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 April 1, 1998 to June 30, 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


                                    6,220,672
       Number of shares of common stock outstanding as of August 10, 1998

                                       1
<PAGE>
                                              PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

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

                                                                                            June 30              December 31
                                                                                              1998                   1997
                                                                                              ----                   ----    
                                 ASSETS
<S>                                                                                      <C>                    <C>    
Investments
   Available for sale:
      Fixed maturities, at market value (amortized cost:  June 30,
         1998  $93,364,741;  December 31, 1997  $86,106,571)                              $95,344,780            $87,965,590
      Equity securities at market (cost: June 30, 1998  $0;
          December 31, 1997  $230,460)                                                              -                223,100
   Short-term investments, at cost                                                          6,358,069              6,137,495
                                                                                          -----------             ----------  
      Total Investments                                                                   101,702,849             94,326,185
Cash                                                                                          183,391                 55,768
Accrued investment income                                                                   1,850,050              1,807,364
Premiums and notes receivable, net                                                          6,131,141              7,404,606
Reinsurance recoverable:
   Paid losses and loss adjustment expenses                                                   164,241                 56,379
   Unpaid losses and loss adjustment expenses                                               1,360,470              1,413,603
Prepaid reinsurance premiums                                                                   22,189                945,563
Deferred policy acquisition costs                                                           5,079,264              4,886,684
Property and equipment (net of accumulated depreciation)                                      206,116                203,709
Deferred income taxes                                                                         665,901              1,005,865
Other assets                                                                                  521,514                836,658
                                                                                          -----------            -----------   
     Total Assets                                                                        $117,887,126           $112,942,384
                                                                                          ===========            ===========      

               LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Unpaid losses and loss adjustment expenses                                                $42,170,299            $42,004,851
Unearned premiums                                                                          20,255,956             21,673,009
Advance premiums                                                                            1,305,774              1,368,114
Funds held as security for performance                                                        714,682                723,066
Accrued expenses and other liabilities                                                      3,606,575              2,095,567
Income taxes payable                                                                          291,611                 16,993
Dividends payable                                                                             435,447                      -
                                                                                           ----------             ----------
    Total Liabilities                                                                     $68,780,344            $67,881,600
                                                                                           ----------             ----------  

STOCKHOLDERS'  EQUITY
Common stock,  no par - authorized  10,000,000  shares,  issued and  outstanding
   shares 6,220,672 at June 30, 1998
   and 6,153,706 at December 31, 1997                                                       2,886,952              2,838,058
Accumulated other comprehensive income:
   Net unrealized gains on investments classified as available for sale                     1,306,826              1,222,095
Retained earnings                                                                          44,913,004             41,000,631
                                                                                           ----------             ----------        
  Total Stockholders' Equity                                                              $49,106,782            $45,060,784
                                                                                           ----------             ----------      
  Total Liabilities and Stockholders' Equity                                             $117,887,126           $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                       Six Months Ended
                                                                        June 30                                 June 30
                                                                1998               1997                1998                1997
                                                                ----               ----                ----                ----

<S>                                                         <C>                <C>                 <C>                 <C> 
REVENUES
Insurance Company Revenues
     Premium earned                                         $10,415,497        $10,689,663         $20,970,307         $20,786,826
     Premium ceded                                            1,600,108          1,598,378           2,771,136           2,554,001
                                                             ----------         ----------          ----------          ---------- 
          Net premium earned                                  8,815,389          9,091,285          18,199,171          18,232,825
     Net investment income                                    1,350,677          1,190,632           2,660,462           2,345,148
     Net realized investment gains                               16,230                  -              16,230                 919
     Other income                                                   105                 45               1,063                 160
                                                             ----------         ----------          ----------          ----------
          Total Insurance Company Revenues                   10,182,401         10,281,962          20,876,926          20,579,052

Other Revenues from Insurance Operations
     Gross commissions and fees                               1,316,134          1,478,723           2,785,379           2,897,459
     Investment income                                           54,520             34,759             103,613              69,713
     Finance charges and late fees earned                       254,765            301,857             517,918             591,925
     Other income                                                 3,601              3,553               5,129               6,354
                                                             ----------         ----------          ----------          ----------  
          Total Revenues                                     11,811,421         12,100,854          24,288,965          24,144,503
                                                             ----------         ----------          ----------          ---------- 

