CALABASAS, CA / ACCESSWIRE / May 15, 2020 / Unico American Corporation (NASDAQ:UNAM) ("Unico" or the "Company"), announced today its consolidated financial results for the three months ended March 31, 2020. For the three months ended March 31, 2020, net loss was $1,043,826 ($0.20 diluted loss per share) compared to net loss of $671,074 ($0.13 diluted loss per share) for the three months ended March 31, 2019. Book value per share was $10.13 and $10.38 at March 31, 2020, and December 31, 2019, respectively.
Results of Operations
| Three Months Ended March 31 | ||||||||||||||||
| Increase (Decrease) | ||||||||||||||||
| 2020 | 2019 | $ | % | |||||||||||||
Direct written premium | $ | 9,206,886 | $ | 8,529,181 | $ | 677,705 | 8 | % | ||||||||
Net investment income | $ | 520,694 | $ | 532,637 | $ | (11,943 | ) | (2 | )% | |||||||
Gross commissions and fees | $ | 469,069 | $ | 547,445 | $ | (78,376 | ) | (14 | )% | |||||||
Losses and loss adjustment expenses | $ | 5,877,385 | $ | 5,154,443 | $ | 722,942 | 14 | % | ||||||||
Policy acquisition costs | $ | 1,144,425 | $ | 1,086,713 | $ | 57,712 | 5 | % | ||||||||
The increase in direct written premium during the three months ended March 31, 2020, was due primarily to growth in the Company's Transportation vertical, transacted by wholly owned subsidiaries Crusader Insurance Company ("Crusader") and Unifax Insurance Systems, Inc. ("Unifax"). 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 declines in the other underwriting verticals.
The decrease in net investment income during the three months ended March 31, 2020, as compared with the three months ended March 31, 2019, was due primarily to a decrease in the average invested assets.
The decrease in gross commissions and fees during the three months ended March 31, 2020, as compared with the three months ended March 31, 2019, was due primarily to decreases in property and casualty insurance policy fee income and health insurance program commission income.
The increase in losses and loss adjustment expenses during the three months ended March 31, 2020, as compared with the three months ended March 31, 2019, was due primarily to higher claims costs related to underwriting activities in the Transportation vertical.
The increase in policy acquisition costs during the three months ended March 31, 2020, as compared with the three months ended March 31, 2019, was due primarily to the increase in net earned premium.
Management Commentary
"Directly or indirectly, COVID-19 impacted virtually all companies, including Unico. While the long-term effect of the COVID-19 situation on Unico remains unknown, we retooled operations and we continued our business without interruption while protecting the health of our employees," said Cary L. Cheldin, Unico's President and Chief Executive Officer.
"Unfortunately, our first quarter's financial results were disappointing, another net loss. The habitability claims driven by 'social inflation' in our Apartment & Commercial Buildings vertical, the reserves strengthening in our Transportation vertical, along with the significant financial markets downturn, contributed to the erosion of stockholders' value during the quarter."
"Nonetheless, we remain optimistic about our ability to achieve sustainable profits by continuing to adopt innovative change. For example, our Unifax Insurance Systems agency business is now offering a wider-range of products through a non-admitted, non-affiliated, "A rated" insurer, and our U.S. Risk Managers business is now offering claims adjustment services to non-affiliated companies. We are also optimistic about and thankful for the contributions of our Board of Directors, a highly skilled, diverse team of insurance professionals and business leaders. Despite the challenges presented by COVID-19 and by social inflation, I believe that our company has a great future."
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 direct written premium (before premium ceded to reinsurers) to net earned premium (after premium ceded to reinsurers):
Three Months Ended March 31 | ||||||||
| 2020 | 2019 | |||||||
Direct written premium | $ | 9,206,886 | $ | 8,529,181 | ||||
Less: written premium ceded to reinsurers | (1,979,127 | ) | (1,683,690 | ) | ||||
Net written premium | 7,227,759 | 6,845,491 | ||||||
Change in direct unearned premium | (297,061 | ) | (561,777 | ) | ||||
Change in ceded unearned premium | (19,564 | ) | (19,564 | ) | ||||
Net earned premium | $ | 6,911,134 | $ | 6,264,150 | ||||
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 Crusader Insurance Company subsidiary. For more information concerning Crusader Insurance Company, 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, the ongoing impact of the COVID-19 outbreak; 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; 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 | ||||||||||
| 2020 | 2019 | ||||||||||
| (Unaudited) | |||||||||||
ASSETS | |||||||||||
Investments | |||||||||||
Available-for-sale: | |||||||||||
Fixed maturities, at fair value (amortized cost: March 31, | |||||||||||
2020 $81,814; December 31, 2019 $82,002) | $ | 82,932 | $ | 83,500 | |||||||
Held-to-maturity: | |||||||||||
Fixed maturities, at amortized cost (fair value: March 31, | |||||||||||
2020 $798; December 31, 2019 $798) | 798 | 798 | |||||||||
Equity securities, at fair value (cost: $502 at March 31, 2020, | |||||||||||
and $0 at December 31, 2019) | 458 | - | |||||||||
Short-term investments, at fair value | 2,198 | 2,197 | |||||||||
