Unico American Corporation (NASDAQ:UNAM) (“Unico” or the
“Company”) announced today its consolidated financial results for
the three and nine months ended September 30, 2017. For the three
months ended September 30, 2017, revenues were $9.3 million and net
loss was $2.9 million ($0.55 diluted loss per share) compared with
revenues of $9.0 million and net loss of $2.0 million ($0.37
diluted loss per share) for the three months ended September 30,
2016. For the nine months ended September 30, 2017, revenues were
$27.5 million and net loss was $5.9 million ($1.12 diluted loss per
share) compared with revenues of $26.3 million and net loss of $2.0
million ($0.38 diluted loss per share) for the nine months ended
September 30, 2016.
Stockholders’ equity was $63.0 million as of September 30, 2017,
or $11.86 per common share including unrealized losses, net of
deferred income tax, of $0.007 million, compared to stockholders’
equity of $68.9 million as of December 31, 2016, or $12.98 per
common share including unrealized investment gains, net of deferred
income tax, of $0.008 million.
“We have identified and addressed the causes of recent quarterly
losses, and we do not expect these kinds of losses to recur. For
example, of the third quarter’s $2.9 million net loss, $1.1 million
can be attributed to adverse results on two claim files. Both of
those claims involved assault and battery litigation that occurred
at two different nightclubs insured by our subsidiary, Crusader
Insurance Company, and both of those cases resulted in runaway jury
awards at trial that were both unexpected and inconsistent with our
experience over the prior 32 years of having handled hundreds of
substantially similar cases with much more modest results,” said
Cary L. Cheldin, Unico’s President and Chief Executive Officer.
“Another $0.5 million of the net loss this quarter is attributed to
three other assault and battery cases at nightclubs. These five
cases, along with many other assault and battery cases that we
resolved during the past 18 months reflect relatively recent
social, legal and economic changes that have materially impacted
the cost of insuring that type of risk in California. Consequently,
we have decided to significantly curtail or entirely exclude
coverage for the risk of assault and battery claims at nightclubs
in California while continuing to service that group of our
customers in other ways.
“In light of the adverse development on the nightclub business
we underwrote, we increased our estimate of expected ultimate loss
ratios used in our IBNR calculation for policies issued to
nightclubs, resulting in a significant increase in our IBNR
reserves. $0.9 million of this quarter’s $2.9 million net loss is
attributable to our strengthening of IBNR reserves associated with
the exposures we have on those nightclubs.
“Costs related to our other restructuring initiatives executed
during the quarter account for most of the remaining balance of
this quarter’s $2.9 million net loss.
“While adverse development and reserve strengthening on prior
accident years reduced our earnings again, we remain strongly
capitalized and we spent the quarter making positive changes. We
improved our underwriting and marketing operations, completed the
vendor selection phase for a new policy administration system,
launched three new websites, and improved the yields on our
investment portfolio. I remain extremely optimistic and confident
about the future success of Unico’s current team of employees,
Unico’s operations and Unico’s profitability.”
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 website at
www.crusaderinsurance.com.
Forward-Looking Statements
Certain statements in this press release are forward-looking
statements as defined under the Private Securities Litigation
Reform Act of 1995 and the Company intends that such
forward-looking statements are subject to the safe harbors created
thereby. These statements, which may be identified by words or
phrases such as “anticipate,” “appear,” “believe,” “estimate,”
“expect,” “intend,” “plan,” “predict,” “will,” “may,” “likely,”
“future,” “should,” “could,” and “would” and similar words, are
intended to identify forward-looking statements. In addition, any
statements that refer to projections of the Company’s future
financial performance, trends in its businesses, or other
characterizations of future events or circumstances are
forward-looking statements.
The forward-looking statements included herein are based on
current expectations of the Company’s management based on available
information and involve certain 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
those anticipated by these forward-looking statements. Factors that
could cause actual results to differ materially include, among
others: failure to meet minimum capital and surplus requirements;
vulnerability to significant catastrophic property loss; a change
in accounting standards issued by the Financial Accounting
Standards Board; required adoption of International Financial
Reporting Standards; ability to adjust claims accurately;
insufficiency of loss and loss adjustment expense reserves to cover
future losses; ability to realize deferred tax assets; ability to
accurately underwrite risks and charge adequate premium; ability to
obtain reinsurance or collect from reinsurers; extensive regulation
and legislative changes; reliance on subsidiaries to satisfy
obligations; downgrade in financial strength rating by AM Best;
intense competition; 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; implementation of new computer software; 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; difficulty in effecting a change of control or sale of
any subsidiaries; and losses in excess of reinsurance limits.