EXPENSES
Losses and loss adjustment expenses                           4,394,980          4,921,938           9,194,681           9,896,411
Policy acquisition costs                                      2,396,532          2,599,119           5,025,638           5,239,049
Salaries and employee benefits                                  992,116            935,663           2,041,737           1,860,076
Commissions to agents/brokers                                   235,611            294,485             480,538             569,461
Other operating expenses                                        501,145            619,809           1,129,871           1,353,436
                                                              ---------          ---------          ----------          ----------
     Total Expenses                                           8,520,384          9,371,014          17,872,465          18,918,433
                                                              ---------          ---------          ----------          ----------
  
     Income Before Taxes                                      3,291,037          2,729,840           6,416,500           5,226,070

Income Tax Provision                                          1,106,927            845,256           2,068,680           1,576,332
                                                              ---------          ---------           ---------           ---------  
     Net Income                                              $2,184,110         $1,884,584          $4,347,820          $3,649,738
                                                              =========          =========           =========           ========= 


PER SHARE DATA:
Basic Shares Outstanding                                      6,179,592          6,132,138           6,167,441           6,110,901
Basic Earnings Per Share                                          $0.35              $0.31               $0.70               $0.60
Diluted Shares Outstanding                                    6,440,927          6,328,350           6,432,800           6,329,570
Diluted Earnings Per Share                                        $0.34              $0.30               $0.68               $0.58
</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                      Six Months Ended    
                                                                        June 30                                June 30
                                                                1998               1997               1998                1997
                                                                ----               ----               ----                ----

<S>                                                          <C>                <C>                <C>                 <C>       
Net income                                                   $2,184,110         $1,884,584         $4,347,820          $3,649,738
Other changes in comprehensive income
net of tax:
  Unrealized gains (losses) on securities
     classified as available-for-sale arising
     during the period                                          160,968            631,822             84,731            (253,328)
  Less: reclassification adjustment for
     gains included in net income                               (10,712)                -             (10,712)               (607)
                                                              ---------          ---------          ---------            --------- 
         Comprehensive Income                                $2,334,366         $2,516,406         $4,421,839           $3,395,803
                                                              =========          =========          =========            ========= 
</TABLE>






































            See notes to unaudited consolidated financial statements

                                       4
<PAGE>

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

                        FOR THE SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>

                                                                                          1998                  1997
                                                                                          ----                  ----    
<S>                                                                                    <C>                   <C>  
Cash Flows from Operating Activities:
   Net Income                                                                          $4,347,820            $3,649,738
   Adjustments to reconcile net income to net cash from operations
      Depreciation and amortization                                                        49,396                41,343
      Bond amortization, net                                                              324,269               243,559
      Net realized (gain) on sale of securities                                           (16,230)                 (919)
   Changes in assets and liabilities
      Premium, notes and investment income receivable                                   1,230,779               677,565
      Reinsurance recoverable                                                            (554,729)              635,370
      Prepaid reinsurance premiums                                                        923,374               314,653
      Deferred policy acquisitions costs                                                 (192,580)             (139,782)
      Other assets                                                                        315,144                24,130
      Reserve for unpaid losses and loss adjustment expenses                              665,448             1,075,525
      Unearned premium reserve                                                         (1,417,053)              374,864
      Funds held as security and advanced premiums                                        (70,724)                2,653
      Accrued expenses and other liabilities                                            1,511,008              (365,461)
      Income taxes current/deferred                                                       570,933                78,035
                                                                                        ---------             ---------     
          Net Cash Provided from Operations                                             7,686,855             6,611,273
                                                                                        ---------             ---------  

Investing Activities
     Purchase of fixed maturity investments                                           (14,376,864)           (8,688,530)
     Proceeds from maturity of fixed maturity investments                               6,774,600             3,098,000
     Purchase of equity securities - cost                                                       -            (1,019,500)
     Proceeds from sale of equity securities                                              246,690                20,959
     Net increase (decrease) in short-term investments                                   (200,749)              671,987
     Additions to property and equipment                                                  (51,803)              (33,708)
                                                                                        ---------             ---------
          Net Cash (Used) by Investing Activities                                      (7,608,126)           (5,950,792)
                                                                                        ---------             ---------      

Financing Activities
     Proceeds from issuance of common stock                                                48,894                   359
     Repayment of note payable - bank                                                           -              (250,000)
                                                                                           ------               -------
          Net Cash Provided (Used) by Financing Activities                                 48,894              (249,641)
                                                                                           ------               -------  

Net increase in cash                                                                      127,623               410,840
Cash at beginning of period                                                                55,768                82,637
                                                                                          -------               ------- 
          Cash at End of Period                                                          $183,391              $493,477
                                                                                          =======               =======

Supplemental cash flow information Cash paid during the period for:
          Interest                                                                           $121               $21,697
          Income taxes                                                                 $1,448,336            $1,380,000

</TABLE>






            See notes to unaudited consolidated financial statements

                                       5
<PAGE>

                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 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 Presentation
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 and six months  ended June 30, 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.

