SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

      For the quarterly period ended June 30, 2005 or

[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934


      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, Including Area Code)

                                    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
    ---     ---

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes       No  X
    ---     ---

                                    5,496,315
       Number of shares of common stock outstanding as of August 11, 2005


                                       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
                                                                                   2005                 2004
                                                                                   ----                 ----
<S>                                                                            <C>                   <C>
ASSETS
------
Investments
   Available for sale:
      Fixed maturities, at market value (amortized cost:
       June 30, 2005 $134,697,877; December 31, 2004 $128,989,658)             $134,635,680          $129,559,615
   Short-term investments, at cost                                                2,078,846             3,118,118
                                                                                -----------           -----------
      Total Investments                                                         136,714,526           132,677,733
Cash                                                                                 16,717                15,016
Accrued investment income                                                           997,115             1,047,278
Premiums and notes receivable, net                                                7,639,053             7,770,560
Reinsurance recoverable:
   Paid losses and loss adjustment expenses                                          63,724                18,512
   Unpaid losses and loss adjustment expenses                                    22,422,244            20,119,011
Deferred policy acquisition costs                                                 7,679,181             8,203,238
Property and equipment (net of accumulated depreciation)                            289,895               278,404
Deferred income taxes                                                             1,749,766             1,667,195
Other assets                                                                        804,820               773,329
                                                                                -----------           -----------
     Total Assets                                                              $178,377,041          $172,570,276
                                                                                ===========           ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

LIABILITIES
-----------
Unpaid losses and loss adjustment expenses                                      $95,053,283           $87,469,000
Unearned premiums                                                                32,805,060            35,656,393
Advance premium and premium deposits                                                914,405             1,067,224
Income taxes payable                                                                315,066               227,551
Notes payable-related parties                                                             -               500,000
Accrued expenses and other liabilities                                            4,070,191             5,224,783
                                                                                -----------           -----------
    Total Liabilities                                                          $133,158,005          $130,144,951
                                                                                -----------           -----------

STOCKHOLDERS' EQUITY
--------------------
Common stock, no par - authorized 10,000,000 shares; issued and
   outstanding shares 5,496,315 at June 30, 2005, and 5,492,315
   at December 31, 2004                                                          $2,720,487            $2,708,047
Accumulated other comprehensive income (loss)                                       (41,050)              376,172
Retained earnings                                                                42,539,599            39,341,106
                                                                                 ----------            ----------
  Total Stockholders' Equity                                                    $45,219,036           $42,425,325
                                                                                 ----------            ----------

  Total Liabilities and Stockholders' Equity                                   $178,377,041          $172,570,276
                                                                                ===========           ===========
</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
                                                                  -------                              -------
                                                          2005               2004               2005            2004
                                                          ----               ----               ----            ----
<S>                                                    <C>                 <C>               <C>              <C>
REVENUES
--------
Insurance Company Revenues
  Premium earned                                       $16,533,913         $16,839,035       $33,209,558      $33,313,993
  Premium ceded                                          3,543,155           4,511,488         7,392,842        8,400,127
                                                        ----------          ----------        ----------       ----------
     Net premium earned                                 12,990,758          12,327,547        25,816,716       24,913,866
  Net investment income                                  1,053,888           1,023,076         2,089,735        2,114,667
  Other income                                              18,834              18,897            44,658           49,188
                                                        ----------          ----------        ----------       ----------
     Total Insurance Company Revenues                   14,063,480          13,369,520        27,951,109       27,077,721

Other Revenues from Insurance Operations
  Gross commissions and fees                             1,391,346           1,629,153         2,764,671        3,339,750
  Investment income                                         14,954               8,576            28,375           18,403
  Finance charges and fees                                 188,882             234,773           391,924          481,738
  Other income                                               3,661               1,392             7,358            5,993
                                                        ----------          ----------        ----------       ----------
     Total Revenues                                     15,662,323          15,243,414        31,143,437       30,923,605
                                                        ----------          ----------        ----------       ----------

EXPENSES
--------
Losses and loss adjustment expenses                      8,183,717           8,651,801        16,555,829       17,608,788
Policy acquisition costs                                 2,721,750           2,644,762         5,327,422        5,123,172
Salaries and employee benefits                           1,271,638           1,097,345         2,558,995        2,313,464
Commissions to agents/brokers                              172,263             231,173           357,303          502,296
Other operating expenses                                   668,964             672,921         1,343,570        1,462,029
                                                        ----------          ----------        ----------       ----------
     Total Expenses                                     13,018,332          13,298,002        26,143,119       27,009,749
                                                        ----------          ----------        ----------       ----------

     Income Before Taxes                                 2,643,991           1,945,412         5,000,318        3,913,856
Income tax provision                                       950,678             712,022         1,801,825        1,422,469
                                                         ---------           ---------         ---------        ---------
     Net Income                                         $1,693,313          $1,233,390        $3,198,493       $2,491,387
                                                         =========           =========         =========        =========




PER SHARE DATA
--------------
Basic Shares Outstanding                                 5,496,315          5,489,815          5,495,581        5,489,815
Basic Earnings Per Share                                     $0.31              $0.22              $0.58            $0.45

