Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - UNICO AMERICAN CORP | unam_8k.htm |
Exhibit 99.1
NEWS RELEASE
CONTACT:
Michael Budnitsky
Chief
Executive Officer
818-591-9800
UNICO AMERICAN CORPORATION REPORTS
FIRST QUARTER 2021 FINANCIAL RESULTS
Calabasas, CA, May 17, 2021 – Unico American
Corporation (NASDAQ: “UNAM”) (“Unico” or
the “Company”), announced today its consolidated
financial results for the three months ended March 31, 2021. For
the three months ended March 31, 2021, net income was $2,267,703
($0.43 diluted income per share) compared to net loss of $1,043,826
($0.20 diluted loss per share) for the three months ended March 31,
2020. Book value per share was $6.84 and $6.60 at March 31, 2021,
and December 31, 2020, respectively.
Results of Operations
|
|
Three Months
Ended March 31
|
|||
|
|
|
|
Increase
(Decrease)
|
|
|
|
2021
|
2020
|
$
|
%
|
|
|
|
|
|
|
|
Gross written
premium
|
$10,482,545
|
$9,206,886
|
$1,275,659
|
14%
|
|
Net realized gains
on real estate sale
|
$3,693,858
|
-
|
$3,693,858
|
100%
|
|
Net investment
income
|
$514,723
|
$520,692
|
$(5,969)
|
(1)%
|
|
Gross commissions
and fees
|
$433,461
|
$469,069
|
$(35,608)
|
(8)%
|
|
Losses and loss
adjustment expenses
|
$5,585,213
|
$5,877,385
|
$(292,172)
|
(5)%
|
|
Policy acquisition
costs
|
$1,021,965
|
$1,144,425
|
$(122,460)
|
(11)%
|
|
Salaries and
employee benefits
|
$1,128,090
|
$1,122,499
|
$5,591
|
0%
|
|
Other operating
expenses
|
$1,173,479
|
$980,415
|
$193,064
|
20%
|
|
Income tax benefit
(expense)
|
$(274,636)
|
$101,672
|
$(376,308)
|
(370)%
|
The
increase in gross written premium (direct and assumed written
premium before cessions to reinsurers under reinsurance treaties)
during the three months ended March 31, 2021, was due primarily to
growth in the Company’s Transportation vertical, transacted
by its wholly owned subsidiary Crusader Insurance Company
(“Crusader”). The Transportation vertical transacts
insurance primarily for long-haul trucking operations that are
domiciled in California. The growth in the Company’s
Transportation vertical was partially offset by coronavirus-related
contraction in the Mainstreet (which were formerly referred to as
Food, Beverage and Entertainment and Garage and Mercantile)
underwriting vertical for Crusader.
The
increase in net realized gains on real estate sale during the three
months ended March 31, 2021, was due to the sale of the building in
which the Company’s corporate headquarters are located (the
“Calabasas Building”) on February 12, 2021. The Company
recognized a gain of $3,693,858 on the sale of the Calabasas
Building.
The
decrease in net investment income during the three months ended
March 31, 2021, was due primarily to a decrease in market
yields.
The
decrease in gross commission and fees during the three months ended
March 31, 2021, was due primarily to
decreases in property and casualty insurance policy fee income and
health insurance program commission income as a result of decrease
in the number of issued policies.
The
decrease in loss and loss adjustment expenses during the three
months ended March 31, 2021, was due primarily to reductions in the
incurred but not reported reserves associated with Transportation
and Buildings verticals due to positive claims emergence partially
offset by higher severity of property claims related to Crusader's
underwriting activities in the Building and Mainsteet verticals,
associated with fire losses. The loss and LAE ratio, expressed as a
percentage of earned premiums, equaled 85% in the three months
ended March 31, 2021, unchanged from 85% in the year-ago
period.
The decrease in policy acquisition costs during the three months
ended March 31, 2021, was due
primarily to higher ceding commission Crusader received on premium
ceded to its reinsurers.
The negligible increase in salaries and employee benefits during
the three months ended March 31, 2021, was due primarily to
increases in executive compensation and increases in employee
benefits due to higher medical insurance rates.
The
increase in other operating expenses during the three months ended
March 31, 2021, was due primarily to an increase in fees
associated with the reinsurance arrangement with United Specialty
Insurance Company, an increase in insurance costs, an increase in
communication costs, and an increase in rent expense as the Company
started paying rent on its corporate headquarters to the new owner
of the Calabasas Building during the three months ended March 31,
2021.
Income tax expense was $274,636
(11% of pre-tax income) for the three months ended March 31, 2021,
and income tax benefit was $101,672 (9% of pre-tax loss) for the
three months ended March 31, 2020.
