Cash at beginning of period 37,988 19,766 ------ ------ Cash at end of Period $44,490 $46,736 ====== ====== Supplemental Cash Flow Information Cash paid during the period for: Interest $14,087 $9,699 Income taxes $395,000 $636
See notes to unaudited consolidated financial statements. 5 UNICO AMERICAN CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 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 through its other subsidiaries provides claim administration services (through December 31, 2003), insurance premium financing, and membership association services. 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 accounting principles generally accepted in the United States of America (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, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. Quarterly financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company's 2003 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. NOTE 2 - OMNIBUS STOCK PLAN - --------------------------- The Company's 1999 Omnibus Stock Plan covers 500,000 shares of the Company's common stock (subject to adjustment in the case of stock splits, reverse stock splits, stock dividends, etc.). Shareholders approved the plan on June 4, 1999. On August 26, 1999, the Company granted 135,000 incentive stock options of which 40,000 were terminated, 95,000 were outstanding, and 95,000 were exercisable as of March 31, 2004. On December 18, 2002, the Company granted an additional 182,000 incentive stock options under the Company's 1999 Omnibus Stock Plan. All of these options were outstanding and 57,000 were exercisable as of March 31, 2004. These options expire 10 years from the date of the grant. Options granted as of March 31, 2004, are exercisable as follows: Grant Date Grant Date Date Exercisable August 26, 1999 December 18, 2002 Total - ---------------- --------------- ----------------- ----- Currently Exercisable 95,000 57,000 152,000 January 1, 2005 - 57,500 57,500 January 1, 2006 - 37,500 37,500 January 1, 2007 - 30,000 30,000 ------ ------- ------- Total 95,000 182,000 277,000 ====== ======= ======= The Company applies Accounting Principles Board Opinion No. 25 (APB No. 25) in accounting for its incentive stock option plans. Accordingly, no compensation cost has been recognized in the accompanying statements of operations. Had compensation cost for the Company's stock-based compensation plan been reflected in the accompanying consolidated financial statements based on the fair value at the grant dates for option awards consistent with the method of Statement of Financial Accounting Standards No. 123 (SFAS No. 123), the Company's net income would have been reduced to the pro forma amounts indicated in the following table: 6 UNICO AMERICAN CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 NOTE 2 - OMNIBUS STOCK PLAN (continued) - ----------------------------------------- Three Months Ended March 31 -------- 2004 2003 ---- ---- Net income As reported $1,257,997 $233,083 Pro forma $1,246,601 $220,173 Income per share As reported $0.23 $0.04 Pro forma $0.23 $0.04 Income per share - assuming dilution: As reported $0.23 $0.04 Pro forma $0.22 $0.04 Calculations of the fair value under the method prescribed by SFAS No. 123 were made using the Black-Scholes Option-Price Model with the following weighted average assumptions used for the 1999 and 2002 grants: 2002 1999 Grant Grant ----- ----- Dividend yield 1.40% 2.46% Expected volatility 34% 43% Expected lives 10 Years 10 Years Risk-free interest rates 4.05% 6.09% Fair value of options granted $1.32 $4.30 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 three months ended March 31, 2003, the Company did not repurchase any shares of the Company's common stock. As of March 31, 2004, the Company had purchased and retired under the Board of Directors' authorization an aggregate of 868,958 shares of its common stock at a cost of $5,517,465. 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, 2004 and 2003: Three Months Ended March 31 -------- 2004 2003 ---- ---- Basic Earnings Per Share - ------------------------ Net income numerator $1,257,997 $233,083 ========= ======= Weighted average shares outstanding denominator 5,489,815 5,489,533 ========= ========= Basic Earnings Per Share $0.23 $0.04 7 UNICO AMERICAN CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 NOTE 4 - EARNINGS PER SHARE (continued) - -------------------------------------- Three Months Ended March 31 -------- 2004 2003 ---- ---- Diluted Earnings Per Share - -------------------------- Net income numerator $1,257,997 $233,083 ========= ======= Weighted average shares outstanding 5,489,815 5,489,533 Effect of diluted securities 87,871 17,429 --------- --------- Diluted shares outstanding denominator 5,577,686 5,506,962 ========= ========= Diluted Earnings Per Share $0.23 $0.04 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 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 