SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                 Quarterly Report Under Section 13 or 15 (d) of
                      the Securities Exchange Act of 1934

         For the quarterly period from January 1, 1998 to March 31, 1998

                           Commission File No. 0-3978

                           UNICO AMERICAN CORPORATION
             (Exact name of registrant as specified in its charter)

                Nevada                                95-2583928
             (State or other jurisdiction of       (I.R.S. Employee
              incorporation or organization)      Identification No.)

         23251 Mulholland Drive, Woodland Hills, California   91364         
           (Address of Principal Executive Offices)        (Zip Code)

                                 (818) 591-9800
                          Registrant's telephone number

           Securities registered pursuant to Section 12(b)of the Act:
                                      None
                              (Title of each class)

           Securities registered pursuant to section 12(g)of the Act:
                           Common Stock, No Par Value
                                (Title of Class)

                                    No Change
(Former name,former address and former fiscal year,if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  Registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No


                                    6,162,096
         Number of shares of common stock outstanding as of May 11, 1998

                                       1
<PAGE>




                         PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                   UNICO AMERICAN CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                           March 31              December 31
                                                                                             1998                    1997
                                     ASSETS
<S>                                                                                      <C>                    <C>    
Investments
   Available for sale:
      Fixed maturities, at market value (amortized cost:  March 31,
         1998  $91,766,736;  December 31, 1997  $86,106,571                              $ 93,529,795           $ 87,965,590
      Equity securities at market (cost: March 31, 1998
         $230,460;  December 31, 1997  $230,460)                                              203,550                223,100
   Short-term investments, at cost                                                          5,311,269              6,137,495
                                                                                           ----------             ----------
      Total Investments                                                                    99,044,614             94,326,185
Cash                                                                                           73,222                 55,768
Accrued investment income                                                                   1,765,027              1,807,364
Premiums and notes receivable, net                                                          7,229,579              7,404,606
Reinsurance recoverable:
   Paid losses and loss adjustment expenses                                                   139,887                 56,379
   Unpaid losses and loss adjustment expenses                                               1,385,722              1,413,603
Prepaid reinsurance premiums                                                                  254,408                945,563
Deferred policy acquisition costs                                                           5,358,076              4,886,684
Property and equipment (net of accumulated depreciation)                                      226,268                203,709
Deferred income taxes                                                                         767,468              1,005,865
Other assets                                                                                  500,003                836,658
                                                                                          -----------            -----------
     Total Assets                                                                        $116,744,274           $112,942,384
                                                                                          ===========            ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses                                                $42,724,137            $42,004,851
Unearned premiums                                                                          21,431,942             21,673,009
Advance premiums                                                                            1,366,937              1,368,114
Funds held as security for performance                                                        697,096                723,066
Accrued expenses and other liabilities                                                      2,752,194              2,095,567
Income taxes payable                                                                          606,556                 16,993
                                                                                           ----------             ----------
    Total Liabilities                                                                     $69,578,862            $67,881,600
                                                                                           ----------             ----------

STOCKHOLDERS'  EQUITY
Common stock,  no par - authorized  10,000,000  shares,  issued and  outstanding
   shares 6,158,861 at March 31, 1998
   and 6,153,706 at December 31, 1997                                                       2,855,213              2,838,058
Accumulated other comprehensive income:
   Net unrealized gains on investments classified as available for sale                     1,145,858              1,222,095
Retained earnings                                                                          43,164,341             41,000,631
                                                                                           ----------             ----------
  Total Stockholders' Equity                                                              $47,165,412            $45,060,784
                                                                                           ----------             ----------

  Total Liabilities and Stockholders' Equity                                             $116,744,274           $112,942,384
                                                                                          ===========            ===========

</TABLE>


            See notes to unaudited consolidated financial statements.


