Executive Summary

Q2 2021 widened to a net loss of $1.41M and diluted EPS of $-0.27 versus $-0.08 a year ago, as the loss ratio rose to 87% on higher severity/frequency in Transportation liability; total revenues were $8.13M, up 2% year over year .
Sequentially, results deteriorated from Q1’s net income of $2.27M and $0.43 diluted EPS, which benefited from a $3.69M gain on sale of the headquarters; Q2 lacked that non-recurring tailwind and saw higher losses and operating costs .
Liquidity and regulatory pressure escalated post-quarter: AM Best downgraded Crusader to B (under review negative), and the California DOI placed Crusader under administrative supervision; Unico disclosed substantial doubt about going concern due to expected absence of dividends from Crusader and limited cash at the parent .
Stock reaction catalysts: regulatory supervision, ratings downgrade, and a announced review of strategic alternatives; execution on loss remediation in Transportation and capital solutions will drive narrative and valuation .

What Went Well and What Went Wrong

What Went Well
- Net investment income rose 8% YoY to $0.53M on a larger invested asset base; average annualized portfolio yield remained ~2.3% .
- Policy acquisition costs fell YoY (Q2: $1.11M, down 8%) as higher ceding commissions offset expenses; GAAP acquisition cost ratio improved to 16% from 18% .
- Vertical mix growth: gross written premium increased 32% YoY to $11.57M, driven primarily by Transportation, offsetting Buildings pressure .
What Went Wrong
- Loss ratio spiked to 87% (vs 72% YoY) and combined ratio to 120% (vs 99%), driven by several fatal accidents and adverse prior-year development tied to Buildings and Transportation .
- Other operating expenses rose 15% YoY (Q2: $1.15M), reflecting new rent expense (post-building sale), reinsurance fees, and CA DOI examination costs .
- Liquidity and capital: Unico flagged substantial doubt about going concern given expected lack of dividends from Crusader; regulatory constraints intensified with CDI administrative supervision and AM Best downgrades .

Financial Results

Metric	Q2 2020	Q1 2021	Q2 2021
Total Revenues ($USD)	$7,976,227	$11,471,654	$8,132,605
Net Income ($USD)	$(434,814)	$2,267,703	$(1,406,811)
Diluted EPS ($USD)	$(0.08)	$0.43	$(0.27)
Loss Ratio (%)	72%	85%	87%
Expense Ratio (%)	27%	31%	33%
Combined Ratio (%)	99%	116%	120%

Segment/operations revenue breakdown:

Revenue Line	Q2 2020	Q1 2021	Q2 2021
Insurance Company Operation ($USD)	$7,450,651	$10,992,655	$7,672,117
Other Insurance Operations ($USD)	$525,576	$479, - commission and fees $433,461 + finance charges $44,998 + other $540 = $479, - see total below	$460,483 (commissions/fees $415,711 + finance charges $44,772)
Total Revenues ($USD)	$7,976,227	$11,471,654	$8,132,605

Key operating KPIs:

KPI	Q2 2020	Q1 2021	Q2 2021
Gross Written Premium ($USD)	$8,781,127	$10,482,545	$11,567,118
Net Earned Premium ($USD)	$6,770,111	$6,603,760	$6,967,748
Net Investment Income ($USD)	$489,498	$514,723	$528,879
Gross Commissions & Fees ($USD)	$457,886	$433,461	$415,711
Policy Acquisition Costs ($USD)	$1,202,026	$1,021,965	$1,105,545
Salaries & Employee Benefits ($USD)	$1,251,922	$1,128,090	$1,205,630
Other Operating Expenses ($USD)	$993,935	$1,173,479	$1,147,124

Notes: Q1 2021 included a one-time $3,693,858 gain on headquarters sale; Q2 2021 had none .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Financial guidance	FY/Q2 2021	None issued	None issued in press release or filings	Maintained (no formal guidance)

Operational updates impacting outlook:

AAC premium finance: Company decided to discontinue new loan issuance effective August 6, 2021 (servicing continues) .
Regulatory supervision: CDI administrative supervision imposes approval thresholds on payments, reinsurance, staffing, and dividends; constrains flexibility .
Ratings: AM Best downgraded Crusader and Unico; under review with negative implications .

