http://www.businesswire.com/news/home/20091109006761/en
WOODLAND HILLS, Calif.--(Business Wire)--
Unico American Corporation (NASDAQ: UNAM) ("Unico," the "Company"), an insurance
holding company that, through its subsidiaries, including Crusader Insurance
Company, offers a variety of property and casualty insurance products and
services, today announced its financial results for the third quarter ended
September 30, 2009. Revenues were $10.3 million and net income was $0.6 million
($0.11 diluted income per share) compared with revenues of $11.5 million and net
income of $1.4 million ($0.26 diluted income per share) for the quarter ended
September 30, 2008. For the nine months ended September 30, 2009, revenues were
$31.5 million and net income was $2.3 million ($0.42 diluted income per share)
compared with revenue of $35.6 million and net income of $3.2 million ($0.56
diluted income per share) for the nine months ended September 30, 2008.
Third Quarter Highlights
* Product Development Activity:
Through the continuation of our product development and enhancement activity, we received regulatory approval for and we implemented enhancements to our Food Establishment Program targeted at the restaurant industry. The enhancements provide options for an array of expanded property coverages, packaged at a very competitive price. In addition to those improvements, we broadened our offering and marketing of our Convenience Stores Program, to a wider segment of both the grocery and retail industries. These
program changes are structured to make our products increasingly desirable and competitive while preserving a reasonable profit margin.
* Sales Force Activity
One new agent was appointed and one was terminated during the quarter leaving the total number of agents unchanged from the prior quarter. The reduction in appointment activity was caused by our adoption of a more stringent screening process during the third quarter. Nonetheless, we expect to appoint several new agents during the fourth quarter. Our short-term goal for a total number of appointed agents remains at eighteen and that will remain so until such time as we have more fully implemented new
internet agency portals.
Direct marketing to consumers continued but at a stepped-up pace throughout the third quarter. This included the Company`s sponsorship of numerous direct mailers, trade shows, and other retail agency activity.
Market Conditions and Outlook
Despite our stepped-up efforts to deliver more competitive products and
services, competition continues to capture market share by lowering their rates
even further. In many of those situations, we believe that our competition is
underwriting at inadequate rates and that it would be inappropriate for us to
follow their lead. Hence, our sales continue to slip in most product lines.
Third Quarter 2009 Financial Results
In the third quarter ended September 30, 2009, revenues were $10.3 million and
net income was $0.6 million ($0.11 diluted income per share) compared with
revenues of $11.5 million and net income of $1.4 million ($0.26 diluted income
per share) for the quarter ended September 30, 2008. The decrease in revenues
was primarily the result of lower investment income and reduction in premiums
earned.
Net premium earned was $7.8 million or 75% of total revenues in the quarter
ended September 30, 2009, compared to net premium earned of $8.4 million or 73%
of total revenues in the quarter ended September 30, 2008. The decline in net
earned premium was primarily a result of a decline in sales. The decline in
sales was primarily due to increasingly-intense price-based competition.
Net investment income for the quarter ended September 30, 2009, was $1.0
million, compared to $1.4 million in the quarter ended September 30, 2008.
Annualized yield on average invested assets was 2.9% for the quarter ended
September 30, 2009, compared to 3.9% in the quarter ended September 30, 2008.
Total insurance company revenues in the quarter ended September 30, 2009, were
$8.9 million or 87% of total revenues, compared to total insurance company
revenues of $10.0 million or 87% of revenues in the quarter ended September 30,
2008.
Gross commissions and fees were $1.3 million for the quarter ended September 30,
2009, compared to $1.4 million for the quarter ended September 30, 2008.
Losses and loss adjustment expenses were $4.9 million or 64% of net premium
earned in the quarter ended September 30, 2009, compared to $4.8 million or 57%
of net premium earned in the quarter ended September 30, 2008. The increase in
losses and loss adjustment expenses for the three months ended September 30,
2009, as compared to the prior year period is primarily due to an increase in
current accident year losses incurred to $5.9 million in the quarter ended
September 30, 2009, from $5.8 million in the quarter ended September 30, 2008
and a decrease in favorable development of prior accident years` losses and loss
adjustment expenses to $0.9 million in the quarter ended September 30, 2009,
from $1.0 million in the quarter ended September 30, 2008.
Policy acquisition costs were $1.8 million in the quarter ended September 30,
2009, compared to $2.1 million in the quarter ended September 30, 2008.
Commissions to agents and brokers were $0.3 million for each of the quarters
ended September 30, 2009 and 2008.