                                       2
<PAGE>


                   UNICO AMERICAN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                  Three Months Ended
                                                                                                       March 31
                                                                                              1998                  1997
                                                                                              ----                  ----
REVENUES
Insurance Company Revenues
<S>                                                                                      <C>                   <C>         
     Premium earned                                                                      $10,554,810           $ 10,097,163
     Premium ceded                                                                         1,171,028                955,623
                                                                                           ---------              ---------
          Net premium earned                                                               9,383,782              9,141,540
     Net investment income                                                                 1,309,785              1,154,516
     Net realized investment gains                                                                 -                    919
     Other income                                                                                958                    115
                                                                                          ----------             ----------
          Total Insurance Company Revenues                                                10,694,525             10,297,090

Other Revenues from Insurance Operations
     Gross commissions and fees                                                            1,469,245              1,418,736
     Investment income                                                                        49,093                 34,954
     Finance charges and late fees earned                                                    263,153                290,068
     Other income                                                                              1,528                  2,801
                                                                                          ----------             ----------
          Total Revenues                                                                  12,477,544             12,043,649
                                                                                          ----------             ----------

EXPENSES
Losses and loss adjustment expenses                                                        4,799,701              4,974,473
Policy acquisition costs                                                                   2,629,106              2,639,930
Salaries and employee benefits                                                             1,049,621                924,413
Commissions to agents/brokers                                                                244,927                274,976
Other operating expenses                                                                     628,726                733,627
                                                                                           ---------              ---------
     Total Expenses                                                                        9,352,081              9,547,419
                                                                                           ---------              ---------

     Income Before Taxes                                                                   3,125,463              2,496,230

Income Tax Provision                                                                         961,753                731,076
                                                                                           ---------              ---------

     Net Income                                                                          $ 2,163,710            $ 1,765,154
                                                                                           =========              =========



PER SHARE DATA:
Basic Shares Outstanding                                                                   6,155,280              6,089,663
Basic Earnings Per Share                                                                       $0.35                  $0.29
Diluted Shares Outstanding                                                                 6,424,671              6,330,790
Diluted Earnings Per Share                                                                     $0.34                  $0.28


</TABLE>




            See notes to unaudited consolidated financial statements


                                       3
<PAGE>

                   UNICO AMERICAN CORPORATION AND SUBSIDIARIES
                        STATEMENT OF COMPREHENSIVE INCOME
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                 Three Months Ended
                                                                                                     March 31
                                                                                             1998                   1997
                                                                                             ----                   ----


<S>                                                                                        <C>                   <C>        
Net income                                                                                 $2,163,710            $1,765,154
Other comprehensive income net of tax:
   Unrealized (losses) on securities classified as available-for-sale
       arising during the period                                                              (76,237)             (885,060)
   Less: reclassification adjustment for gains included in net income                               -                  (607)
                                                                                            ---------               -------
      Comprehensive Income                                                                 $2,087,473              $879,487
                                                                                            =========               =======

</TABLE>








            See notes to unaudited consolidated financial statements


                                       4
<PAGE>

                   UNICO AMERICAN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                      FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>

                                                                                          1998                  1997
                                                                                          ----                  ----
Cash flows from operating activities:
<S>                                                                                    <C>                   <C>       
   Net Income                                                                          $2,163,710            $1,765,154
   Adjustments to reconcile net income to net cash from operations
      Depreciation and amortization                                                        25,604                20,308
      Bond amortization, net                                                              167,899               111,766
      Net realized (gain) on sale of securities                                                 -                  (919)
   Changes in assets and liabilities
      Premium, notes and investment income receivable                                     217,364             1,239,452
      Reinsurance recoverable                                                             (55,627)              649,075
      Prepaid reinsurance premiums                                                        691,155               345,577
      Deferred policy acquisitions costs                                                 (471,392)             (140,108)
      Other assets                                                                        336,655                41,750
      Reserve for unpaid losses and loss adjustment expenses                              719,286                89,546
      Unearned premium reserve                                                           (241,067)             (415,235)
      Funds held as security and advanced premiums                                        (27,147)               63,897
      Accrued expenses and other liabilities                                              656,628               240,035
      Income taxes current/deferred                                                       867,233               623,080
                                                                                        ---------             ---------
          Net Cash Provided from Operations                                             5,050,301             4,633,378
                                                                                        ----------            ---------