Diluted Shares Outstanding                               5,614,936          5,572,944          5,614,438        5,575,315
Diluted Earnings Per Share                                   $0.30              $0.22              $0.57            $0.45
</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
                                                                         -------                           -------
                                                                   2005             2004            2005             2004
                                                                   ----             ----            ----             ----
<S>                                                             <C>              <C>              <C>              <C>
Net Income                                                      $1,693,313       $1,233,390       $3,198,493       $2,491,387
Other changes in comprehensive income, net of tax:
     Unrealized gains (losses) on securities classified
        as available-for-sale arising during the period            215,612       (1,493,684)        (417,222)      (1,352,432)
                                                                 ---------        ---------        ---------        ---------
            Comprehensive Income (Loss)                         $1,908,925        $(260,294)      $2,781,271       $1,138,955
                                                                 =========          =======        =========        =========
</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>
                                                                                          2005                  2004
                                                                                          ----                  ----
<S>                                                                                   <C>                   <C>
Cash Flows from Operating Activities:
   Net Income                                                                          $3,198,493            $2,491,387
   Adjustments to reconcile net income to net cash from operations
      Depreciation                                                                         49,934                47,521
      Bond amortization, net                                                               67,198               158,291
   Changes in assets and liabilities
      Premium, notes and investment income receivable                                     181,670               103,807
      Reinsurance recoverable                                                          (2,348,445)             (475,122)
      Prepaid reinsurance premiums                                                              -                21,257
      Deferred policy acquisition costs                                                   524,057               (57,630)
      Other assets                                                                        (31,491)              544,726
      Reserve for unpaid losses and loss adjustment expenses                            7,584,283             3,561,581
      Unearned premium reserve                                                         (2,851,333)              277,199
      Funds held as security and advanced premiums                                       (152,819)              (19,907)
      Accrued expenses and other liabilities                                           (1,154,592)             (956,329)
      Income taxes current/deferred                                                       219,876               108,000
                                                                                        ---------             ---------
          Net Cash Provided from Operations                                             5,286,831             5,804,781
                                                                                        ---------             ---------

Investing Activities
     Purchase of fixed maturity investments                                           (23,971,507)          (31,481,030)
     Proceeds from maturity of fixed maturity investments                              18,196,090            24,490,000
     Net decrease in short-term investments                                             1,039,272             1,253,022
     Additions to property and equipment                                                  (61,425)              (47,677)
                                                                                        ---------             ---------
          Net Cash (Used) by Investing Activities                                      (4,797,570)           (5,785,685)
                                                                                        ---------             ---------

Financing Activities
    Proceeds from issuance of common stock                                                 12,440                     -
    Repayment of notes payable - related parties                                         (500,000)                    -
                                                                                          -------
          Net Cash (Used) by Financing Activities                                        (487,560)                    -
                                                                                          -------

Net increase in cash                                                                        1,701                19,096
    Cash at beginning of period                                                            15,016                37,988
                                                                                           ------                ------
          Cash at End of Period                                                           $16,717               $57,084
                                                                                           ======                ======

Supplemental Cash Flow Information Cash paid during the period for:
    Interest                                                                               $6,250               $42,452
    Income taxes                                                                       $1,590,563            $1,370,000
</TABLE>


            See notes to unaudited consolidated financial statements.


                                       5
<PAGE>

                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Nature of Business
------------------
Unico American Corporation is an insurance holding company that underwrites
property and casualty insurance through its insurance company subsidiary;
provides property, casualty, health and life insurance through its agency
subsidiaries; and provides insurance premium financing and membership
association services through its other subsidiaries. Unico American Corporation
is referred to herein as the "Company" or "Unico" and such references include
both the corporation and its subsidiaries, all of which are wholly owned, unless
otherwise indicated. Unico was incorporated under the laws of Nevada in 1969.

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 U.S. 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, 2005, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2005. Quarterly financial statements should be read in conjunction with the
consolidated financial statements and related notes in the Company's 2004 Annual
Report on Form 10-K as filed with the Securities and Exchange Commission.

Use of Estimates in the Preparation of the Financial Statements
---------------------------------------------------------------
The preparation of financial statements in conformity with GAAP requires the
Company to make estimates and assumptions that affect its reported amounts of
assets and liabilities and its disclosure of any contingent assets and
liabilities at the date of its financial statements, as well as its reported
amounts of revenues and expenses during the reporting period. Actual results
could differ materially from those estimates.


NOTE 2 - OMNIBUS STOCK PLAN
---------------------------
The Company's 1999 Omnibus Stock Plan that covers 500,000 shares of the
Company's common stock (subject to adjustment in the case of stock splits,
reverse stock splits, stock dividends, etc.) was approved by shareholders June
4, 1999. On August 26, 1999, the Company granted 135,000 incentive stock options
of which 40,000 were terminated and 95,000 were outstanding and exercisable as
of June 30, 2005. These options expire 10 years from the date of the grant.