Management
Commentary
"Our
sales were better than expected as a result of growth in our
Transportation vertical where we currently see opportunities. The
completed sale of our building allowed us to focus more on our core
operations and to reposition our portfolio for improvements in
investment income. Unfortunately, this quarter had some large fire
losses, which led us to the underwriting loss; in fact, fire losses
on just five claims exceeded total property losses of any quarter
of 2020. We are in the business of paying claims to our
policyholders, and while the frequency and randomness of fire
losses is difficult to predict, we are focused on continually
improving our underwriting results over time. We remain committed
to executing our business plan to return the company to
profitability," said Michael Budnitsky, Unico's Interim President
and Chief Executive Officer.
Definitions and Non-GAAP Financial Measures
Written
premium is a non-GAAP financial measure that is defined, under the
statutory accounting practices prescribed or permitted by the
California Department of Insurance, as the contractually determined
amount charged by the insurance company to the policyholder for the
effective period of the contract based on the expectation of risk,
policy benefits, and expenses associated with the coverage provided
by the terms of the policies. Written premium is a required
statutory measure. Written premium is defined under U.S. generally
accepted accounting principles (“GAAP”) in Accounting
Standards Codification Topic 405, “Liabilities,” as
“premiums on all policies an entity has issued in a
period.” Earned premium, the most directly comparable GAAP
measure to written premium, represents the portion of written
premium that is recognized as income in the financial statements
for the period presented and earned on a pro-rata basis over the
terms of the policies. Written premium is intended to reflect
production levels and is meant as supplemental information and not
intended to replace earned premium. Such information should be read
in conjunction with the GAAP financial results.
The following is a reconciliation of gross written premium (direct
and assumed written premium ceded to reinsurers) to net earned
premium (after premium ceded to reinsurers):
|
|
Three Months
Ended
March
31
|
|
|
|
2021
|
2020
|
|
|
|
|
|
Direct written
premium
|
$10,176,863
|
$9,206,886
|
|
Assumed written
premium
|
305,682
|
-
|
|
Less:
written premium ceded to reinsurers
|
(2,779,992)
|
(1,979,127)
|
|
Net written
premium
|
7,702,553
|
7,227,759
|
|
Change
in direct unearned premium
|
(883,694)
|
(297,061)
|
|
Change
in assumed unearned premium
|
(211,216)
|
-
|
|
Change
in ceded unearned premium
|
(3,883)
|
(19,564)
|
|
Net
earned premium
|
$6,603,760
|
$6,911,134
|
About Unico
Headquartered
in Calabasas, California, Unico is an insurance holding company
whose subsidiaries underwrite and market property and casualty
insurance, and transact health insurance, insurance premium
financing and membership association services. Since 1985, the
majority of Unico’s financial activity has been related to
the operations of its subsidiary, Crusader. For more information
concerning Crusader, please visit Crusader’s website at
www.crusaderinsurance.com.
Forward-Looking Statements
This press release may contain “forward-looking
statements” within the meaning of the federal securities
laws, including Section 27A of the Securities Act of 1933, as
amended (or “the Securities Act”), and Section 21E of
the Securities Exchange Act of 1934, as amended (or “the
Exchange Act”). In this context, forward-looking statements
are not historical facts and include statements about the
Company’s plans, objectives, beliefs and expectations.
Forward-looking statements include statements preceded by, followed
by, or that include the words “believes,”
“expects,” “anticipates,”
“seeks,” “plans,” “estimates,”
“intends,” “projects,”
“targets,” “should,” “could,”
“may,” “will,” “can,”
“can have,” “likely,” the negatives thereof
or similar words and expressions.
Forward-looking statements are only predictions and are not
guarantees of future performance. These statements are based on
current expectations and assumptions involving judgments about,
among other things, future economic, competitive and market
conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are
beyond the Company’s control. These predictions are also
affected by known and unknown risks, uncertainties and other
factors that may cause the Company’s actual results to be
materially different from those expressed or implied by any
forward-looking statement. Many of these factors are beyond the
Company’s ability to control or predict. The Company’s
actual results could differ materially from the results
contemplated by these forward-looking statements due to a number of
factors. Such factors include, but are not limited to, substantial
historical net losses, which may continue in the future,
failure to meet minimum capital and surplus
requirements; vulnerability to climate change and significant
catastrophic property loss; the ongoing impact of the recent
coronavirus pandemic; a change in accounting standards issued by
the Financial Accounting Standards Board; ability to adjust
claims accurately; insufficiency of loss and loss adjustment
expense reserves to cover future losses; changes in federal or
state tax laws; ability to realize deferred tax
assets; ability to accurately underwrite risks and charge
adequate premium; ability to obtain reinsurance or collect
from reinsurers and or losses in excess of reinsurance
limits; extensive regulation and legislative
changes; reliance on subsidiaries to satisfy
obligations; downgrade in financial strength rating by A.M.
