UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
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Item 2.05. Cost Associated with Exit or Disposal Activities
In connection with its previously announced review of strategic alternatives, on September 24, 2021, the Board of Directors of Unico American Corporation (the "Company"), approved and ratified a resolution passed by the Board of Directors of Crusader Insurance Company ("Crusader"), a wholly-owned subsidiary of the Company, to place Crusader into runoff. Effective immediately, Crusader will cease writing any new insurance policies and will issue notices of non-renewal for its existing in-force policies to terminate such policies at the expiration of the current policy periods. Such notices of non-renewal will be sent to policyholders in the time frame required by state insurance laws and regulations. Crusader will continue to provide only those services to existing insurance policyholders and claimants during the run-off. Actions to wind down operations that support the writing of new insurance policies and the issuance of renewal insurance policies will begin immediately and the servicing operations will be adjusted over time to support business requirements including the retention of the necessary staff.
The Board of Directors of the Company made this decision in light of the historic and more recent operating results of the Company and Crusader, its review of strategic alternatives for the Company and Crusader, the financial outlook of the Company and Crusader, and the difficulties faced by Crusader in profitably underwriting new insurance policies.
The Company expects to incur material costs in connection with the decision to place Crusader into runoff, including costs associated with workforce reductions. At this time the Company is unable to make a good faith determination of an estimate or range of estimates for charges that it will incur in connection with this action, or the amount or range of such charges that will result in future cash expenditures, required by paragraphs (b), (c) and (d) of Item 2.05 of Form 8-K. The Company will file an amendment to this report after it makes a determination of such estimate or range of estimates, if any.
Item 2.06. Material Impairments
In conjunction with the Crusader run off, the Company may incur a potential impairment of assets under generally accepted accounting principles. At this time the Company is unable to make a good faith determination of an estimate or range of estimates for the impairment. The Company will file an amendment to this report after it makes a determination of such estimate or range of estimates, if any.
Item 8.01. Other Events.
On September 24, 2021, AM Best Company (“AM Best”) downgraded the Financial Strength Rating to C++ (Marginal) from B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “b” (Marginal) from “bb+” (Fair) of Crusader. AM Best also has downgraded the Long-Term ICR to “ccc-” (Weak) from “b” (Marginal) of the Company. In addition, AM Best has maintained the “under review with negative implications” status for these Credit Ratings (the “Ratings”). Also on September 24, 2021, AM Best withdrew these ratings at the request of Crusader to no longer participate in AM Best’s interactive rating process.
The Ratings reflect Crusader’s balance sheet strength, which AM Best assesses as weak, as well as its weak operating performance, limited business profile and marginal enterprise risk management. The Rating downgrades follow Crusader’s announcement that it has entered into an Administrative Supervision Agreement with the California Department of Insurance (the “CDI”).
AM Best stated that, while Crusader maintains sufficient liquidity, and its risk-adjusted capital levels remain at the strongest level, as measured by AM Best’s Capital Adequacy Ratio, the downgrades reflect the lowered assessment of the balance sheet strength given the enterprise’s diminished financial flexibility and the constraints imposed on Crusader by the CDI.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
UNICO AMERICAN CORPORATION (Registrant) | |||
| Date: September 30, 2021 | By: | /s/ Michael Budnitsky | |
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| Name: Michael Budnitsky | |
Title: Chief Executive Officer, President, Chief Operations Officer, and Secretary | |||
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