comprised 87% of consolidated revenues for the three months ended March 31, 2004, and 81% of revenues for the three months ended March 31, 2003. The Company's remaining operations constitute a variety of specialty insurance services, each with unique characteristics and individually insignificant to consolidated revenues. Revenues, income before income taxes, and assets by segment are as follows: Three Months Ended March 31 2004 2003 ---- ---- Revenues - -------- Insurance company operation $13,708,201 $9,246,512 Other insurance operations 6,404,849 5,461,868 Intersegment elimination (1) (4,432,859) (3,291,789) --------- --------- Total other insurance operations 1,971,990 2,170,079 ---------- ---------- Total Revenues $15,680,191 $11,416,591 ========== ========== Income Before Income Taxes - -------------------------- Insurance company operation $1,330,058 $90,687 Other insurance operations 638,386 269,393 ---------- -------- Total Income (Loss) Before Income Taxes $1,968,444 $360,080 ========= ======= As of March 31 2004 2003 ---- ---- Assets - ------ Insurance company operation $143,961,736 $132,362,561 Intersegment eliminations (2) (3,129,884) (1,877,859) ----------- ----------- Total insurance company operation 140,831,852 130,484,702 Other insurance operations 23,842,041 20,271,469 ---------- ---------- Total Assets $164,673,893 $150,756,171 =========== =========== (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. 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------------------------------------------------------------------------ RESULTS OF OPERATIONS --------------------- OVERVIEW - -------- General - ------- 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 through its other subsidiaries provides nsurance premium financing, and membership association services. The Company had a net income of $1,257,997 for the three months ending March 31, 2004, compared to net income of $233,083 for the three months ended March 31, 2003, an increase in net income of $1,024,914. This overview discusses some of the relevant factors that management considers in evaluating the Company's performance, prospects and risks. It is not all-inclusive and is meant to be read in conjunction with the entirety of the management discussion and analysis, the Company's financial statements and notes thereto and all other items contained within the report on this Form 10-Q. Revenue and Income Generation - ----------------------------- The Company receives its revenue primarily from earned premium derived from the insurance company operations, commission and fee income generated from the insurance agency operations, finance charges and fee income from the premium finance operations, and investment income from cash generated primarily from the insurance operation. The insurance company operation generates approximately 87% of the Company's total revenue. The Company's remaining operations constitute a variety of specialty insurance services, each with unique characteristics and individually not material to consolidated revenues. Insurance Company Operation - --------------------------- The property and casualty insurance industry is highly competitive and includes many insurers, ranging from large companies offering a wide variety of products worldwide to smaller, specialized companies in a single state or region offering only a single product. Many of the Company's existing or potential competitors have considerably greater financial and other resources, have a higher rating assigned by independent rating organizations such as A.M. Best Company, have greater experience in the insurance industry and offer a broader line of insurance products than the Company. Currently, Crusader is writing primarily Commercial Multiple Peril business only in the state of California and is rated B+ (Very Good) by A.M. Best Company. The primary challenge of the property and casualty insurance company operation is the fact that the Company sells its products before the ultimate costs are actually known. When pricing its products, the Company projects the ultimate claim and loss adjustment cost that it anticipates will be incurred after the policy is sold. In addition, factors such as changes in, among other things, regulations, changes in the legal environment, and inflation can all impact the ultimate cost. Over the past two years, the insurance industry has seen some difficult times as a result of September 11, industry-wide underwriting losses, decreases in investment yield, and increases in reinsurance cost that have all contributed to the change from a "soft market" to a "hard market. The Company believes that a "hard market" cycle currently exists in the insurance marketplace. The Company has experienced beneficial market changes in its primary line of business and is benefiting from the fact that some of its competitors have gone out of business and others have recently raised rates or adopted more restrictive rules. Although the Company has increased its rates and adopted more restrictive underwriting guidelines, the beneficial market changes have contributed to a 35% increase in direct written premiums in the three months ended March 31, 2004, compared to the three months ended March 31, 2003. The Company cannot determine how long the existing market conditions will continue, nor in which direction they might change. The Company's future writings and growth are dependent on, among other things, market conditions, competition, and the Company's ability to introduce new and profitable products. 