Best; changes in interest rates; investments subject to
credit, prepayment and other risks; geographic
concentration; reliance on independent insurance agents and
brokers; insufficient reserve for doubtful
accounts; litigation; enforceability of exclusions and
limitations in policies; reliance on information technology
systems; ability to prevent or detect acts of fraud with
disclosure controls and procedures; change in general economic
conditions; dependence on key personnel; ability to
attract, develop and retain employees and maintain appropriate
staffing levels; insolvency, financial difficulties, or
default in performance of obligations by parties with significant
contracts or relationships; ability to effectively
compete; maximization of long-term value and no focus on
short-term earnings expectations; control by a small number of
shareholders; failure to maintain effective system of internal
controls; and difficulty in effecting a change of control or
sale of any subsidiaries.
Please see Part I - Item 1A – “Risk Factors” in
the Company’s 2019 Annual Report on Form 10-K as filed with
the U.S. Securities and Exchange Commission (“SEC”), as
well as other documents the Company files or furnishes with the SEC
from time-to-time, for other important risks and uncertainties that
could cause the Company’s actual results to differ materially
from its current expectations and from the forward-looking
statements discussed herein. Because of these and other risks,
uncertainties and assumptions, you should not place undue reliance
on these forward-looking statements. In addition, these statements
speak only as of the date of this press release and, except as may
be required by law, the Company undertakes no obligation to revise
or update publicly any forward-looking statements, whether as a
result of changed circumstances, new information, future events or
otherwise, for any reason.
Financial
Tables Follow –
UNICO
AMERICAN CORPORATION
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
($ in
thousands)
|
|
March
31
|
December
31
|
|
|
2021
|
2020
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Investments
|
|
|
|
Available-for-sale:
|
|
|
|
Fixed
maturities, at fair value (amortized cost: $86,520 at March 31, 2021, and
$80,071 at December 31,
2020)
|
$88,550
|
$83,409
|
|
Held-to-maturity:
|
|
|
|
Fixed
maturities, at amortized cost (fair value: $798 at
March
31, 2021, and $798 at December 31, 2020)
|
798
|
798
|
|
Equity
securities, at fair value (cost: $2,834 at March 31, 2021, and
$2,548 at December 31, 2020)
|
3,184
|
2,747
|
|
Short-term
investments, at fair value
|
2,950
|
200
|
|
Total
Investments
|
95,482
|
87,154
|
|
Cash and cash
equivalents
|
7,773
|
3,958
|
|
Accrued investment
income
|
498
|
402
|
|
Receivables,
net
|
3,587
|
3,321
|
|
Reinsurance
recoverable:
|
|
|
|
Paid
losses and loss adjustment expenses
|
78
|
621
|
|
Unpaid
losses and loss adjustment expenses
|
22,133
|
22,254
|
|
Deferred policy
acquisition costs
|
3,568
|
3,503
|
|
Real estate held
for sale, net
|
-
|
|
|
Property and
equipment, net
|
2,228
|
10,374
|
|
Deferred income
taxes
|
-
|
-
|
|
Other
assets
|
256
|
314
|
|
Total
Assets
|
$135,603
|
$131,901
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||
|
|
|
|
|
LIABILITIES
|
|
|
|
Unpaid losses and
loss adjustment expenses
|
$74,402
|
$74,894
|
|
Unearned
premiums
|
19,283
|
18,188
|
|
Advance premium and
premium deposits
|
143
|
209
|
|
Accrued expenses
and other liabilities
|
5,507
|
3,577
|
|
Total
Liabilities
|
99,335
|
96,868
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
Common stock, no
par value – authorized 10,000,000 shares; 5,304,885 shares
issued and outstanding at March 31, 2021, and December 31,
2020
|
3,772
|
3,772
|
|
Accumulated other
comprehensive income
|
1,604
|
2,637
|
|
Retained
earnings
|
30,892
|