Except as may be required by law, the Company undertakes no
obligation to update any forward-looking statements to reflect new
information or events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
September 30,
December 31,
2017 2016
(Unaudited)
ASSETS
Investments Available for sale:
Fixed maturities, at fair value (amortized
cost: $84,279 at September 30, 2017, and $80,372 December 31,
2016)
$ 84,269 $ 80,384 Short-term investments, at fair value
13,081 10,205 Total
Investments 97,350 90,589 Cash 230 13,496 Accrued investment income
436 186 Receivables, net 6,047 6,008 Reinsurance recoverable: Paid
losses and loss adjustment expenses 1,692 261 Unpaid losses and
loss adjustment expenses 11,891 9,521 Deferred policy acquisition
costs 4,231 4,432 Property and equipment, net 10,118 10,283
Deferred income taxes 1,231 1,177 Other assets
4,853 2,269 Total Assets $
138,079 $
138,222
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses $ 53,067 $ 47,056
Unearned premiums 19,472 19,375 Advance premium and premium
deposits 430 224 Accrued expenses and other liabilities
2,156 2,661 Total
Liabilities $
75,125 $
69,316
Commitments and contingencies
STOCKHOLDERS'
EQUITY
Common stock, no par – authorized
10,000,000 shares; 5,307,133 shares issued and outstanding at
September 30, 2017, and December 31, 2016
$ 3,773 $ 3,761 Accumulated other comprehensive (loss) income (7 )
8 Retained earnings
59,188
65,137 Total Stockholders’ Equity $
62,954 $
68,906 Total
Liabilities and Stockholders' Equity $
138,079
$
138,222
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,
2017 2016
2017 2016
REVENUES
Insurance company operation: Net premium earned $ 8,168 $ 7,981 $
24,309 $ 23,271 Investment income 310 235 785 659 Net realized
investment gains (losses) - - 1 (1 ) Other income
108 66
244 201 Total
Insurance Company Operation 8,586 8,282 25,339 24,130 Other
insurance operations: Gross commissions and fees 685 697 2,098
2,064 Finance charges and fees earned 22 18 58 51 Other income
- 1
- 6 Total Revenues
9,293 8,998
27,495 26,251
EXPENSES
Losses and loss adjustment expenses 9,918 8,038 24,352 17,983
Policy acquisition costs 1,854 1,742 4,943 5,142 Salaries and
employee benefits 1,221 1,319 4,535 3,980 Commissions to
agents/brokers 40 40 127 121 Other operating expenses
696 826
2,592 2,053 Total
Expenses
13,729
11,965 36,549
29,279 Loss before taxes (4,436 ) (2,967
) (9,054 ) (3,028 ) Income tax benefit
1,509
1,013 3,105
1,027 Net Loss $ (2,927 ) $
(1,954 ) $ (5,949 ) $ (2,001 )
PER SHARE
DATA:
Basic Loss per share $ (0.55 ) $ (0.37 ) $ (1.12 ) $ (0.38 )
Weighted average shares 5,307,133 5,307,133 5,307,133 5,307,881
Diluted Loss per share $ (0.55 ) $ (0.37 ) $ (1.12 ) $ (0.38 )
Weighted average shares 5,307,133 5,307,133 5,307,133 5,307,881
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in thousands)
Nine Months Ended
September 30,
2017
2016 Cash flows from operating activities: Net loss $
(5,949 ) $ (2,001 ) Adjustments to reconcile net loss to net cash
from operations: Depreciation and amortization 386 361 Bond
amortization, net (533 ) (13 ) Bad debt expense 16 - Non-cash stock
based compensation 12 17 Realized investment (gains) losses (1 ) 1
Changes in assets and liabilities: Net receivables and accrued
investment income (305 ) (727 ) Reinsurance recoverable (3,801 )
237 Deferred policy acquisitions costs 201 (314 ) Other assets 478
698 Unpaid losses and loss adjustment expenses 6,011 728 Unearned
premiums 97 1,323 Advance premium and premium deposits 206 277
Accrued expenses and other liabilities (505 ) 331 Income taxes
current/deferred (3,109 ) (1,037 ) Net Cash Used by
Operating Activities (6,796 ) (119 ) Cash
flows from investing activities: Purchase of fixed maturity
investments (44,321 ) (12,032 ) Proceeds from maturity of fixed
maturity investments 39,354 10,894 Proceeds from sale of fixed
maturity investments 1,594 746 Net (increase) decrease in
short-term investments (2,876 ) 7,467 Additions to property and
equipment (221 ) (536 ) Net Cash (Used by) Provided
by Investing Activities (6,470 )
6,539
Cash flows from financing activities: Repurchase of
common stock
- (90 ) Net Cash
Used by Financing Activities
-
(90 ) Net (decrease) increase in cash (13,266 ) 6,330 Cash
and restricted cash at beginning of period
13,496 8,259 Cash
and Restricted Cash at End of Period $
230 $
14,589 Supplemental Cash Flow
Information Cash paid during the period for: Interest - - Income
taxes $ 9 $ 9
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version on businesswire.com: http://www.businesswire.com/news/home/20171113006432/en/
Unico American CorporationMichael BudnitskyChief Financial
Officer818-591-9800
Unico American (NASDAQ:UNAM)
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