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.


NOTE 2 - 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 June
30, 1998, there were 286,366 options outstanding of which 216,035 were currently
exercisable. During the quarter ended June 30, 1998, options on 82,327 shares of
common stock were  exercised.  There are no  additional  options  available  for
future grant under the 1985 plan.












                                       6
<PAGE>

                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 3 - 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 June 30, 1998 and 1997, and for the six months ended June 30,
1998 and 1997:
<TABLE>
<CAPTION>

                                                                 Three Months Ended                  Six Months Ended
                                                                       June 30                           June 30
                                                                1998              1997            1998              1997
                                                                ----              ----            ----              ----  
<S>                                                          <C>               <C>             <C>               <C>    
Basic Earnings Per Share

Net income numerator                                         $2,184,110        $1,884,584      $4,347,820        $3,649,738
                                                              =========         =========       =========         =========
Weighted average shares outstanding
     denominator                                              6,179,592         6,132,138       6,167,441         6,110,901
                                                              =========         =========       =========         =========      

     Basic Earnings Per Share                                     $0.35             $0.31           $0.70             $0.60


Diluted Earnings Per Share
Net income numerator                                         $2,184,110        $1,884,584      $4,347,820        $3,649,738
                                                              =========         =========       =========         =========
Weighted average shares outstanding
     denominator                                              6,179,592         6,132,138       6,167,441         6,110,901
Effect of diluted securities                                    261,335           196,212         265,359           218,669
                                                              ---------         ---------       ---------         ---------  
Diluted shares outstanding denominator                        6,440,927         6,328,350       6,432,800         6,329,570
                                                              =========         =========       =========         =========  

     Diluted Earnings Per Share                                   $0.34             $0.30           $0.68             $0.58
</TABLE>


                                       7
<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  Insurance Company  ("Crusader"),  the Company's  property and casualty
insurance  company,  generates a  significant  amount of cash as a result of its
holdings of unearned premium reserves and reserves for loss payments. 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 June 30, 1998, the Company
had  cash and cash  investments  of  $99,906,201  (at  amortized  cost) of which
$94,452,001 (95%) were investments of Crusader.

As of the quarter ended June 30, 1998, the Company had invested  $93,364,741 (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
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  $93,364,741  (at
amortized cost) include  $35,476,613  (38%) of pre-refunded  state and municipal
tax exempt bonds,  $14,579,098  (16%) of U.S. treasury  securities,  $43,009,030
(46%) in high-quality  industrial bonds and $300,000 of certificates of deposit.
The tax exempt  interest income earned for the three months and six months ended
June 30, 1998, was $419,206 and $865,953,  respectively. The tax exempt interest
income  earned  for the three  months and six months  ended June 30,  1997,  was
$449,546 and $904,162, 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.

Although  material capital  expenditures may also be funded through  borrowings,
the Company believes that its cash and short-term  investments at June 30, 1998,
net of trust restriction of $2,557,954,  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.

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

Year 2000. The Year 2000 issue is the result of computer  programs being written
utilizing  two digits  rather  than four digits to define a year.  Any  computer
programs  which have date  sensitive  software  utilizing a two digit year would
recognize a year of "00" as 1900 rather than 2000. This could result in a system
failure or miscalculations causing disruptions of operations,  including,  among
other things, a temporary inability to process  transactions,  send invoices, or
engage in similar normal business activities.  The Company has assessed its Year
2000 issues and is in the process of making any necessary  modifications  to its
computer systems.  This project is estimated to be completed by the end of 1998,
prior to any anticipated impact on the Company's operating systems.  Portions of
this project  have been  completed  and tested as of June 30, 1998.  The cost of
this  project has been  charged to current  operations  as incurred and will not
have a material  effect on the  Company's  results  of  operation  or  financial
position.