28,624
|
|
Total
Stockholders’ Equity
|
36,268
|
35,033
|
|
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
$135,603
|
$131,901
|
UNICO
AMERICAN CORPORATION
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in
thousands, except per share)
|
|
Three Months
Ended
|
|
|
|
March
31
|
|
|
|
2021
|
2020
|
|
REVENUES
|
|
|
|
Insurance company
operation:
|
|
|
|
Net
earned premium
|
$6,604
|
$6,911
|
|
Net
investment income
|
515
|
520
|
|
Net
realized investment gains
|
55
|
1
|
|
Net
realized gains on real estate sale
|
3,694
|
-
|
|
Net
unrealized investment gains (losses) on equity
securities
|
152
|
(45)
|
|
Other
income (loss)
|
(27)
|
82
|
|
Total
Insurance Company Operation
|
10,993
|
7,469
|
|
|
|
|
|
Other insurance
operations:
|
|
|
|
Gross
commissions and fees
|
433
|
469
|
|
Finance
charges and fees earned
|
45
|
67
|
|
Other
income
|
1
|
-
|
|
Total
Revenues
|
11,472
|
8,005
|
|
|
|
|
|
EXPENSES
|
|
|
|
Losses and loss
adjustment expenses
|
5,585
|
5,877
|
|
Policy acquisition
costs
|
1,022
|
1,144
|
|
Salaries and
employee benefits
|
1,128
|
1,123
|
|
Commissions to
agents/brokers
|
21
|
26
|
|
Other operating
expenses
|
1,174
|
981
|
|
Total
Expenses
|
8,930
|
9,151
|
|
|
|
|
|
Income (Loss)
before taxes
|
2,542
|
(1,146)
|
|
Income tax benefit
(expense)
|
(274)
|
102
|
|
Net
Income (Loss)
|
$2,268
|
$(1,044)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA:
|
|
|
|
Basic
|
|
|
|
Income
(Loss) per share
|
$0.43
|
$(0.20)
|
|
Weighted
average shares
|
5,304,885
|
5,306,720
|
|
Diluted
|
|
|
|
Income
(Loss) per share
|
$0.43
|
$(0.20)
|
|
Weighted
average shares
|
5,304,885
|
5,306,720
|
UNICO
AMERICAN CORPORATION
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in
thousands)
|
|
Three Months
Ended
|
|
|
|
March
31
|
|
|
|
2021
|
2020
|
|
Cash flows from
operating activities:
|
|
|
|
Net
Income (Loss)
|
$2,268
|
$(1,044)
|
|
Adjustments
to reconcile net loss to net cash from operations:
|
|
|
|
Depreciation
and amortization
|
105
|
189
|
|
Bond
amortization, net
|
(332)
|
(7)
|
|
Bad
debt expense
|
6
|
-
|
|
Net
realized investment gains
|
(98)
|
(1)
|
|
Net
realized gains on real estate sale
|
(3,694)
|
-
|
|
Net
unrealized investment losses (gains) on equity
securities
|
(152)
|
45
|
|
Changes
in assets and liabilities:
|
|
|
|
Net
receivables and accrued investment income
|
(367)
|
(74)
|
|
Reinsurance
recoverable
|
663
|
(353)
|
|
Deferred
policy acquisitions costs
|
(64)
|
(68)
|
|
Other
assets
|
58
|
(39)
|
|
Unpaid
losses and loss adjustment expenses
|
(491)
|
1,073
|
|
Unearned
premium
|
1,095
|
297
|
|
Advance
premium and premium deposits
|
(65)
|
126
|
|
Accrued
expenses and other liabilities
|
1,929
|
(48)
|
|
Income
taxes current/deferred
|
274
|
(103)
|
|
Net Cash Provided
(Used) by Operating Activities
|
1,135
|
(7)
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchase of fixed
maturity investments
|
(11,009)
|
(1,736)
|
|
Purchase of equity
securities
|
(286)
|
(503)
|
|
Proceeds from
maturity of fixed maturity investments
|
3,492
|
1,328
|
|
Proceeds from sale
or call of fixed maturity investments
|
1,498
|
604
|
|
Purchase of
short-term investments
|
(2,750)
|
(1)
|
|
Proceeds
from sale of real estate held for sale
|
12,029
|
-
|
|
Purchase of
property and equipment
|
(294)
|
(185)
|
|
Net Cash Provided
(Used) by Investing Activities
|
2,680
|
(493)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Repurchase of
common stock
|
-
|
(6)
|
|
Net Cash Used by
Financing Activities
|
-
|
(6)
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
3,815
|
(506)
|
|
Cash and cash
equivalents at beginning of period
|
3,958
|
5,782
|
|
Cash and Cash
Equivalents at End of Period
|
$7,773
|
$5,276
|
|
|
|
|
|
Supplemental Cash
Flow Information
|
|
|
|
Cash paid during
the period for:
|
|
|
|
Interest
|
$-
|
$-
|
|
Income
taxes
|
$-
|
$9
|