9 The Company believes that rate adequacy is more important than premium growth and underwriting profit is the Company's primary goal. Management's assessment of trends and underwriting results is a primary factor in its decisions to expand or contract its business. Primarily as a result of losses from liquor and premise liability coverages, much of the Company's business outside of California has not been profitable. In 2002 the Company began placing moratoriums on non-California business on a state-by-state basis. By July 2003, the Company had placed moratoriums on all non-California business. The Company has no short-term plan to expand into additional states or to expand its marketing channels. Instead, the Company intends to allocate its resources toward improving its California business rates, rules, and forms. Other Operations - ---------------- The Company's other operations generate commissions, fees, and finance charges from various insurance products. The events that have the most significant economic impact on other operations are as follows: Unifax primarily sells and services insurance policies for Crusader. The commissions paid by Crusader to Unifax are eliminated as intercompany transactions and are not reflected as income in the financial statements. As a result of the increase in policies sold by Unifax, policy fee income increased 14% in the three months ended March 31, 2004, compared to the three months ended March 31, 2003. American Insurance Brokers, Inc. (AIB), a wholly owned subsidiary of the Company, sells and services health insurance policies for individual/family and small business groups primarily for CIGNA HealthCare and receives commission and fee income based on the premiums that it writes. Commission and fee income in this program decreased 29% in the three months ended March 31, 2004, compared to the three months ended March 31, 2003. This decrease has been a result of CIGNA HealthCare discontinuing its individual/family health insurance program over the period from November 1, 2003 through October 1, 2004. AIB has been assisting existing CIGNA policyholders to find health coverage with other insurance carriers that AIB represents. The Company is unsure of the number of terminated CIGNA policyholders it may ultimately assist with the purchase of new health coverage. In addition, CIGNA small business group has decreased due to intense competition in both rates and benefits offered. Investments and Liquidity - ------------------------- The Company generates revenue from its investment portfolio, which consisted of approximately $119.7 million (at amortized cost) at March 31, 2004, compared to $118.6 million (at amortized cost) at December 31, 2003. Although the portfolio increased slightly in 2004, investment income decreased $178,585. The decrease in investment income is primarily the result of a decline in short and long-term yields in the marketplace and a shorter weighted average maturity of the portfolio. Due to the interest rate environment, management believed it was prudent to purchase fixed maturity investments with shorter maturities with minimal credit risk. The Company generated positive cash flows from operations of approximately $1.2 million in the three months ended March 31, 2004 and $4.5 million in the three months ended March 31, 2003. 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, 2004, the Company had cash and investments of $119,720,420 (at amortized cost) of which $116,610,846 (97%) were investments of Crusader. As of the quarter ended March 31, 2004, the Company had invested $115,760,743 (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. 