                                       8
<PAGE>
  ITEM 2 - MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS (continued)

While the Year 2000  considerations  are not expected to  materially  impact the
Company's internal operations,  they may have an effect on some of the Company's
agents and brokers,  suppliers,  financial institutions and others with whom the
Company conducts  business,  and thus indirectly  affect the Company.  It is not
possible to quantify the aggregate  cost to the Company with respect to external
Year 2000 problems,  if any, although the Company does not presently  anticipate
it will have a material adverse impact on its business.


(b) Results of Operations:
All  comparisons  made in this discussion are comparing the three and six months
ended June 30, 1998,  to the three and six months  ended June 30,  1997,  unless
otherwise indicated.

The Company's net income  increased  $299,526  (16%) to $2,184,110 for the three
months and $698,082  (19%) to $4,347,820 for the six months ended June 30, 1998,
compared to net income of $1,884,584 for the three months and $3,649,738 for the
six months ended June 30, 1997. Total revenues  decreased  $289,433 (2%) for the
three months and increased $144,462 (1%) for the six months ended June 30, 1998,
when compared to the three and six months ended June 30, 1997.

Premium earned before reinsurance decreased $274,166 (3%) to $10,415,497 for the
three months and increased $183,481 (1%) to $20,970,307 for the six months ended
June 30,  1998,  compared  to the  three and six  months  ended  June 30,  1997.
Crusader's Commercial Package business represents approximately 97% of insurance
premiums earned as of June 30, 1998, compared to 96% as of June 30, 1997.

Premium written before reinsurance  decreased $2,240,253 (20%) to $9,239,511 for
the three months and decreased $1,608,437 (8%) for the six months ended June 30,
1998, compared to the three and six months ended June 30, 1997. This decrease in
written  premium is primarily due to a change in the marketing  strategy for the
states of Washington and Oregon.  The Company began  marketing  direct to retail
agents and  brokers in these  states,  and ceased  marketing  through its former
General  Agent.  While this has  resulted  in a temporary  reduction  in premium
written,  the Company expects the long-term result to be increased revenues with
reduced acquisition expense.

Ceded  premium  earned was 15% of gross earned  premium for the three months and
13% of gross earned premium for the six months ended June 30, 1998,  compared to
15% for the three months and 12% for the six months ended June 30, 1997.

Net investment income,  excluding realized investment gains,  increased $179,806
(15%) to $1,405,197  for the three months and $349,214  (14%) to $2,764,075  for
the six months ended June 30, 1998,  compared to investment income of $1,225,391
for the three months and $2,414,861 for the six months ended June 30, 1997. This
increase was  primarily  due to a 15% increase (at  amortized  cost) in invested
assets.

Gross commission and fee income  decreased  $162,589 (11%) to $1,316,134 for the
three months and decreased  $112,080 (4%) to $2,785,379 for the six months ended
June 30, 1998,  compared to the three and six months  ended June 30, 1997.  This
decrease for the three and six months consisted of the following:

                                               Three months         Six months
                                                  
  Workers' compensation program                 $ (34,202)          $  36,431
  Daily automobile rental insurance program          (901)             17,406
  Service fee income                              (80,833)            (59,551)
  Commercial automobile insurance program         (24,098)            (68,943)
  Health and life insurance program               (22,555)            (37,423)
                                                 --------            -------- 
     Net decrease in commission and fee income  $(162,589)          $(112,080)
                                                 ========            ========= 

Losses and loss adjustment expenses were 50% of net premium earned for the three
months and 51% of net  premium  earned for the six months  ended June 30,  1998,
compared  to 54% of net premium  earned for the three and six months  ended June
30, 1997. This decrease was primarily due to the favorable  development of prior
period  losses.

                                       9
<PAGE>

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

Policy acquisition costs consist of commissions, premium taxes, inspection fees,
and certain  other  underwriting  costs which are 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 27% of net premium earned for the three months and 28%
of net premium earned for the six months ended June 30, 1998, compared to 29% of
net premium earned for the three months and six months ended June 30, 1997.

Salaries and employee benefits  increased $56,453 (6%) to $992,116 for the three
months and increased  $181,661 (10%) to $2,041,737 for the six months ended June
30,  1998,  compared to salary and  employee  benefits of $935,663 for the three
months and $1,860,076 for the six months ended June 30, 1997.

Commissions to agents/brokers  decreased $58,874 (20%) to $235,611 for the three
months and decreased $88,923 (16%) to $480,538 for the six months ended June 30,
1998,  compared to the three and six months ended June 30, 1997. The decrease is
primarily due to related decreases in revenue in the health and life program and
to the sale of the commercial automobile program to a non-affiliated third party
in June, 1997.