Investing Activities
     Purchase of fixed maturity investments                                            (8,467,945)           (5,768,290)
     Proceeds from maturity of fixed maturity investments                               2,630,000             2,000,000
     Purchase of equity securities - cost                                                       -            (1,019,500)
     Proceeds from sale of equity securities                                                    -                20,959
     Net increase in short-term investments                                               836,106               828,935
     Additions to property and equipment                                                  (48,163)              (22,035)
                                                                                        ---------             ---------
          Net Cash (Used) by Investing Activities                                      (5,050,002)           (3,959,931)
                                                                                        ---------             ---------

Financing Activities
     Proceeds from issuance of common stock                                                17,155                   350
     Repayment of note payable - bank                                                           -              (250,000)
                                                                                           ------              ---------
          Net Cash Provided (Used) by Financing Activities                                 17,155              (249,650)
                                                                                           ------               -------

Net increase in cash                                                                       17,454               423,797
Cash at beginning of period                                                                55,768                82,637
                                                                                           ------               -------
          Cash at End of Period                                                           $73,222              $506,434
                                                                                           ======               =======

Supplemental cash flow information Cash paid during the period for:
          Interest                                                                           $121               $12,314
          Income taxes                                                                    $93,336                     -



</TABLE>


            See notes to unaudited consolidated financial statements


                                       5
<PAGE>

                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Nature of Business
Unico American Corporation ("Unico") is an insurance holding company.  Unico and
its  subsidiaries,  all of which are  wholly  owned  (the  "Company"),  provide,
primarily in California,  property,  casualty,  health and life  insurance,  and
related premium financing.

Principles of Consolidation
The  accompanying   unaudited  consolidated  financial  statements  include  the
accounts of Unico American  Corporation  and its  subsidiaries.  All significant
inter-company accounts and transactions have been eliminated in consolidation.

Basis of Presentations
The accompanying  unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial  information  and the  instructions  to Form  10-Q and  Article  10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes required by GAAP for complete financial statements.  In the opinion of
management,   all  adjustments  (consisting  of  normal  recurring  adjustments)
considered  necessary  for a fair  presentation  have been  included.  Operating
results  for the  three  months  ended  March  31,  1998,  are  not  necessarily
indicative of the results that may be expected for the year ending  December 31,
1998.  Quarterly  financial  statements  should be read in conjunction  with the
financial  statements  and related notes in the Company's  1997 Annual Report on
Form 10-K as filed with the Securities and Exchange Commission.

Use of Estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts and disclosure of certain assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the reporting  period.  While every effort is made to ensure the
integrity of such estimates, actual results could differ from those estimates.

Investments
All  of  the   Company's   fixed   maturity   investments   are   classified  as
available-for-sale  and are  stated  at market  value.  Although  classified  as
available-for-sale,  the Company's investment  guidelines place primary emphasis
on  buying  and  holding  high-quality   investments  to  maturity.   Short-term
investments are carried at cost, which approximates market value. Investments in
equity  securities are carried at market value.  The unrealized  gains or losses
from fixed maturities and equity securities are reported as a separate component
of stockholders'  equity,  net of deferred tax. When a decline in the value of a
fixed maturity or equity security is considered other than temporary,  a loss is
recognized in the  consolidated  statements of  operations.  Realized  gains and
losses are included in the  consolidated  statements of operations  based on the
specific identification method.

Property and Equipment
Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation  is  computed  using  accelerated  depreciation  methods  over  the
estimated useful lives of the related assets.

Income Taxes
The  provision  for federal  income  taxes is computed on the basis of income as
reported for financial reporting purposes. Deferred income taxes reflect the net
tax effects of temporary  differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes and are measured using the enacted tax rates and laws expected to apply
to taxable income in the years in which those temporary differences are expected
to be recovered or settled.  Income tax expense provisions  increase or decrease
in the same period in which a change in tax rates is enacted.

                                       6
<PAGE>


                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
--------------------------------------------------------------
Earnings Per Share
Basic earnings per share excludes the impact of common share  equivalents and is
based upon the weighted average common shares outstanding.  Diluted earnings per
share  utilizes the average  market  price per share when  applying the treasury
stock method in determining common share equivalents.  Outstanding stock options
are  treated as common  share  equivalents  for  purposes of  computing  diluted
earnings  per share and  represent  the  difference  between  basic and  diluted
weighted average shares outstanding.