10 The Company's investments in fixed maturity obligations of $115,760,743 (at amortized cost) include $2,018,797 (1.7%) of pre-refunded state and municipal tax-exempt bonds, $53,286,231 (46.0%) of U.S. treasury securities, $11,997,639 (10.4%) of U.S. government agency securities, $47,958,076 (41.4%) of industrial and miscellaneous securities, and $500,000 (0.5%) of certificates of deposit. The tax-exempt interest income earned for the three months ended March 31, 2004 and 2003 was $17,087 and $35,304, respectively. The balance of the Company's investments is in short-term investments that include, bank money market accounts, certificates of deposit, commercial paper and a short-term treasury money market fund. The Company's investment guidelines on equity securities limit investments in equity securities to an aggregate maximum of $2,000,000. The Company's investment guidelines on fixed maturities limit fixed maturity investments to high-grade obligations with a maximum term of eight years. The maximum investment authorized in any one issuer is $2,000,000 and any one U.S. government agency is $3,000,000. This dollar limitation excludes bond premiums paid in excess of par value and U.S. government or U.S. government guaranteed issues. All investments in municipal securities are pre-refunded and secured by U.S. treasury securities. The short-term investments are either U.S. government obligations, FDIC insured, or are in an institution with a Moody's rating of P2 and/or a Standard & Poor's rating of A1. All of the Company's fixed maturity investment securities are rated and readily marketable and could be liquidated without any material adverse financial impact. 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). No shares were repurchased in the three months ended March 31, 2004. Although material capital expenditures may also be funded through borrowings, the Company believes that its cash and short-term investments as of the date of this report, net of trust restriction of $1,447,414, statutory deposits of $2,700,000, cash of $752,659 deposited with Superior courts in lieu of bonds, 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. RESULTS OF OPERATIONS: - --------------------- All comparisons made in this discussion are comparing the three months ended March 31, 2004, to the three months ended March 31, 2003, unless otherwise indicated. The Company had a net income of $1,257,997 for the three months ending March 31, 2004, compared to net income of $233,083 for the three months ended March 31, 2003, an increase in net income of $1,024,914. Total revenues for the three months ended March 31, 2004, increased $4,263,600 (37%) to $15,680,191, compared to total revenues of $11,416,591 for the three months ended March 31, 2003. Premium written before reinsurance increased $4,190,353 (35%) to $16,150,050 for the three months ended March 31, 2004, compared to $11,959,697 for the three months ended March 31, 2003. The Company primarily writes commercial multiple peril business package policies. This line of business represents approximately 98% and 97% of Crusader's total written premium for the three months ended March 31, 2004 and 2003, respectively. Crusader's written premium by state is as follows: Three Months Ended March 31 -------- Increase 2004 2003 (Decrease) ---- ---- -------- California $16,150,318 $11,960,669 $4,189,649 Ohio - (13,598) 13,598 Arizona - 8,789 (8,789) Pennsylvania - (3,681) 3,681 Oregon - (7,841) 7,841 Montana - 18,391 (18,391) Washington - (2,894) 2,894 Nevada (268) (2,049) 1,781 Idaho - 1,911 (1,911) ---------- ---------- --------- Total $16,150,050 $11,959,697 $4,190,353 ========== ========== ========= 11 The $4,190,353 increase in written premium in the three months ended March 31, 2004 compared to the three months ended March 31, 2003 was primarily the result of the continued subsidence in priced-based competition in the property casualty insurance market that has resulted in the Company's products becoming more competitive. In addition, the Company has increased rates on some of its products. The Company believes that a "hard market" cycle exists in California. Industry-wide underwriting losses, decreases in investment yield, and increases in reinsurance cost have all contributed to the change from the "soft market" to the "hard market." The Company is also benefiting from the fact that some of its competitors have gone out of business and others have raised rates or adopted more restrictive rules. The Company cannot determine how long the existing market conditions will continue, nor in which direction they might change. The Company's future writings and growth are dependent on market conditions, competition, and the Company's ability to introduce new and profitable products. The Company's average gross written premium per policy issued is as follows: Quarter Ended Gross Written Policies Average Gross March 31 Premium Issued Written Premium -------- ------- ------ --------------- 2004 $16,150,050 5,142 $3,141 2003 $11,959,697 4,623 $2,587 Primarily as a result of losses from liquor and premise liability coverages, much of the Company's business outside of California has not been profitable. In August 2002, the Company placed moratoriums on a substantial amount of non-California business until further studies can be completed regarding underwriting and pricing. As a result of these moratoriums, the Company no longer produces business outside of California. The Company has no short-term plan to expand into additional states, nor to expand its marketing channels. Instead, the Company intends to allocate its resources toward improving its California business rates, rules, and forms. PREMIUM EARNED before reinsurance increased $5,050,038 (44%) to $16,474,958 for the three months ended March 31, 2004, compared to $11,424,920 for the three months ended March 31, 2003. The Company writes annual policies and, therefore, earns written premium over the one-year policy term. The increase in earned premium is a direct result of the related increase in written premium previously discussed. Premium ceded increased $424,543 (12%) to $3,888,639 for the three months ended March 31, 2004, compared to ceded premium of $3,464,096 in the three months ended March 31, 2003. 