On December 18, 2002, the Company granted an additional 182,000 incentive stock
options under the Company's 1999 Omnibus Stock Plan of which 6,500 options were
exercised, 2,500 options were terminated and 173,000 were outstanding as of June
30, 2005. These options expire 10 years from the date of the grant. These
options become exercisable as follows:

        Currently Exercisable            105,500
        January 1, 2006                   37,500
        January 1, 2007                   30,000
                                         -------
           Total                         173,000
                                         =======


                                       6
<PAGE>

                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005



NOTE 2 - OMNIBUS STOCK PLAN (continued)
--------------------------------------
The Company applies the intrinsic-value based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations including FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation," an
interpretation of APB Opinion No. 25, to account for its fixed-plan stock
options. Under this method, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. FASB Statement No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," and FASB Statement No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure," an amendment of SFAS 123, established
accounting and disclosure requirements using a fair-value based method of
accounting for stock-based employee compensation plans. As permitted by existing
accounting standards, the Company has elected to continue to apply the
intrinsic-value based method of accounting described above and has adopted only
the disclosure requirements of SFAS 123, as amended. In December 2004, FASB
Statement No. 123R (SFAS 123R) which revised SFAS 123 was issued and will be
applicable for the Company in 2006 (see Note 5).

Had compensation cost for the Company's stock-based compensation plan been
reflected in the accompanying consolidated financial statements based on the
fair value at the grant dates for option awards consistent with the method of
SFAS 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                                  Three Months Ended                  Six Months Ended
                                                                       June 30                            June 30
                                                                       -------                            -------
                                                                2005              2004             2005              2004
                                                                ----              ----             ----              ----
<S>                                                          <C>               <C>              <C>               <C>
Net Income
  As reported                                                $1,693,313        $1,233,390       $3,198,493        $2,491,387
    Deduct:  Total stock-based employee
    compensation expense determined under
    fair value based method for all awards,
    net of related tax effects                                    7,432            11,936           14,864            22,793
                                                              ---------         ---------        ---------         ---------
  Pro forma                                                  $1,685,881        $1,221,994       $3,183,629        $2,468,594
                                                              =========         =========        =========         =========

Income Per Share
  As reported                                                     $0.31             $0.22            $0.58             $0.45
  Pro forma                                                       $0.31             $0.22            $0.58             $0.45

Income Per Share - Assuming Dilution:
  As reported                                                     $0.30             $0.22            $0.57             $0.45
  Pro forma                                                       $0.30             $0.22            $0.57             $0.44
</TABLE>

Calculations of the fair value under the method prescribed by SFAS No. 123 were
made using the Black-Scholes Option-Price Model with the following weighted
average assumptions used for the 1999 and 2002 grants:

                                          2002         1999
                                          Grant        Grant
                                          -----        -----
Dividend yield                            1.40%        2.46%
Expected volatility                        34%          43%
Expected lives                          10 Years     10 Years
Risk-free interest rates                  4.05%        6.09%
Fair value of options granted             $1.32        $4.30


                                       7
<PAGE>

                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005



NOTE 3 - REPURCHASE OF COMMON STOCK - EFFECT ON STOCKHOLDERS' EQUITY
--------------------------------------------------------------------
The Company has previously announced that its Board of Directors had authorized
the repurchase in the open market from time to time of up to an aggregate of
945,000 shares of the common stock of the Company. During the six months ended
June 30, 2005, the Company did not repurchase any shares of the Company's common
stock. As of June 30, 2005, the Company had purchased and retired under the
Board of Directors' authorization an aggregate of 868,958 shares of its common
stock at a cost of $5,517,465.


NOTE 4 - 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 and six months ended June 30, 2005 and 2004:

<TABLE>
<CAPTION>
                                                                 Three Months Ended                 Six Months Ended
                                                                       June 30                           June 30
                                                                       -------                           -------
                                                                 2005             2004              2005           2004
                                                                 ----             ----              ----           ----
<S>                                                          <C>               <C>               <C>            <C>
Basic Earnings Per Share
------------------------
Net income numerator                                         $1,693,313        $1,233,390        $3,198,493     $2,491,387
                                                              =========         =========         =========      =========

Weighted average shares outstanding denominator               5,496,315         5,489,815         5,495,581      5,489,815
                                                              =========         =========         =========      =========

     Basic Earnings Per Share                                     $0.31             $0.22             $0.58          $0.45


Diluted Earnings Per Share
--------------------------
Net income numerator                                         $1,693,313        $1,233,390        $3,198,493     $2,491,387
                                                              =========         =========         =========      =========

Weighted average shares outstanding                           5,496,315         5,489,815         5,495,581      5,489,815
Effect of diluted securities                                    118,621            83,129           118,857         85,500
                                                              ---------         ---------        ---------       ---------
Diluted shares outstanding denominator                        5,614,936         5,572,944        5,614,438       5,575,315
                                                              =========         =========        =========       =========

     Diluted Earnings Per Share                                   $0.30             $0.22            $0.57           $0.45
</TABLE>


NOTE 5 - RECENTLY ISSUED ACCOUNTING STANDARDS
---------------------------------------------
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement No. 123R "Share-Based Payment" (SFAS I23R), which revises FASB
Statement No. 123 (SFAS 123) and supersedes APB 25. SFAS 123R eliminates an
entity's ability to account for share-based payments using APB 25 and requires
that all such transactions be accounted for using a fair value based method. In
April 2005, the SEC deferred the effective date of SFAS 123R from the first
interim or annual period beginning after June 15, 2005, to the next fiscal year
beginning after June 15, 2005. SFAS 123R is not expected to have a material
impact on the Company's results of operations or financial position.