Recently Issued Accounting Standards
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
130,  "Reporting  Comprehensive  Income,"  which  establishes  standards for the
reporting and displaying of comprehensive  income and its components.  All items
required to be recognized as components of comprehensive income must be reported
in a financial  statement  that is displayed  with the same  prominence as other
financial  statements.  SFAS No. 130 became  effective for financial  statements
with fiscal years beginning after December 15, 1997.

Statement of Financial Accounting  Standards (SFAS No. 131),  "Disclosures about
Segments of an Enterprise and Related  Information," was issued in June 1997 and
is effective for fiscal years beginning after December 15, 1997. SFAS No. 131 is
not requiring interim information in the first year of implementation.  SFAS No.
131  establishes   standards  for  disclosures  related  to  business  operating
segments.  The Company is currently  evaluating the impact that these statements
will have on the consolidated financial statements.


NOTE 2 - FUNDS HELD AS SECURITY
-------------------------------
Funds  held as  security  for  performance  represent  funds  received  from the
Company's  daily  automobile  rental  program which  guarantee  the  contractual
obligations of its customers.


NOTE 3 - RESTRICTED FUNDS
-------------------------
As required by law, the Company  segregates from its operating accounts premiums
collected  from insureds into separate trust  accounts.  As of a March 31, 1998,
these trust funds  represent  $2,478,898  of the Company's  cash and  short-term
investments.  In addition,  $2,725,000  of the Company's  investments  represent
statutory  deposits of Crusader  Insurance Company  ("Crusader"),  the Company's
property and casualty  insurance  subsidiary,  which are assigned to and held by
the California  State  Treasurer and the Insurance  Commissioner of the State of
Nevada.  These  deposits are required  for  Crusader to write  certain  lines of
business in California and for its admission in states other than California.


NOTE 4 - STATUTORY CAPITAL AND SURPLUS
--------------------------------------
As of March 31,  1998,  Crusader's  statutory  capital and  surplus  were deemed
sufficient to support its present insurance premium writings.


NOTE 5 - INCENTIVE STOCK OPTION PLAN
------------------------------------
The Company's 1985 stock option plan provided for the grant of "incentive  stock
options"  to  officers  and key  employees.  The plan  covers  an  aggregate  of
1,500,000  shares of the  Company's  common stock  (subject to adjustment in the
case of stock splits, reverse stock splits, stock dividends,  etc.). As of March
31, 1998,  368,693  options were  outstanding  of which  298,362 were  currently
exercisable. During the quarter ended March 31, 1998, options on 5,255 shares of
common stock were  exercised.  There are no  additional  options  available  for
future grant under the 1985 plan.


                                       7
<PAGE>


                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998


NOTE 6 - EARNINGS PER SHARE
---------------------------
The  following  table  represents  the  reconciliation  of  the  numerators  and
denominators of the Company's basic earnings per share and diluted  earnings per
share computations reported on the Consolidated Statements of Operations for the
three months ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>

                                                                                           Three Months Ended March 31
                                                                                            1998                1997
Basic Earnings Per Share

<S>                                                                                      <C>                 <C>       
Net income numerator                                                                     $2,163,710          $1,765,154
                                                                                          =========           =========

Weighted average shares outstanding denominator                                           6,155,280           6,089,663
                                                                                          =========           =========

     Basic Earnings Per Share                                                                 $0.35               $0.29

Diluted Earnings Per Share
Net income numerator                                                                     $2,163,710          $1,765,154
                                                                                          =========           =========

Weighted average shares outstanding denominator                                           6,155,280           6,089,663
Effect of diluted securities                                                                269,391             241,127
                                                                                          ---------           ---------
Diluted shares outstanding denominator                                                    6,424,671           6,330,790
                                                                                          =========           =========

     Diluted Earnings Per Share                                                               $0.34               $0.28

</TABLE>

NOTE 7 - COMPREHENSIVE INCOME
-----------------------------
The Company's other comprehensive income consists solely of net unrealized gains
(losses)  on  securities  classified  as  available-for-sale.  All prior  period
information  presented  has been stated to conform  with SFAS No. 130. The total
net  unrealized  (loss) on  securities  for the periods ended March 31, 1998 and
1997 consists of the following:
<TABLE>
<CAPTION>