Other operating expenses increased $0.4 million to $1.1 million for the three
months ended September 30, 2009, compared to $0.7 for the three months ended
September 30, 2008. The increase in other operating expenses is primarily due to
an increase in the Company`s reserve for bad debts, legal fees and the fees
charged by the California Department of Insurance for performing its required
tri-annual examination of the Company`s insurance subsidiary. The reserve for
bad debt increased to $0.5 million representing 35% of the $1.4 million due the
Company`s general agency subsidiary from a recently appointed agent of the
Company. In May 2009, the Company terminated that agent`s agency agreement and
assumed ownership and control of that agent`s policy expirations written with
the Company. The Company commenced legal proceedings against the agent and the
agent`s guarantors, for recovery of the balance due and any related recovery
costs incurred. The Company`s bad debt reserve is subject to change as more
information becomes available.
Total expenses for the quarter ended September 30, 2009, were $9.4 million
compared to $9.3 million for the quarter ended September 30, 2008.
Nine months Ended September 2009, Financial Results
For the nine months ended September 30, 2009, revenues were $31.5 million and
net income was $2.3 million ($0.42 diluted income per share) compared with
revenues of $35.6 million and net income of $3.2 million ($0.56 diluted income
per share) for the nine months ended September 30, 2008.
Net premium earned was $23.2 million or 74% of revenues for the nine months
ended September 30, 2009, compared to net premium earned of $25.9 million or 73%
of revenues for the nine months ended September 30, 2008.
Net investment income before net realized investment gains for the nine months
ended September 30, 2009, was $3.4 million, compared to $4.5 million for the
nine months ended September 30, 2008. Annualized yield on average invested
assets was 3.2% for the nine months ended September 30, 2009, compared to 4.1%
for the nine months ended September 30, 2008.
Total insurance company revenues were $27.2 million or 86% of total revenues in
the nine months ended September 30, 2009, compared to total insurance company
revenues of $30.9 million or 87% of revenues for the nine months ended September
30, 2008.
Gross commissions and fees were $4.1 million in the nine months ended September
30, 2009, compared to $4.3 million for the nine months ended September 30, 2008.
Loss and loss adjustment expenses were $14.4 million or 62% of net premium
earned for the nine months ended September 30, 2009, compared to $17.0 million
or 66% of net premiums earned for the nine months ended September 30, 2008. The
decrease in loss and loss adjustment expenses was due to a lower level of
property claims in the current accident year and an increase in favorable
development to $2.7 million in the nine months ended September 30, 2009, from
$1.7 million for the nine months ended September 30, 2008.
Policy acquisition costs were $5.8 million in the nine months ended September
30, 2009, compared to $6.2 million for the nine months ended September 30, 2008.
Commissions to agents and brokers were $0.9 million in the nine months ended
September 30, 2009, compared to $1.0 million for the nine months ended September
30, 2008.
Other operating expenses increased $0.8 million to $3.1 million for the nine
months September 30, 2009 compared to $2.3 million for the nine months ended
September 30, 2008. The increase in other operating expenses is primarily due to
an increase in the Company`s reserve for bad debts (described above under "Third
Quarter 2009 Financial Results") and fees charged by the California Department
of Insurance for performing its required tri-annual examination of the Company`s
insurance subsidiary.
Total expenses for the nine months ended September 30, 2009, were $28.1 million
compared to $30.8 million for the nine months ended September 30, 2008.
Financial Condition
As of September 30, 2009, the Company had cash and investments (at amortized
cost) of $141.0 million. $115.3 million, or 82% of these investments were fixed
maturity investments, and 81% of those fixed maturity investments were U.S.
treasury securities.
Stockholders` equity was $75.3 million as of September 30, 2009, or $13.87 per
common share including unrealized after-tax investment gains of $3.2 million and
after a cash dividend to shareholders of $0.18 per share paid on May 1, 2009,
compared to stockholders` equity of $77.0 million or $13.81 per common share
including unrealized after-tax investment gains of $4.9 million as of December
31, 2008.
During the quarter ended September 30, 2009, the Company repurchased 135,109
shares of its common stock at a cost of $1,227,288. As of September 30, 2009,
the Company had remaining authority to repurchase up to an aggregate of 370,495
shares of common stock under its share repurchase programs. The programs have no
expiration date and may be terminated by the Board of Directors at any time.
"Our diligent efforts continued to pay off during the third quarter," said Mr.
Cary Cheldin, President of Unico. "The profits we earned, however, continue to
reflect an increasingly-competitive marketplace in comparison to the profits we
earned during prior quarters. While we do not see any signs of the marketplace
significantly changing or hardening at this time, we remain optimistic about our
ability to grow our business and profits on a long-term basis. For example, we
remain on track with respect to our development of a new IT system, a new agency
distribution system, new internet agency portals, many new promotional
activities and many new products. All things considered, I am extremely proud of
our accomplishments and optimistic about our future."
About Unico American Corporation
Headquartered in Woodland Hills, 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 Crusader Insurance Company since 1985. For
more information, please visit the Company`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," "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, and the Company`s ability to introduce
new profitable products.