NOTE 6 - SEGMENT REPORTING
--------------------------
Statement of Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosures
about Segments of an Enterprise and Related Information", became effective for
fiscal years effective after December 15, 1997. SFAS No. 131 establishes
standards for the way information about operating segments is reported in
financial statements. The Company has adopted SFAS No. 131 and has identified
its insurance company operation, Crusader Insurance Company (Crusader), as its
primary reporting segment. Revenues from this segment comprised 90% of
consolidated revenues for the three and six months ended June 30, 2005, and 88%
of revenues for the three and six months ended June 30, 2004. The Company's
remaining operations constitute a variety of specialty insurance services, each
with unique characteristics and individually insignificant to consolidated
revenues.


                                       8
<PAGE>

                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005



NOTE 6 - SEGMENT REPORTING (continued)
-------------------------------------
Revenues, income before income taxes, and assets by segment are as follows:

<TABLE>
<CAPTION>
                                                   Three Months Ended                 Six Months Ended
                                                         June 30                          June 30
                                                         -------                          -------
                                                   2005            2004             2005            2004
                                                   ----            ----             ----            -----
<S>                                             <C>             <C>              <C>              <C>
Revenues
--------
Insurance company operation                     $14,063,480     $13,369,520      $27,951,109      $27,077,721


Other insurance operations                        6,055,522       6,661,853       11,517,766       13,066,703
Intersegment elimination (1)                     (4,456,679)     (4,787,959)      (8,325,438)      (9,220,819)
                                                  ---------       ---------        ---------        ---------
   Total other insurance operations               1,598,843       1,873,894        3,192,328        3,845,884
                                                  ---------       ---------        ---------        ---------

   Total Revenues                               $15,662,323     $15,243,414      $31,143,437      $30,923,605
                                                 ==========      ==========       ==========       ==========

Income Before Income Taxes
--------------------------
Insurance company operation                      $2,199,883      $1,019,570       $4,598,076       $2,349,628
Other insurance operations                          444,108         925,842          402,242        1,564,228
                                                  ---------       ---------        ---------        ---------
   Total Income Before Income Taxes              $2,643,991      $1,945,412       $5,000,318       $3,913,856
                                                  =========       =========        =========        =========
</TABLE>


                                                      As of June 30
                                                      -------------
                                                   2005           2004
                                                   ----           ----
Assets
------
Insurance company operation                    $158,985,172    $144,634,718
Intersegment eliminations (2)                    (2,397,486)     (1,568,714)
                                                -----------     -----------
     Total insurance company operation          156,587,686     143,066,004

Other insurance operations                       21,789,355      22,226,581
                                                 ----------      ----------
     Total Assets                              $178,377,041    $165,292,585
                                                ===========     ===========

(1)  Intersegment revenue eliminations reflect commission paid by Crusader to
     Unifax Insurance Systems, Inc., (Unifax) a wholly owned subsidiary of the
     Company.
(2)  Intersegment asset eliminations reflect the elimination of Crusader
     receivables and Unifax payables.


                                       9
<PAGE>

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

OVERVIEW
--------

General
-------
Unico American Corporation is an insurance holding company that underwrites
property and casualty insurance through its insurance company subsidiary;
provides property, casualty, health and life insurance through its agency
subsidiaries; and through its other subsidiaries provides insurance premium
financing and membership association services.

The Company had a net income of $1,693,313 for the three months ending June 30,
2005, compared to net income of $1,233,390 for the three months ended June 30,
2004, an increase in net income of $459,923 (37%). For the six months ended June
30, 2005, the Company had a net income of $3,198,493 compared to a net income of
$2,491,387 for the six months ended June 30, 2004, an increase in net income of
$707,106 (28%).

This overview discusses some of the relevant factors that management considers
in evaluating the Company's performance, prospects and risks. It is not
all-inclusive and is meant to be read in conjunction with the entirety of the
management discussion and analysis, the Company's financial statements and notes
thereto, and all other items contained within the report on this Form 10-Q.

Revenue and Income Generation
-----------------------------
The Company receives its revenue primarily from earned premium derived from the
insurance company operations, commission and fee income generated from the
insurance agency operations, finance charges and fee income from the premium
finance operations, and investment income from cash generated primarily from the
insurance operation. The insurance company operation generates approximately 90%
of the Company's total revenue. The Company's remaining operations constitute a
variety of specialty insurance services, each with unique characteristics and
individually not material to consolidated revenues.