Other  operating  expenses  decreased  $118,664  (19%) for the three  months and
$223,565 (17%) for the six months ended June 30, 1998, compared to the three and
six months ended June 30, 1997.  This  decrease was  primarily due to a $255,000
reduction in interest  expense payable due to a settlement of federal income tax
issues for the fiscal years ended March 31, 1990,  through March 31, 1994, which
were under appeal.

Income tax  provision  increased  2.6% to 33.6% of income  before  taxes for the
three  months and  increased  2.0% to 32.2% of income  before  taxes for the six
months  ended June 30,  1998,  compared to the three months and six months ended
June 30, 1997.  This increase was primarily due to a federal  income tax payment
of $64,441 in full settlement of all issues under appeal regarding the Company's
federal  income tax  returns for the fiscal  years ended March 31, 1990, through
March 31, 1994.

The effect of  inflation  on net income of the Company  during the three and six
months ended June 30, 1998, and 1997 was not significant.


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  statements are disclosed in the Company's
1997 Form 10-K as filed with the  Securities and Exchange  Commission.  Further,
the statements herein concerning the effects of the Company's stated expectation
as to the long-term  results of marketing in the states of Washington and Oregon
directly to retail agents and brokers  rather than through the Company's  former
general  agent  are  forward   looking   statements   which  involve  risks  and
uncertainties  that could cause actual results to differ  materially  from these
forward looking statements. With respect to the statement concerning the effects
of the change in marketing in the states of Washington and Oregon, factors which
would  cause the  actual  results to differ  materially  include  the  Company's
ability to effectively  market to retail agents and brokers in those states, the
willingness  of the retail  agents and brokers in those states to deal  directly
with the Company,  and general  economic  conditions  and  competition  in those
states.



ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

                                       10
<PAGE>
PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

     (c) During the quarter ended June 30, 1998, the Company issued an aggregate
of 61,784  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 three  employees  of the
Company. Of these shares, 4,065 shares were issued in exchange for $14,227.50 in
cash,  5,000 shares were issued in exchange for  $17,500.00 in cash,  and 73,262
shares were issued in exchange  for 20,543  shares of common stock and $11.25 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 4 - SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

(a) On June 5, 1998, the Company held its Annual Meeting of Stockholders.

(b)  Proxies for the meeting were solicited  pursuant to Regulation 14 under the
     Securities Exchange Act of 1934; there was no solicitation in opposition to
     nominees of the Board of Directors as listed in the Proxy Statement and all
     such nominees were elected.

(c)  At the meeting,  the following  persons were elected by the vote  indicated
     (there were no abstentions or broker non-votes) as directors to serve until
     the next  meeting  of  shareholders  and until  their  successors  are duly
     elected and qualified.

Name                             For                      Against or Withheld

Erwin Cheldin                 5,414,584                         50,200
Lester A. Aaron               5,414,584                         50,200
Cary L. Cheldin               5,414,584                         50,200
George C. Gilpatrick          5,414,584                         50,200
Roger H. Platten              5,414,584                         50,200
David A. Lewis                5,414,584                         50,200
Bernard R. Gans               5,414,584                         50,200


ITEM 5 - OTHER INFORMATION

In July 1998, David E. Driscoll was elected a Director of the Registrant to fill
a vacancy  created by the  resignation of Bernard R. Gans. Mr. Gans resigned for
personal reasons.  Mr. Driscoll is a partner in the Riverside,  California,  law
firm of Foster,  Driscoll &  Reynolds  that  specializes  in  insurance  defense
matters.

If a shareholder desires to submit a proposal for consideration at the Company's
1999 Annual  Meeting of  Shareholders  and to have the proposal set forth in the
Proxy Statement and form of Proxy for such meeting in accordance with Rule 14a-8
of the Securities and Exchange  Commission,  such proposal should be received by
the  Company no later than  December  21,  1998.  If a  shareholder  proposal is
otherwise  presented  at the  Company's  1999  Annual  Meeting of  Shareholders,
proxies  solicited  by the Company for such Annual  Meeting will confer upon the
proxy holders' discretionary authority to vote on any matter so presented at the
meeting of which the Company did not have notice prior to March 6, 1999.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits:
      Exhibit 27 - Financial Data Schedule

(b)   Reports on Form 8-K:
      None

                                       11
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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 there unto authorized.

                           UNICO AMERICAN CORPORATION



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



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

                                       12
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