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
September 30 December 31
2009 2008
(Unaudited)
ASSETS
Investments
Available for sale:
Fixed maturities, at fair value (amortized cost: September 30,
2009 $115,280; December 31, 2008 $135,540) $ 120,132 $ 142,972
Short-term investments, at cost 25,671 9,502
Total Investments 145,803 152,474
Cash 68 28
Accrued investment income 716 1,301
Premiums and notes receivable, net 4,890 4,681
Reinsurance recoverable:
Paid losses and loss adjustment expenses 69 114
Unpaid losses and loss adjustment expenses 17,556 19,816
Deferred policy acquisition costs 5,112 5,220
Property and equipment (net of accumulated depreciation) 269 360
Deferred income taxes 390 -
Other assets 835 609
Total Assets $ 175,708 $ 184,603
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses $ 73,487 $ 78,655
Unearned premiums 19,652 19,962
Advance premium and premium deposits 1,262 1,193
Income taxes payable - 559
Deferred income taxes - 795
Accrued expenses and other liabilities 6,025 6,481
Total Liabilities $ 100,426 $ 107,645
STOCKHOLDERS' EQUITY
Common stock, no par - authorized 10,000,000 shares; issued and
outstanding shares 5,429,343 at September 30, 2009, and 5,574,315 at
December 31, 2008 $ 3,498 $ 3,569
Accumulated other comprehensive income 3,203 4,905
Retained earnings 68,581 68,484
Total Stockholders` Equity $ 75,282 $ 76,958
Total Liabilities and Stockholders' Equity $ 175,708 $ 184,603
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
2009 2008 2009 2008
REVENUES
Insurance Company Revenues
Premium earned $ 10,089 $ 10,567 $ 30,185 $ 32,519
Premium ceded 2,337 2,200 6,950 6,646
Net premium earned 7,752 8,367 23,235 25,873
Net investment income 1,012 1,415 3,379 4,493
Net realized investment gains - - - 6
Other income 175 209 575 532
Total Insurance Company Revenues 8,939 9,991 27,189 30,904
Other Revenues from Insurance Operations
Gross commissions and fees 1,278 1,413 4,072 4,300
Investment income - 11 1 51
Finance charges and fees 86 110 279 354
Other income 1 4 5 11
Total Revenues 10,304 11,529 31,546 35,620
EXPENSES
Losses and loss adjustment expenses 4,931 4,750 14,353 17,027
Policy acquisition costs 1,846 2,056 5,771 6,214
Salaries and employee benefits 1,305 1,494 4,016 4,329
Commissions to agents/brokers 252 320 860 960
Other operating expenses 1,071 717 3,103 2,285
Total Expenses 9,405 9,337 28,103 30,815
Income Before Taxes 899 2,192 3,443 4,805
Income tax provision 281 747 1,112 1,619
Net Income $ 618 $ 1,445 $ 2,331 $ 3,186
PER SHARE DATA:
Basic
Earnings Per Share $ 0.11 $ 0.26 $ 0.42 $ 0.57
Weighted Average Shares 5,500 5,624 5,545 5,625
Diluted
Earnings Per Share $ 0.11 $ 0.26 $ 0.42 $ 0.56
Weighted Average Shares 5,542 5,665 5,585 5,668
UNICO AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in thousands)
For the Nine months Ended
September 30
2009 2008
Cash Flows from Operating Activities:
Net Income $ 2,331 $ 3,186
Adjustments to reconcile net income to net cash from operations
Depreciation 147 159
Bond amortization, net 212 194
Net realized investment gains - (6 )
Changes in assets and liabilities
Premium, notes and investment income receivable 376 289
Reinsurance recoverable 2,305 6,824
Deferred policy acquisitions costs 107 401
Other assets 106 154
Reserve for unpaid losses and loss adjustment expenses (5,167 ) (12,206 )
Unearned premium reserve (310 ) (2,247 )
Funds held as security and advanced premiums 70 (560 )
Accrued expenses and other liabilities (457 ) 1,951
Income taxes current/deferred (1,198 ) 667
Net Cash (Used in) Operations (1,478 ) (1,194 )
Investing Activities
Purchase of fixed maturity investments (22,652 ) (61,561 )
Proceeds from maturity of fixed maturity investments 42,700 60,010
Proceeds from sale of fixed maturity investments - 505
Net (increase) decrease in short-term investments (16,169 ) 2,259
Additions to property and equipment (56 ) (5 )
Net Cash Provided by Investing Activities 3,823 1,208
Financing Activities
Dividends paid to shareholders (1,002 ) -
Repurchase of common stock (1,303 ) (98 )
Net Cash (Used in) Financing Activities (2,305 ) (98 )
Net increase (decrease) in cash 40 (84 )
Cash at beginning of period 28 109
Cash at End of Period $ 68 $ 25
Supplemental Cash Flow Information
Cash paid during the period for:
Interest - -
Income taxes $ 2,309 $ 950
CCG Investor Relations
Mark Collinson, 310-231-8600, ext. 117
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