                                                                                            Three Months Ended March 31
                                                                                              1998               1997

<S>                                                                                       <C>               <C>         
Net unrealized (loss) on securities before deferred income taxes                          $(115,111)        $(1,341,000)
Deferred income taxes                                                                        39,274             459,940
                                                                                             ------             -------

     Net Unrealized (Loss) on Securities                                                  $ (76,237)          $(885,060)
                                                                                             ======            =========

The Company's  accumulated other  comprehensive  income balance,  which consists
solely   of   unrealized   gains   (losses)   on   securities    classified   as
available-for-sale, is as follows:

Accumulated other comprehensive income as of December 31, 1997                                               $1,222,095
Current period change                                                                                           (76,237)
                                                                                                            -----------

     Accumulated Other Comprehensive Income as of March 31, 1998                                             $1,145,858
                                                                                                              =========


</TABLE>




                                       8
<PAGE>


                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998


NOTE 8 - CLAIMS AND LITIGATION
------------------------------
The Company,  by virtue of the nature of the business  conducted by it,  becomes
involved in numerous  legal  proceedings as either  plaintiff or defendant.  The
Company is required to resort to legal proceedings from time-to-time in order to
enforce collection of premiums, commissions or fees for the services rendered to
customers  or to  their  agents.  These  routine  items  of  litigation  do  not
materially  affect the Company and are handled on a routine basis by the Company
through its general counsel.

Likewise,  the Company is sometimes  named as a  cross-defendant  in  litigation
which is  principally  directed  against that insurer who has issued a policy of
insurance  directly or indirectly  through the Company.  Incidental  actions are
sometimes  brought  by  customers  or other  agents  which  relate  to  disputes
concerning the issuance or non-issuance of individual policies.  These items are
also handled on a routine basis by the Company's  general  counsel,  and they do
not  materially  affect the  operations of the Company.  Management is confident
that the  ultimate  outcome  of  pending  litigation  should not have an adverse
effect on the Company's consolidated operation or financial position.


NOTE 9 - LEASE COMMITMENTS AND CONTINGENCIES
--------------------------------------------
The Company  presently  occupies a 46,000 square foot building  located at 23251
Mulholland  Drive,  Woodland  Hills,  California,  under a master lease expiring
March 31, 2007.  The lease  provides  for an annual gross rental of  $1,025,952.
Erwin Cheldin, the Company's president,  chairman and principal stockholder,  is
the owner of the building. On February 22, 1995, the Company signed an extension
to the lease with no increase in rent to March 31,  2007.  The Company  believes
that the terms of the lease at inception and at the time the lease extension was
signed were at least as  favorable  to the  Company as could have been  obtained
from non-affiliated third parties.

 The Company utilizes for its own operations 100% of the space it leases.



                                       9
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

(a)  Liquidity and Capital Resources:
Due to the nature of the Company's business  (insurance and insurance  services)
and whereas Company growth does not normally require  material  reinvestments of
profits into  property or equipment,  the cash flow  generated  from  operations
usually results in improved liquidity for the Company.

Crusader  generates a significant  amount of cash as a result of its holdings of
unearned  premium  reserves,  reserves  for loss  payments,  and its capital and
surplus.  Crusader's  loss and loss  adjustment  expense  payments  are the most
significant cash flow requirement of the Company. These payments are continually
monitored  and  projected to ensure that the Company has the  liquidity to cover
these payments  without the need to liquidate its  investments.  As of March 31,
1998, the Company had cash and cash  investments  of  $97,381,687  (at amortized
cost) of which $92,047,672 (95%) were investments of Crusader.

As of the quarter ended March 31, 1998, the Company had invested $91,766,736 (at
amortized cost) or 94% of its invested assets in fixed maturity obligations.  In
accordance with Statement of Financial  Accounting Standard No. 115, "Accounting
for Certain  Investments in Debt and Equity Securities," the Company is required
to classify  its  investments  in debt and equity  securities  into one of three
categories: held-to-maturity, available-for-sale or trading securities. Although
all of the  Company's  investments  are  classified as  available-for-sale,  the
Company's  investment  guidelines  place primary  emphasis on buying and holding
high-quality investments. The balance of the Company's investments was in equity
securities  of  a  regional   utility  company  and   high-quality,   short-term
investments  that include a U.S.  treasury  bill,  bank money  market  accounts,
certificates of deposit, commercial paper and a short-term treasury money market
fund.