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 contracts. Direct earned premium, earned ceded premium, and ceding commission are as follows:
Three Months Ended March 31 -------- Increase 2004 2003 (Decrease) ---- ---- -------- Direct earned premium $16,474,958 $11,424,920 $5,050,038 Earned ceded premium Excluding provisionally rated ceded premium 4,196,062 3,399,562 796,500 Provisionally rated ceded premium (307,423) 64,534 (371,957) --------- --------- ------- Total earned ceded premium 3,888,639 3,464,096 424,543 Ceding commission 1,463,636 1,154,347 309,289 --------- --------- ------- Earned ceded premium, net of ceding commission $2,425,003 $2,309,749 $115,254 ========= ========= =======
The increase in ceded premium (excluding provisionally rated ceded premium) for the three months ended March 31, 2004, is primarily related to the increase in direct earned premium. Other factors effective January 1, 2004, affecting ceded premium were a slight decrease in the reinsurance rate charged by the Company's reinsurers and a change in the Company's participation in certain reinsurance treaties. In 2003 Crusader retained a participation in its excess of loss reinsurance treaties of 5% on its 1st layer ($750,000 in excess of $250,000), 10% on its 2nd layer ($1,000,000 in excess of $1,000,000), and 30% on its property clash treaty. In 2004 Crusader retained a participation on its excess of loss reinsurance treaties of 10% for both its 1st and 2nd layer and 15% on its property clash treaty. 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. 12 NET INVESTMENT INCOME, excluding realized investment gains, decreased $178,585 (14%) to $1,101,418 for the three months ended March 31, 2004, compared to investment income of $1,280,003 for the three months ended March 31, 2003. The decrease in investment income is primarily the result of a continued decline in the average return on invested assets in the Company's investment portfolio due to both a general decline in short and long-term yield in the marketplace and a shorter weighted average maturity of the portfolio. At March 31, 2004, the Company held fixed maturity investments with unrealized appreciation of $3,426,664 and fixed maturity investments with unrealized depreciation of $14,193. The Company does not deem the unrealized depreciation to be significant or indicative of an other-than-temporary decline, either individually or in the aggregate. At December 31, 2003, the Company held investments with unrealized appreciation of $3,236,623 and securities with unrealized depreciation of $38,169. The securities with unrealized depreciation at March 31, 2004, consisted of four fixed maturity investments with a total par value of $8,890,000. These investments consists of a U.S. treasury note (par value $5,000,000), a U.S. government agency bond (par value $3,000,000), and two pre-refunded municipal bonds secured with U.S. treasury securities (par value $890,000). 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, 2004, the Company had no investments with a decline in market value that was considered other than temporary. No investments were sold in the quarter ended March 31, 2004. GROSS COMMISSION AND FEE INCOME decreased $226,912 (12%) to $1,710,597 for the three months ended March 31, 2004, compared to commission and fee income of $1,937,509 for the three months ended March 31, 2003. The decrease in gross commission and fee income for the three months ended March 31, 2004, compared to the three months ended March 31, 2003, are as follows:
Three Months Ended March 31 -------- Increase 2004 2003 (Decrease) ---- ---- -------- Policy fee income $840,946 $740,082 $100,864 Health and life insurance program commission and fee income 629,516 889,651 (260,135) Other commission and fee income 98,536 133,129 (34,593) Daily automobile rental insurance program: Commission income (excluding contingent commission) 132,111 143,056 (10,945) Claim administration fee 31,591 (31,591) Contingent commission 9,488 - 9,488 --------- --------- ------- Total $1,710,597 $1,937,509 $(226,912) ========= ========= =======