Insurance Company Operation
---------------------------
The property and casualty insurance industry is highly competitive and includes
many insurers, ranging from large companies offering a wide variety of products
worldwide to smaller, specialized companies in a single state or region offering
only a single product. Many of the Company's existing or potential competitors
have considerably greater financial and other resources, have a higher rating
assigned by independent rating organizations such as A.M. Best Company, have
greater experience in the insurance industry and offer a broader line of
insurance products than the Company. Currently, Crusader is writing primarily
Commercial Multiple Peril business only in the state of California and is rated
B+ (Very Good) by A.M. Best Company.

A primary challenge of the property and casualty insurance company operation is
contending with the fact that the Company sells its products before the ultimate
costs are actually known. When pricing its products, the Company projects the
ultimate claim and loss adjustment cost that it anticipates will be incurred
after the policy is sold. In addition, factors such as changes in, among other
things, regulations, the legal environment, and inflation can all impact the
ultimate cost.

The Company's future writings growth is dependent on market conditions,
competition, and the Company's ability to introduce new and profitable products.
The Company believes that the "hard market" condition experienced by the Company
in the last few years no longer exists. The Company also believes that rate
adequacy is more important than premium growth and that underwriting profit is
the Company's primary goal. Management's assessment of trends and underwriting
results is a primary factor in its decisions to expand or contract its business.
The Company has no plan to expand into additional states. Instead, the Company
intends to allocate its resources toward marketing and improving its California
business rates, rules, and forms.

As a result of underwriting losses in 2000 through 2002, management analyzed and
acted upon various components of its underwriting activity. The Company believes
that the implementation of those actions contributed to the improved
underwriting results.


                                       10
<PAGE>

Crusader's underwriting results are as follows:

<TABLE>
<CAPTION>
                                            Three Months Ended June 30                     Six Months Ended June 30
                                            --------------------------                     ------------------------
                                                                    Increase                                       Increase
                                         2005           2004       (Decrease)          2005            2004       (Decrease)
                                         ----           ----        --------           ----            ----        --------

<S>                                  <C>             <C>          <C>               <C>             <C>          <C>
Net premium earned                   $12,990,758     $12,327,547    $663,211        $25,816,716     $24,913,866    $902,850

Less:
  Losses and loss
   adjustment expenses                 8,183,717       8,651,801    (468,084)        16,555,829      17,608,788  (1,052,959)
  Policy acquisition costs             2,721,750       2,644,762      76,988          5,327,422       5,123,172     204,250
                                      ----------      ----------     -------         ----------      ----------     -------
     Total                            10,905,467      11,296,563    (391,096)        21,883,251      22,731,960    (848,709)
                                      ----------      ----------     -------         ----------      ----------     -------
Underwriting Profit
 (Before Income Taxes)                $2,085,291      $1,030,984  $1,054,307         $3,933,465      $2,181,906  $1,751,559
                                       =========       =========   =========          =========       =========   =========
</TABLE>

Premium written before reinsurance decreased $1,192,494 (7%) to $16,248,649 for
the three months ended June 30, 2005, compared to $17,441,143 for the three
months ended June 30, 2004. For the six months ended June 30, 2005, premium
written before reinsurance decreased $3,232,988 (10%) to $30,358,205, compared
to $33,591,193 for the six months ended June 30, 2004. Policies issued decreased
734 (14%) to 4,639 for the three months ended June 30, 2005, compared to 5,373
for the three months ended March 31, 2004. For the six months ended June 30,
2005, policies issued decreased 1,181 (11%) to 9,334, compared to 10,515 for the
six months ended June 30, 2004. The decrease in written premium and policies
issued in the three and six months ended June 30, 2005, compared to the three
and six months ended June 30, 2004, was primarily the result of increased
competition.

Other Operations
----------------
The Company's other operations generate commissions, fees, and finance charges
from various insurance products. The items that have the most significant
economic impact on other operations are as follows:

Unifax primarily sells and services insurance policies for Crusader. The
commissions paid by Crusader to Unifax are eliminated as intercompany
transactions and are not reflected as income in the financial statements. Unifax
also receives policy fee income that is directly related to the Crusader
policies it sells. As a result of the decrease in Crusader policies sold by
Unifax, policy fee income decreased $114,357 (13%) to $750,778 for the three
months and $217,282 (13%) to $1,488,799 for the six months ended June 30, 2005,
compared to $865,135 for the three months and $1,706,081 for the six months
ended June 30, 2004.

American Insurance Brokers, Inc. (AIB), a wholly owned subsidiary of the
Company, sells and services health insurance policies for individual/family and
small business groups and receives commission and fee income based on the
premiums that it writes. Commission income in this program decreased $121,898
(23%) to $409,847 for the three months and $335,241 (29%) to $826,021 for the
six months ended June 30, 2005, compared to $531,745 and $1,161,262 for the
three and six months ended June 30, 2004, respectively. The decrease is
primarily a result of CIGNA HealthCare's (CIGNA) decision to discontinue its
individual/family health insurance program over the period from November 1,
2003, through October 1, 2004. AIB had been assisting former CIGNA policyholders
to find health coverage with other insurance carriers that AIB represents.

