Unico American Corporation Reports Third Quarter 2016 Financial Results

Unico American Corporation (NASDAQ: UNAM) ("Unico," the "Company"), announced today its consolidated financial results for the three and nine months ended September 30, 2016. For the three months ended September 30, 2016, revenues were $9.0 million and net loss was $2.0 million ($0.37 diluted loss per share) compared with revenues of $8.5 million and net loss of $0.7 million ($0.12 diluted loss per share) for the three months ended September 30, 2015. For the nine months ended September 30, 2016, revenues were $26.3 million and net loss was $2.0 million ($0.38 diluted loss per share) compared with revenues of $24.6 million and net loss of $0.9 million ($0.17 diluted loss per share) for the nine months ended September 30, 2015.

Stockholders' equity was $68.3 million as of September 30, 2016, or $12.87 per common share including unrealized gains, net of tax, of $0.03 million, compared to stockholders' equity of $70.3 million as of December 31, 2015, or $13.23 per common share including unrealized investment losses, net of tax, of $0.03 million.

"We are disappointed with our third quarter results," said Cary L. Cheldin, Unico's President and Chief Executive Officer. "Nonetheless, Unico's operations have always been managed conservatively and we are optimistic about the company's future. Our management team remains diligent and committed to delivering better results.

"Although most of the third quarter loss can be attributed to statistical aberration, it gave us new information specifically related to first-party property claims and to certain liability claims. Our management team reacts immediately whenever presented with new information, as we did in this case. Of the amount of losses and loss adjustment expenses that was higher than expected, about 49% came from prior accident year development in only one particular sector of liability claims, a sector where we are significantly raising rates and changing rules; and, approximately 37% came from current year first-party property claims, which management considers being a statistical aberration because our overall year-to-date loss ratio from that sector, including those losses, remains good."

Headquartered in Calabasas, California, Unico is an insurance holding company that underwrites property and casualty insurance through its insurance company subsidiary; provides property, casualty and health insurance through its agency subsidiaries; and through its other subsidiaries provides insurance premium financing and membership association services. Unico has conducted the majority of its operations through its subsidiary Crusader Insurance Company since 1985. For more information concerning Crusader Insurance Company, please visit the Crusader's Web site at www.crusaderinsurance.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained herein that are not historical facts are forward-looking. These statements, which may be identified by forward-looking words or phrases such as "anticipate," "appear," "believe," "estimate," "expect," "intend," "may," "plan," "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 or marketing actions not being effective; rate increases for coverages not being sufficient; premium rate adequacy relating to competition or regulation; actual versus estimated claim experience; the outcome of rate change filings with regulatory authorities; acceptance by insureds of rate changes; adequacy of rate changes; changes in Crusader's A.M. Best rating; regulatory changes or developments; the outcome of regulatory proceedings; unforeseen calamities; general market conditions; and the Company's ability to introduce new profitable products.
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
 
  September 30   December 31
2016   2015  
( Unaudited)

ASSETS
Investments
Available for sale:

Fixed maturities, at fair value (amortized cost: September 30, 2016 $82,608; December 31, 2015 $82,203)
$ 82,649 $ 82,161
Short-term investments, at fair value   8,174   15,641  
Total Investments 90,823 97,802
Cash 1,215 334
Accrued investment income 175 86
Receivables, net 6,143 5,505
Reinsurance recoverable:
Paid losses and loss adjustment expenses 497 751
Unpaid losses and loss adjustment expenses 9,654 9,637
Deferred policy acquisition costs 4,547 4,233
Property and equipment, net 10,396 10,221
Deferred income taxes 1,296 1,334
Other assets   16,064   10,268  
Total Assets $ 140,810 $ 140,171  
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 

LIABILITIES
Unpaid losses and loss adjustment expenses $ 49,822 $ 49,094
Unearned premiums 19,402 18,079
Advance premium and premium deposits 489 212
Accrued expenses and other liabilities   2,774   2,443  
Total Liabilities $ 72,487 $ 69,828  
 