The increase in policy fee income was primarily due to 11% increase in the number of policies issued during the three months ended March 31, 2004 compared to the three months ended March 31, 2003. The decrease in health and life insurance program commission and fee income is primarily due to a decrease in premium written in the CIGNA HealthCare programs. CIGNA discontinued its individual and family health insurance programs to new policyholders in the state of California in April 2003. In addition, CIGNA began the termination of existing policyholders in November 1, 2003, through October 1, 2004. As such, the percentage of business derived from CIGNA decreased. CIGNA's termination of their California individual and family health insurance does not affect CIGNA's individual and family dental program. AIB has secured both commission and override commission relationships with other carriers including Health Net, Nationwide (formerly CalFarm), and PacifiCare, and is continuing its efforts to diversify and offer a wider variety of products to its customers. The decrease in claim administration fee is due to the fact that as of December 31, 2003, the Company no longer provides claim administration services. Prior to December 31, 2003, a subsidiary of the Company provided insurance claim administration services to a non-affiliated property and casualty insurance company. As of December 31, 2003, the non-affiliated insurance company assumed the claim administration responsibility for all outstanding and IBNR claims. As such, the Company's subsidiary that provided the claim administration services is currently inactive. 13 LOSSES AND LOSS ADJUSTMENT EXPENSES were 71% of net premium earned for the three months ended March 31, 2004, compared to 84% of net premium earned for the three months ended March 31, 2003. In the quarter ended March 31, 2004, current year losses incurred were 71% of net premium earned and the Company incurred favorable development of prior years' losses of approximately $10,000. In the quarter ended March 31, 2003, current year losses incurred were 78% of net earned premium and the Company incurred adverse development of prior years' losses of approximately $496,000. As a result of Crusader underwriting losses that began in year ended December 31, 2000, Crusader's management has been analyzing and acting upon various components of its underwriting activity. These components include the following: 1. Business Outside of California 2. Habitability Exposure 3. Construction Defect Exposure 4. Special Risk Class of Business 5. Increased Cost of Settling Claims, Indemnity and Expense 6. Increased Cost of Reinsurance 7. Mold Exposure 8. Terrorism Exposure Crusader believes that implementation of managements actions on the underwriting components discussed above have contributed to improved operating results. Estimating loss reserves is a difficult process as there are many factors that can ultimately affect the final settlement of a claim and, therefore, the reserve that is needed. Changes in the regulatory and legal environment, results of litigation, medical costs, the cost of repair materials and labor rates can all impact ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably predictable than long-tail liability claims. The liability for unpaid losses and loss adjustment expenses is based upon the accumulation of individual case estimates for losses reported prior to the close of the accounting period plus estimates based on experience and industry data for development of case estimates and for unreported losses and loss adjustment expenses. Since the emergence and disposition of claims are subject to uncertainties, the net amounts that will ultimately be paid to settle claims may vary significantly from the estimated amounts provided for in the accompanying consolidated financial statements. Any adjustments to reserves are reflected in the operating results of the periods in which they are made. Management believes that the aggregate reserves for losses and loss adjustment expenses are reasonable and adequate to cover the cost of claims, both reported and unreported. POLICY ACQUISITION COSTS consist of commissions, premium taxes, inspection fees, and certain other underwriting costs, which are 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 20% of net premium earned for the three months ended March 31, 2004, and 22% of net earned premium for the three months ended March 31, 2003. SALARIES AND EMPLOYEE BENEFITS increased $22,709 (2%) to $1,216,119 for the three months ended March 31, 2004, compared to salary and employee benefits of $1,193,410 for the three months ended March 31, 2003. COMMISSIONS TO AGENTS/BROKERS decreased $131,455 (33%) to $271,123 for the three months ended March 31, 2004, compared to commission expense of $402,578 for the three months ended March 31, 2003. The decrease is primarily the result of a decrease in premiums written in the health and life insurance program and is related to the decrease in commission income. OTHER OPERATING EXPENSES decreased $207,361 (21%) to $789,108 for the three months ended March 31, 2004, compared to $996,469 for the three months ended March 31, 2003. The decrease in other operating expenses is primarily due to a decrease of approximately $124,000 in legal expenses and a decrease of approximately $36,000 of expenses related to the 2001 tri-annual examination of the Company's insurance subsidiary performed by the California Department of Insurance. 