Investments and Liquidity
-------------------------
The Company generates revenue from its fixed maturity and short-term
investments. These investments totaled approximately $136.8 million (at
amortized cost) at June 30, 2005, compared to $132.1 million (at amortized cost)
at December 31, 2004. Investment income for the three months ended June 30,
2005, increased $37,190 (4%) to $1,068,842 and decreased $14,960 (1%) to
$2,118,110 for the six months ended June 30, 2005, compared to $1,031,652 and
$2,133,070 for the three and six months ended June 30, 2004, respectively.

Due to the current interest rate environment, management believes it is prudent
to purchase fixed maturity investments with approximately two-year maturities
and with minimal credit risk.


                                       11
<PAGE>

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 June 30,
2005, the Company had cash and investments of $136,793,440 (at amortized cost)
of which $134,742,458 (98.5%) were investments of Crusader.

As of June 30, 2005, the Company had invested $134,697,877 (at amortized cost)
or 98% 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 Company's investments in fixed maturity obligations of $134,697,877 (at
amortized cost) include $952,587 (0.7%) of pre-refunded state and municipal
tax-exempt bonds, $96,770,000 (71.8%) of U.S. treasury securities, $11,999,518
(8.9%) of U.S. government sponsored enterprise securities, $24,475,772 (18.2%)
of industrial and miscellaneous securities, and $500,000 (0.4%) of long-term
certificates of deposit. The tax-exempt interest income earned for the three and
six months ended June 30, 2005, was $3,491 and $7,216, respectively.

The balance of the Company's investments is in short-term investments that
include, bank money market accounts, certificates of deposit, commercial paper
and a short-term treasury money market fund.

The Company's investment guidelines on equity securities limit investments in
equity securities to an aggregate maximum of $2,000,000. The Company's
investment guidelines on fixed maturities limit fixed maturity investments to
high-grade obligations with a maximum term of eight years. The maximum
investment authorized in any one issuer is $2,000,000 and the maximum in any one
U.S. government agency or U.S. government sponsored enterprise is $3,000,000.
This dollar limitation excludes bond premiums paid in excess of par value and
U.S. government or U.S. government guaranteed issues. All investments in
municipal securities are pre-refunded and secured by U.S. treasury securities.
The short-term investments are either U.S. government obligations, FDIC insured,
or are in an institution with a Moody's rating of P2 and/or a Standard & Poor's
rating of A1. All of the Company's fixed maturity investment securities are
rated and readily marketable and could be liquidated without any materially
adverse financial impact.

On September 29, 2003, the Company borrowed $1,000,000 from Erwin Cheldin, a
director and the Company's principal shareholder, president and chief executive
officer. As of April 29, 2005, the note was paid in full.

The Company anticipates incurring approximately $600,000 of capital expenditures
in 2005 for computer hardware and software related to its conversion to a
"paperless office." The Company expects this project to be completed in 2005.
The Company's analysis of its potential return on this capital expenditure is
estimated to be approximately two years due to anticipated productivity
improvements and lower operating costs.

The Company has previously announced that its Board of Directors had authorized
the repurchase in the open market from time to time of up to an aggregate of
945,000 shares of the common stock of the Company (see Note 3). No shares were
repurchased in the six months ended June 30, 2005.

Although material capital expenditures may also be funded through borrowings,
the Company believes that its cash and short-term investments as of the date of
this report, net of trust restriction of $587,861, statutory deposits of
$700,000, cash of $200,000 deposited with superior courts in lieu of bonds, and
the 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.


                                       12
<PAGE>

RESULTS OF OPERATIONS:
---------------------
All comparisons made in this discussion are comparing the three months and six
months ended June 30, 2005, to the three months and six months ended June 30,
2004, unless otherwise indicated.

The Company had a net income of $1,693,313 for the three months ended June 30,
2005, compared to a net income of $1,233,390 for the three months ended June 30,
2004, an increase of $459,923 (37%). For the six months ended June 30, 2005, the
Company had a net income of $3,198,493 compared to a net income of $2,491,387
for the six months ended June 30, 2004, an increase of $707,106 (28%). Total
revenues increased $418,909 (3%) to $15,662,323 for the three months and
$219,832 (1%) to $31,143,437 for the six months ended June 30, 2005, compared to
total revenues of $15,243,414 for the three months and $30,923,605 for the six
months ended June 30, 2004.

PREMIUM WRITTEN before reinsurance decreased $1,192,494 (7%) to $16,248,649 for
the three months ended June 30, 2005, compared to $17,441,143 for the three
months ended June 30, 2004. For the six months ended June 30, 2005, premium
written before reinsurance decreased $3,232,988 (10%) to $30,358,205, compared
to $33,591,193 for the six months ended June 30, 2004. The Company primarily
writes commercial multiple peril business package policies in California. This
line of business represents approximately 98% of Crusader's total written
premium for the three and six months ended June 30, 2005. The decrease in
written premium in the three and six months ended June 30, 2005, compared to the
three and six months ended June 30, 2004, was primarily the result of increased
competition. A decrease in the industry-wide underwriting losses, an increase in
investment yield and decreased reinsurance costs have all contributed to the
change from the "hard market" that existed in California in the past few years
to a "soft market". The Company cannot determine how long the existing market
conditions will continue, nor in which direction they might change. The
Company's future writings and growth are dependent on market conditions,
competition, and the Company's ability to introduce new and profitable products.