Commitments and contingencies
 

STOCKHOLDERS' EQUITY

Common stock, no par - authorized 10,000,000 shares; issued and outstanding shares 5,307,133 at September 30, 2016, and 5,315,945 at December 31, 2015
$ 3,756 $ 3,743
Accumulated other comprehensive income 27 (27 )
Retained earnings   64,540   66,627  
Total Stockholders' Equity $ 68,323 $ 70,343  
 
Total Liabilities and Stockholders' Equity $ 140,810 $ 140,171  
 
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in thousands, except per share)
 
  Three Months Ended   Nine Months Ended
September 30 September 30
  2016       2015     2016       2015  

REVENUES
Insurance company revenues
Net premium earned $ 7,981 $ 7,564 $ 23,271 $ 21,857
Investment income 235 129 659 314
Net realized investment losses - - (1 ) -
Other income   66     68     201     310  
Total Insurance Company Revenues 8,282 7,761 24,130 22,481
 
Other revenues from insurance operations
Gross commissions and fees 697 673 2,064 2,066
Finance charges and fees earned 18 17 51 48
Other income   1     -     6     2  
Total Revenues   8,998     8,451     26,251     24,597  
 

EXPENSES
Losses and loss adjustment expenses 8,038 4,347 17,983 13,874
Policy acquisition costs 1,742 1,659 5,142 4,752
Salaries and employee benefits 1,319 1,255 3,980 3,669
Commissions to agents/brokers 40 38 121 127
Other operating expenses   826     2,120     2,053     3,551  
Total Expenses   11,965     9,419     29,279     25,973  
 
Loss before taxes (2,967 ) (968 ) (3,028 ) (1,376 )
Income tax benefit   (1,013 )   (318 )   (1,027 )   (442 )
Net Loss $ (1,954 ) $ (650 ) $ (2,001 ) $ (934 )
 
 
 

PER SHARE DATA:
Basic
Loss per share $ (0.37 ) $ (0.12 ) $ (0.38 ) $ (0.17 )
Weighted average shares 5,307,133 5,335,319 5,307,881 5,338,619
Diluted
Loss per share $ (0.37 ) $ (0.12 ) $ (0.38 ) $ (0.17 )
Weighted average shares 5,307,133 5,335,319 5,307,881 5,338,619
 
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in thousands)
 
  Nine Months Ended
September 30
  2016       2015  
Cash flows from operating activities:
Net loss $ (2,001 ) $ (934 )
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization 361 349
Bond amortization, net (13 ) (14 )
Non-cash stock based compensation 17 17
Loss on asset impairment - 1,287
Changes in assets and liabilities:
Net receivables and accrued investment income (727 ) (754 )
Reinsurance recoverable 237 (1,480 )
Deferred policy acquisitions costs (314 ) (451 )
Other assets (4,750 ) (371 )
Unpaid losses and loss adjustment expenses 728 1,184
Unearned premiums 1,323 1,907
Advance premium and premium deposits 277 165
Accrued expenses and other liabilities 331 (759 )
Income taxes current/deferred   (1,037 )   (453 )
Net Cash Used by Operating Activities   (5,568 )   (307 )
 
Cash flows from investing activities:
Purchase of fixed maturity investments (12,032 ) (36,248 )
Proceeds from maturity of fixed maturity investments 11,640 3,249
Net decrease in short-term investments 7,467 34,008
Additions to property and equipment   (536 )   (490 )
Net Cash Provided by Investing Activities   6,539     519  
 
Cash flows from financing activities:
Repurchase of common stock   (90 )   (118 )
Net Cash Used by Financing Activities   (90 )   (118 )
 
Net increase in cash 881 94
Cash at beginning of period   334     309  
Cash at End of Period $ 1,215   $ 403  
 
Supplemental Cash Flow Information
Cash paid during the period for:
Interest - -
Income taxes $ 9 $ 9

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