Unico American Corporation 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
provides insurance premium financing and membership association services through
its other subsidiaries. Unico American Corporation is referred to herein as
the "Company" or "Unico" and such references include both
the corporation and its subsidiaries, all of which are wholly owned unless otherwise
indicated. Unico was incorporated under the laws of Nevada in 1969.
The insurance company operation is conducted through Crusader. Crusader is
a multiple line property and casualty insurance company that began transacting
business on January 1, 1985. Since 2004, all Crusader business has been written
in the state of California until June 2014 when Crusader also began writing
business in the state of Arizona. Commercial multiple peril policies provide
a combination of property and liability coverages for businesses. Commercial
property coverage insures against loss or damage to buildings, inventory and
equipment from natural disasters, including hurricanes, windstorms, hail, water,
explosions, severe winter weather, and other events such as theft and vandalism,
fires, storms, and financial loss due to business interruption resulting from
covered property damage. However, Crusader does not write earthquake coverage.
Commercial liability coverage insures against third party liability from accidents
occurring on the insured’s premises or arising out of its operation. In
addition to commercial multiple peril policies, Crusader also writes separate
policies to insure commercial property and commercial liability risks on a mono-line
basis. Crusader is domiciled in California; and, Crusader is licensed as an
admitted insurance carrier in the states of Arizona, California, Nevada, Oregon,
and Washington.
Crusader sells its insurance policies through Unifax Insurance Systems, Inc.
(Unifax), Crusader’s sister corporation and exclusive general agent. All
policies are produced by a network of independent brokers and agents.
Crusader implemented product changes such as revised rates, eligibility guidelines,
rules and coverage forms. On October 9, 2015, the Company concluded that a charge
for impairment of the Company’s capitalized computer software costs, related
to a policy administration system contract entered into on November 1, 2012,
was required under U.S. generally accepted accounting principles (GAAP). The
decision to impair the asset was based on the Company’s beliefs that the
software had not achieved and would not be able to achieve the Company’s
expected implementation targets and that the Company was unable to renegotiate
the terms of its agreement with the software vendor. The Company believes that
it will need to make future cash expenditures to replace or upgrade its policy
administration system but it is unable to estimate the amount at this time.
While the Company’s policy administration system continues to support
the Company’s existing operations, the Company believes it would realize
more competitive parity with respect to product and service by switching or
upgrading to a more contemporary platform. The Company is currently evaluating
its alternatives. Crusader does not intend to substantially increase its number
of appointed retail agents until the Company replaces or upgrades its policy
administration system.
The property casualty insurance marketplace continues to be intensely competitive.
While Crusader attempts to meet such competition with competitive prices, its
emphasis is on service, promotion, and distribution. Crusader believes that
rate adequacy is more important than premium growth and that underwriting profit
(net earned premium less losses and loss adjustment expenses and policy acquisition
costs) is its primary goal. Nonetheless, Crusader believes that it can grow
its sales and profitability by continuing to focus upon three areas of its operations:
(1) product development, (2) improved service to retail brokers, (3) appointment
of captive and independent retail agents, and (4) geographical expansion..
Crusader maintains reserves for losses and loss adjustment expenses with respect
to both reported and unreported losses. When a claim for loss is reported to
Crusader, a reserve is established for the expected cost to settle the claim,
including estimates of any related legal expense and other costs associated
with resolving the claim. These reserves are called “case based”
reserves. In addition, Crusader also sets up reserves at the end of each reporting
period for losses that have occurred but have not yet been reported to Crusader.
These incurred but not reported losses are referred to as “IBNR”
reserves.
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