The Company's  investments  in fixed maturity  obligations  of  $91,766,736  (at
amortized cost) include  $36,660,565  (40%) of pre-refunded  state and municipal
tax exempt bonds,  $15,479,529  (17%) of U.S. treasury  securities,  $39,226,642
(43%) in high quality  industrial bonds and $400,000 of certificates of deposit.
The tax exempt  interest income earned for the three months ended March 31, 1998
and 1997 was $446,747 and $454,616, respectively.

The Company's  investment  policy limits  investments  in any one company.  This
limit was raised from $1,000,000 to $1,500,000 in 1997. This limitation excludes
bond premiums paid in excess of par value and U.S. Government or U.S.
Government guaranteed issues.

All of the Company's  investments are high-grade  investment quality;  all state
and municipal tax exempt fixed maturity investments are pre-refunded issues, and
all certificates of deposit are FDIC insured.

On May 1,  1998,  the  Board of  Directors  declared  a ($0.07)  per share  cash
dividend  payable on August 14, 1998, to  shareholders of record at the close of
business on July 31, 1998.

American Acceptance Corporation ("AAC"), the Company's insurance premium finance
subsidiary,  has a bank line of credit with a variable rate of interest based on
fluctuations in the London InterBank Offered Rate ("LIBOR"). This credit line is
only used to  provide  AAC with the  additional  funds it  requires  to  finance
insurance  premiums.  The bank note  payable  was paid in full on July 3,  1997,
resulting in no amounts  being  outstanding  under the bank credit line.  Due to
decreased  utilization,  AAC decreased this bank credit line from  $4,000,000 to
$2,000,000 in September 1997.

In addition  to the AAC line of credit,  Unico has a  $2,000,000  line of credit
with Union  Bank.  Interest on this line is  referenced  to LIBOR and is payable
monthly.  The agreement  contains  certain  covenants  including  maintenance of
certain financial  ratios.  This credit line expires September 2, 1998, at which
time it is expected to be renewed.  As of March 31,  1998,  no amounts have been
borrowed.

Although  material capital  expenditures may also be funded through  borrowings,
the Company  believes that its cash and short-term  investments at year end, net
of trust  restriction  of  $2,478,898,  statutory  deposits of  $2,725,000,  and
dividend  restriction  between  Crusader and Unico plus the cash to be generated
from operations,  should be sufficient to meet its operating requirements during
the next twelve months without the necessity of borrowing funds (excluding AAC's
credit line discussed above).

There are no material  commitments  for capital  expenditures  as of the date of
this report.

                                       10
<PAGE>


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS (continued)

 (b)  Results of Operations:
All  comparisons  made in this  discussion  are comparing the three months ended
March 31,  1998,  to the three months  ended March 31,  1997,  unless  otherwise
indicated.

The  Company's  net income  for the  quarter  ended  March 31,  1998,  increased
$398,556 (23%) to $2,163,710  compared to $1,765,154 for the quarter ended March
31, 1997. Revenues for the quarter ended March 31, 1998, increased $433,895 (4%)
to $12,477,544 compared to $12,043,649 for the quarter ended March 31, 1997.

Premium earned before reinsurance increased $457,647 (5%) to $10,554,810 for the
quarter  ended March 31, 1998,  compared to  $10,097,163  for the quarter  ended
March 31, 1997. Premium earned in California accounted for 67% of this increase.
Crusader's Commercial Package business represents approximately 97% of insurance
premiums earned as of March 31, 1998 compared to 96% as of March 31, 1997.

Ceded  premium was 11% of gross earned  premium for the quarter  ended March 31,
1998,  compared to 9% of gross  earned  premium for the quarter  ended March 31,
1997.