The Company's average gross written premium per policy issued is as follows:

                              Gross
          Year to Date       Written       Policies     Average Gross
             June 30         Premium        Issued     Written Premium
             -------         -------        ------     ---------------
              2005         $30,358,205       9,334         $3,252
              2004         $33,591,193      10,515         $3,195

Beginning July 1, 2003, the Company had placed moratoriums on all non-California
business, primarily due to the fact that much of the Company's business outside
of California had not been profitable. The Company has no current plan to expand
into additional states. Instead, the Company intends to allocate its resources
toward marketing and improving its California business rates, rules, and forms.

PREMIUM EARNED before reinsurance decreased $305,122 (2%) to $16,533,913 for the
three months and $104,435 (0.3%) to $33,209,558 for the six months ended June
30, 2005, compared to $16,839,035 for the three months and $33,313,913 for the
six months ended June 30, 2004. The Company writes annual policies and,
therefore, earns written premium over the one-year policy term. The decrease in
earned premium is a direct result of the related decrease in written premium
previously discussed.

Premium ceded decreased $968,333 (21%) to $3,543,155 for the three months and
$1,007,285 (12%) to $7,392,842 for the six months ended June 30, 2005, compared
to ceded premium of $4,511,488 in the three months and $8,400,127 for the six
months ended June 30, 2004. Earned premium ceded consists of both premium ceded
under the Company's current reinsurance contracts and premium ceded to the
Company's provisionally rated reinsurance contracts. Prior to January 1, 1998,
the Company's reinsurer charged a provisional rate on exposures up to $500,000
that was subject to adjustment and was based on the amount of losses ceded,
limited by a maximum percentage that could be charged. That provisionally rated
treaty was cancelled on a runoff basis in 1997.


                                       13
<PAGE>

Direct earned premium, earned ceded premium, and ceding commission are as
follows:

<TABLE>
<CAPTION>
                                             Three Months Ended June 30                        Six Months Ended June 30
                                             --------------------------                        ------------------------
                                                                    Increase                                         Increase
                                        2005            2004       (Decrease)            2005           2004        (Decrease)
                                        ----            ----        --------             ----           ----         --------
<S>                                 <C>             <C>             <C>               <C>            <C>             <C>
Direct earned premium               $16,533,913     $16,839,035     ($305,122)        $33,209,558    $33,313,993     $(104,435)
Earned ceded premium:
  Excluding provisionally rated
    ceded premium                     3,618,163       4,488,767      (870,604)          7,268,272      8,684,829    (1,416,557)
  Provisionally rated ceded premium     (75,008)         22,721       (97,729)            124,570       (284,702)      409,272
                                      ---------       ---------       -------           ---------      ---------     ---------
      Total Earned Ceded Premium      3,543,155       4,511,488      (968,333)          7,392,842      8,400,127    (1,007,285)
Ceding commission                    (1,188,303)     (1,496,280)      307,977          (2,386,706)    (2,959,916)      573,210
                                      ---------       ---------       -------           ---------      ---------       -------
      Total Earned Ceded Premium
       Net of Ceding Commission      $2,354,852      $3,015,208     $(660,356)         $5,006,136     $5,440,211      $434,075)
                                      =========       =========       =======           =========      =========       =======
</TABLE>

The decrease in earned ceded premium (excluding provisionally rated ceded
premium) for the three and six months ended June 30, 2005, is primarily related
to a decrease in the reinsurance rate charged by the Company's reinsurers. This
rate decrease was primarily due to favorable ceded loss experience in 2004 and
2003, an increase in 2005 retention of $50,000 per risk, and cessation of the
contingent commission in 2005.

In 2005 and 2004 Crusader retained a participation in its excess of loss
reinsurance treaties of 10% in its 1st layer ($750,000 in excess of $250,000 for
2004, and $700,000 in excess of $300,000 for 2005), 10% in its 2nd layer
($1,000,000 in excess of $1,000,000), and 30% in its property clash treaty.

Beginning January 1, 2005, Crusader increased its retention from $250,000 to
$300,000 per risk. There has been no change in the annual aggregate deductible
or participation rates compared to 2004. The 2005 1st layer primary excess of
loss treaty does not provide for a contingent commission.

Crusader's 2004 and 2003 1st layer primary excess of loss treaty provides for a
contingent commission equal to 45% of the net profit, if any, accruing to the
reinsurer. Based on losses and loss adjustment expenses ceded (including
incurred but not reported losses) as of June 30, 2005, no contingent commission
has been accrued.

NET INVESTMENT INCOME, excluding realized investment gains, increased $37,190
(4%) to $1,068,842 for the three months and decreased $14,960 (1%) to $2,118,110
for the six months ended June 30, 2005, compared to investment income of
$1,031,652 for the three months and $2,133,070 for the six months ended June 30,
2004. Due to the current interest rate environment, management believes it is
prudent to purchase fixed maturity investments with approximately two-year
maturities and with minimal credit risk.