Earnings Call Themes & Trends

No earnings call transcript was found for Q2 2021; the company appears not to have held an earnings call. This section synthesizes themes from MD&A, 8-Ks, and press releases.

Topic	Previous Mentions (Q2 2020)	Previous Mentions (Q1 2021)	Current Period (Q2 2021)	Trend
Regulatory/legal (RBC/DOI)	Elevated combined ratio in 2020; RBC plan referenced for Crusader	RBC Plan submitted to CA DOI; extraordinary dividend limits noted	CDI administrative supervision agreement executed; stricter oversight; revised RBC plan not accepted	Deteriorating oversight intensity
Ratings	Not highlighted	Outlook revised to negative; B++ affirmed Feb 2021	AM Best downgrades to B; under review negative	Deteriorated
Transportation vertical performance	Not detailed	Growth in GWP; favorable prior-year development in some lines	GWP growth but higher liability severity/frequency (fatal accidents) drove loss ratio up	Mixed (top-line up, losses up)
Buildings program/policy form constraints	Not detailed	CA DOI denied rate/form changes; shifted Buildings to USIC paper	Continued pressure; adverse development tied to Buildings	Persistent headwinds
COVID-19 litigation	Business interruption claims and lawsuits; denials explained	Class action filed (Anchors & Whales v. Crusader)	Litigation proceeding; defense continues	Ongoing legal risk
Capital/liquidity at parent	Not highlighted	Parent relied on dividends; noted constraints	Substantial doubt about going concern; lack of Crusader dividends expected	Deteriorated
Strategic alternatives	Not applicable	Not applicable	Board authorized review; TigerRisk engaged	New potential catalyst

Management Commentary

“Our team remains focused on improving underwriting performance and managing expenses… we are also faced with constraints on liquidity, and are actively considering multiple operational and strategic options to address these constraints.” — Michael Budnitsky, Interim President & CEO .
MD&A highlights social inflation, adverse severity in Transportation, and regulatory constraints on rate and form changes as key drivers of underwriting volatility .

Q&A Highlights

No Q2 2021 earnings call transcript was available; accordingly, no Q&A highlights or guidance clarifications were disclosed in a call [ListDocuments (no transcript returned)].

Estimates Context

Wall Street consensus (S&P Global) for Q2 2021 EPS and revenue was unavailable due to missing SPGI mapping for UNAM. As a result, comparison to consensus cannot be provided at this time [SpgiEstimatesError].

Key Takeaways for Investors

Underwriting pressure intensified: loss ratio rose to 87% and combined ratio to 120% on Transportation severity/frequency; near-term thesis hinges on claims management and rate/form remediation where permitted .
Sequential step-down from Q1’s one-time real estate gain underscores core underwriting weakness; watch for normalized earnings power absent non-recurring gains .
Regulatory and ratings actions are material: CDI supervision and AM Best downgrades constrain operations, reinsurance, and capital flexibility; increased oversight is a near-term overhang .
Liquidity risk at the parent is real: Unico disclosed substantial doubt about going concern given expected lack of dividends from Crusader; monitor capital raises, asset sales, or strategic transactions .
Strategic alternatives review introduces optionality; outcomes (sale, merger, reorg) could be catalysts, but execution risk is high under regulatory supervision .
Vertical mix: Transportation drives premium growth but loss severity; Buildings remains pressured by regulatory rate/form constraints—mix shift and underwriting discipline are critical .
Near-term trading implications: expect sensitivity to regulatory headlines, reserve development, and any capital actions; medium-term thesis requires evidence of sustainable loss ratio improvement and capital clarity .

UNICO AMERICAN CORP (UNAM)·Q2 2021 Earnings Summary