Investment income, excluding realized investment gains, increased $169,408 (14%)
to $1,358,878  for the quarter ended March 31, 1998,  compared to $1,189,470 for
the quarter  ended March 31,  1997.  This  increase was  primarily  due to a 16%
increase (at amortized cost) in invested assets.

Commission  and fee income  increased  $50,509 (4%) to $1,469,245  for the three
months ended March 31, 1998,  compared to the three months ended March 31, 1997.
This increase consisted of the following:

         Workers' compensation program                          $70,633
         Daily automobile rental insurance program               18,307
         Service fee income                                      21,282
         Commercial automobile insurance program                (44,845)
         Health and life insurance program                      (14,868)
                                                                 ------
            Net Increase in Commission and Fee income           $50,509
                                                                =======

Losses  and loss  adjustment  expenses  were 51% of net  premium  earned for the
quarter  ended March 31,  1998,  compared  to 54% of net premium  earned for the
quarter  ended March 31, 1997.  This decrease was primarily due to the favorable
development of prior period losses.

Policy acquisition costs consist of commissions, premium taxes, inspection fees,
and certain other underwriting costs which are directly or indirectly related to
the production of Crusader insurance policies. These costs include both Crusader
expenses  and  allocated  expenses  of  other  Unico  subsidiaries.   Crusader's
reinsurers pay Crusader a ceding commission,  which is primarily a reimbursement
of the acquisition cost related to the ceded premium.  Policy acquisition costs,
net of ceding commission, are deferred and amortized as the related premiums are
earned.  These costs were 28% of net premium  earned for the three  months ended
March 31, 1998, compared to 29% for the three months ended March 31, 1997.

Salaries and employee  benefits  increased  $125,208 (14%) to $1,049,621 for the
quarter  ended March 31, 1998,  compared to $924,413 for the quarter ended March
31, 1997.

Commissions to agents/brokers decreased $30,049 (11%) to $244,927 in the quarter
ended March 31, 1998,  primarily due to related revenue  decreases in the health
and life program and the discontinued commercial automobile program.

Other operating expenses decreased $104,901 (14%) during the quarter ended March
31, 1998  compared  to the  quarter  ended March 31,  1997.  This  decrease  was
primarily  due to the timing of  expenses  incurred  for  professional  services
rendered to the Company.

The effect of  inflation  on net income of the Company  during the three  months
ended March 31, 1998, and 1997 was not significant.


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<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS (continued)

Forward looking statements
Information contained in this discussion, other than historical information, are
considered  "forward-looking  statements"  and may be subject to change based on
various important factors and  uncertainties.  Some, but not all, of the factors
and  uncertainties  that may cause actual results to differ  significantly  from
those expected in any  forward-looking  statement are disclosed in the Company's
1997 Form 10-K as filed with the Securities and Exchange Commission.



ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable



PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES

(c)   During the quarter ended March 31, 1998,  the Company  issued an aggregate
      of 5,255  shares of its  common  stock upon  exercise  of  employee  stock
      options granted under the Unico American  Corporation  Employee  Incentive
      Stock  Option  Plan.  These  shares  were  issued to an  aggregate  of two
      employees  of the  Company.  Of these  shares,  355 shares  were issued in
      exchange for 100 shares of common stock and $5.00 of cash and 4,900 shares
      were issued in exchange for $17,150.00 in cash. These shares were acquired
      for  investment  and without a view to the public  distribution  or resale
      thereof,  and the  issuance  thereof  was  exempt  from  the  registration
      requirements under the Securities Act of 1933, as amended, under Section 4
      (2) thereof as transactions not involving a public offering.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits:
      Exhibit 27 - Financial Data Schedule

(b)   Reports on Form 8-K:
      None





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<PAGE>

                                   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 there unto authorized.

                                             UNICO AMERICAN CORPORATION



Date:   May  13, 1998       By:/s/ERWIN CHELDIN
                                  -------------
                               Erwin Cheldin
                               Chairman of the Board, President and Chief
                               Executive Officer, (Principal Executive Officer)



Date:   May  13, 1998        By:/s/LESTER A. AARON
                                   ---------------
                                Lester A. Aaron
                                Treasurer, Chief Financial Officer, (Principal
                                Accounting and Principal Financial Officer)



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