14 INCOME TAX PROVISION was an expense of $710,447 (36% of pre-tax income) for the three months ended March 31, 2004, compared to an income tax expense of $126,997 in the three months ended March 31, 2003 (35% of pre-tax income). This change was primarily due to a pre-tax income of $1,968,444 (including tax-exempt investment income of $17,087) in the three months ended March 31, 2004, compared to pre-tax income of $360,080 (including tax-exempt investment income of $35,304) in the three months ended March 31, 2003. The effect of inflation on net income of the Company during the three months ended March 31, 2004, and the three months ended March 31, 2003, was not significant. 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 underwriting actions not being effective, rate increases for coverages not being sufficient, 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 Increase 2004 2003 (Decrease) ---- ---- -------- Fixed maturity bonds (at amortized value) $115,260,743 $110,825,592 $4,435,151 Short-term cash investments (at cost) 3,915,187 7,229,315 (3,314,128) Certificates of deposit (over 1 year, at cost) 500,000 500,000 - ----------- ----------- --------- Total invested assets $119,675,930 $118,554,907 $1,121,023 =========== =========== =========
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. ITEM 4 - CONTROLS AND PROCEDURES - -------------------------------- An evaluation was carried out by the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2004 (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. During the period covered by this report, there have been no changes in the Company's internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting. 15 PART II - OTHER INFORMATION - --------------------------- ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) Exhibits: 31.1 Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: On March 25, 2004, the Company filed a Form 8-K furnishing under Item 12 a news release of its earnings for the year ended December 31, 2003. 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 thereunto duly authorized. UNICO AMERICAN CORPORATION Date: May 13, 2004 By /s/ ERWIN CHELDIN ----------------- Erwin Cheldin Chairman of the Board, President and Chief Executive Officer, (Principal Executive Officer) Date: May 13, 2004 By: /s/ LESTER A. AARON ------------------- Lester A. Aaron Treasurer, Chief Financial Officer, (Principal Accounting and Principal Financial Officer) 16 EXHIBIT INDEX ------------- Exhibit No. Description - ---------- ----------- 31.1 Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 31.2 Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) EX-31 2 ex31-1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Erwin Cheldin, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Unico American Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2004 /s/ Erwin Cheldin - ------------------ Erwin Cheldin Chairman of the Board, President and Chief Executive Officer EX-31 3 ex31-2.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Lester A. Aaron, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Unico American Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2004 /s/ Lester A. Aaron - -------------------- Lester A. Aaron Treasurer, Chief Financial Officer EX-32 4 ex32-1.txt EXHIBIT 32.1 EXHIBIT 32.1 ------------ CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report on Form 10-Q of Unico American Corporation (the "Company") for the period ended March 31, 2004, as filed with the Securities and Exchange Commission as of the date hereof (the "Report"), I, Erwin Cheldin, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Erwin Cheldin ------------------ Name: Erwin Cheldin Title: Chairman of the Board, President and Chief Executive Officer Date: May 13, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Unico American Corporation, and will be retained by Unico American Corporation, and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 5 ex32-2.txt EXHIBIT 32.2 EXHIBIT 32.2 ------------ CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report on Form 10-Q of Unico American Corporation (the "Company") for the period ended March 31, 2004, as filed with the Securities and Exchange Commission as of the date hereof (the "Report"), I, Lester A. Aaron, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Lester A. Aaron -------------------- Name: Lester A. Aaron Title: Treasurer and Chief Financial Officer Date: May 13, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Unico American Corporation, and will be retained by Unico American Corporation, and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----