Total Investments | 86,386 | 86,495 | |||||||||
Cash and cash equivalents | 5,276 | 5,782 | |||||||||
Accrued investment income | 503 | 397 | |||||||||
Receivables, net | 3,987 | 4,019 | |||||||||
Reinsurance recoverable: | |||||||||||
Paid losses and loss adjustment expenses | 365 | 686 | |||||||||
Unpaid losses and loss adjustment expenses | 15,400 | 14,726 | |||||||||
Deferred policy acquisition costs | 3,688 | 3,620 | |||||||||
Property and equipment, net | 10,223 | 10,227 | |||||||||
Deferred income taxes | 4,107 | 3,925 | |||||||||
Other assets | 469 | 430 | |||||||||
Total Assets | $ | 130,404 | $ | 130,307 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
LIABILITIES | |||||||||||
Unpaid losses and loss adjustment expenses | $ | 56,140 | $ | 55,067 | |||||||
Unearned premiums | 18,107 | 17,810 | |||||||||
Advance premium and premium deposits | 345 | 219 | |||||||||
Accrued expenses and other liabilities | 2,082 | 2,130 | |||||||||
Total Liabilities | 76,674 | 75,226 | |||||||||
Commitments and contingencies | |||||||||||
STOCKHOLDERS' EQUITY | |||||||||||
Common stock, no par - authorized 10,000,000 shares; 5,305,742 | |||||||||||
and 5,306,720 shares issued and outstanding at March 31, 2020, and | |||||||||||
December 31, 2019, respectively | 3,772 | 3,773 | |||||||||
Accumulated other comprehensive income | 883 | 1,183 | |||||||||
Retained earnings | 49,075 | 50,125 | |||||||||
Total Stockholders' Equity | 53,730 | 55,081 | |||||||||
Total Liabilities and Stockholders' Equity | $ | 130,404 | $ | 130,307 | |||||||
UNICO AMERICAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in thousands, except per share)
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2020 | 2019 | |||||||
REVENUES | ||||||||
Insurance company operation: | ||||||||
Net earned premium | $ | 6,911 | $ | 6,264 | ||||
Investment income | 520 | 533 | ||||||
Net realized investment gains (losses) | 1 | (8 | ) | |||||
Net unrealized investment losses on equity securities | (45) | - | ||||||
Other income (loss) | 82 | (261 | ) | |||||
Total Insurance Company Operation | 7,469 | 6,528 | ||||||
Other insurance operations: | ||||||||
Gross commissions and fees | 469 | 547 | ||||||
Finance charges and fees earned | 67 | 49 | ||||||
Other income | - | 11 | ||||||
Total Revenues | 8,005 | 7,135 | ||||||
EXPENSES | ||||||||
Losses and loss adjustment expenses | 5,877 | 5,154 | ||||||
Policy acquisition costs | 1,144 | 1,087 | ||||||
Salaries and employee benefits | 1,123 | 1,028 | ||||||
Commissions to agents/brokers | 26 | 50 | ||||||
Other operating expenses | 981 | 628 | ||||||
Total Expenses | 9,151 | 7,947 | ||||||
Loss before taxes | (1,146 | ) | (812 | ) | ||||
Income tax benefit | 102 | 141 | ||||||
Net Loss | $ | (1,044 | ) | $ | (671 | ) | ||
PER SHARE DATA: | ||||||||
Basic | ||||||||
Loss per share | $ | (0.20 | ) | $ | (0.13 | ) | ||
Weighted average shares | 5,306,720 | 5,307,103 | ||||||
Diluted | ||||||||
Loss per share | $ | (0.20 | ) | $ | (0.13 | ) | ||
Weighted average shares | 5,306,720 | 5,307,103 | ||||||
UNICO AMERICAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in thousands)
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net Loss | $ | (1,044 | ) | $ | (671 | ) | ||
Adjustments to reconcile net loss to net cash from operations: | ||||||||
Depreciation and amortization | 189 | 135 | ||||||
Bond amortization, net | (7 | ) | 7 | |||||
Bad debt expense | - | 3 | ||||||
Net realized investment gains (losses) | (1) | 8 | ||||||
Net unrealized investment losses on equity securities | 45 | - | ||||||
Changes in assets and liabilities: | ||||||||
Net receivables and accrued investment income | (74 | ) | (457 | ) | ||||
Reinsurance recoverable | (353 | ) | (3,135 | ) | ||||
Deferred policy acquisitions costs | (68 | ) | (81 | ) | ||||
Other assets | (39 | ) | 349 | |||||
Unpaid losses and loss adjustment expenses | 1,073 | (324 | ) | |||||
Unearned premium | 297 | 561 | ||||||
Advance premium and premium deposits | 126 | 109 | ||||||
Accrued expenses and other liabilities | (48 | ) | (78 | ) | ||||
Deferred income taxes | (103 | ) | (149 | ) | ||||
Net Cash Used by Operating Activities | (7 | ) | (3,723 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of fixed maturity investments | (1,736 | ) | (3,574 | ) | ||||
Purchase of equity securities | (503 | ) | - | |||||
Proceeds from maturity of fixed maturity investments | 1,328 | 1,780 | ||||||
Proceeds from sale or call of fixed maturity investments | 604 | 483 | ||||||
Net decrease (increase) in short-term investments | (1 | ) | 3,994 | |||||
Additions to property and equipment | (185 | ) | (232 | ) | ||||
Net Cash Provided (Used) by Investing Activities | (493 | ) | 2,451 | |||||
Cash flows from financing activities: | ||||||||
Repurchase of common stock | (6 | ) | - | |||||
Net Cash Used by Financing Activities | (6 | ) | - | |||||
Net decrease in cash and cash equivalents | (506 | ) | (1,272 | ) | ||||
Cash and cash equivalents at beginning of period | 5,782 | 4,918 | ||||||
Cash and Cash Equivalents at End of Period | $ | 5,276 | $ | 3,646 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid during the period for: | ||||||||
Interest | - | - | ||||||
Income taxes | $ | 9 | $ | 9 | ||||
CONTACT:
Michael Budnitsky
Chief Financial Officer
818-591-9800
SOURCE: Unico American Corporation
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https://www.accesswire.com/589908/Unico-American-Corporation-Reports-First-Quarter-2020-Financial-Results