The average yield on the Company's investments is as follows:

<TABLE>
<CAPTION>
                             Three Months Ended June 30       Six Months Ended June 30
                             --------------------------       ------------------------
                                 2005           2004             2005           2004
                                 ----           ----             ----           ----
<S>                          <C>            <C>              <C>            <C>
Average Invested Assets      $136,950,535   $121,905,278     $134,442,250   $121,344,766
Total Investment income        $1,068,842     $1,031,652       $2,118,110     $2,133,070
Average Yield                         3.1%           3.4%             3.2%           3.5%
</TABLE>

The weighted average maturity of the Company's investments was 1.4 years as of
June 30, 2005, compared to 2.0 years as of June 30, 2004.

At June 30, 2005, the Company held fixed maturity investments with unrealized
appreciation of $691,166 and fixed maturity investments with unrealized
depreciation of $753,363. The Company monitors its investments closely. If an
unrealized loss is determined to be other than temporary, it is written off as a
realized loss through the Consolidated Statements of Operations. The Company's
methodology of assessing other-than-temporary impairments is based on
security-specific analysis as of the balance sheet date and considers various
factors including the length of time and the extent to which the fair value has
been less than the cost, the financial condition and the near term prospects of
the issuer, whether the debtor is current on its contractually obligated
interest and principal payments, and the Company's intent to hold the investment
for a period of time sufficient to


                                       14
<PAGE>

allow the Company to recover its costs. The Company has concluded that the gross
unrealized losses of $753,363 at June 30, 2005, were temporary in nature.
However, facts and circumstances may change which could result in a decline in
market value considered to be other than temporary. The following table
summarizes, for all fixed maturities in an unrealized loss position at June 30,
2005, the aggregate fair value and gross unrealized loss by length of time those
fixed maturities have been continuously in an unrealized loss position:

                                           Gross
                       Fair Value      Unrealized Loss
                       ----------      ---------------
0-6 months            $16,884,734         $37,726
7-12 months            26,222,310         256,681
Over 12 months         54,581,898         458,956
                       ----------         -------
  Total               $97,688,942        $753,363
                       ==========         =======

As of June 30, 2005, the fixed maturity investments with a gross unrealized loss
for a continuous period of 0 to 6 months consisted of U.S. treasury securities
and industrial securities. The fixed maturity investments with a gross
unrealized loss position for a continuous period of 7 to 12 months consisted of
U.S. treasury securities. The fixed maturity investments with a gross unrealized
loss position for a continuous period over 12 months consisted of U.S. treasury
securities, U.S. government sponsored enterprise securities, and pre-refunded
state bonds.

GROSS COMMISSIONS AND FEES decreased $237,807 (15%) to $1,391,346 for the three
months and $575,079 (17%) to $2,764,671 for the six months ended June 30, 2005,
compared to commissions and fees of $1,629,153 for the three months and
$3,339,750 for the six months ended June 30, 2004.

The decrease in gross commissions and fee income for the three and six months
ended June 30, 2005, compared to the three and six months ended June 30, 2004,
are as follows:

<TABLE>
<CAPTION>
                                               Three Months Ended June 30                   Six Months Ended June 30
                                               --------------------------                   ------------------------
                                                                    Increase                                      Increase
                                             2005         2004     (Decrease)            2005         2004       (Decrease)
                                             ----         ----      --------             ----         ----        --------
<S>                                        <C>          <C>        <C>               <C>           <C>            <C>
Policy fee income                          $750,778     $865,135   $(114,357)        $1,488,799    $1,706,081     $(217,282)
Health and life insurance program
  commission and fee income                 409,847      531,745    (121,898)           826,021     1,161,262      (335,241)
Other commission and fee income              92,249       93,876      (1,627)           190,503       192,412        (1,909)
Daily automobile rental insurance program:
   Commission income (excluding
      contingent commission)                108,596      138,397     (29,801)           229,472       270,507       (41,035)
   Contingent commission                     29,876            -      29,876             29,876         9,488        20,388
                                          ---------    ---------     -------          ---------     ---------       -------
      Total                              $1,391,346   $1,629,153   $(237,807)        $2,764,671    $3,339,750     $(575,079)
                                          =========    =========     =======          =========     =========       =======
</TABLE>

The decrease in policy fee income is a result of a decrease in the number of
policies issued during the three and six months ended June 30, 2005, as compared
to the three and six months ended June 30, 2004. The Company has increased its
policy fee approximately 8% for policies effective on or after June 26, 2005.
The effect of this increase should be recognized beginning in the quarter ending
September 30, 2005.

Commission and fee income in the health and life program decreased in the three
and six months ended June 30, 2005, compared to the three and six months ended
June 30, 2004. The decrease is a result of CIGNA's decision to discontinue its
individual/family health insurance program over the period from November 1,
2003, through October 1, 2004. AIB had been assisting former CIGNA policyholders
to find health coverage with other insurance carriers that AIB represents.

LOSSES AND LOSS ADJUSTMENT EXPENSES were 63% of net premium earned for the three
months and 64% of net premium earned for the six months ended June 30, 2005,
compared to 70% of net premium earned for the three months and 71% of net
premium earned for the six months ended June 30, 2004. Losses and loss
adjustment expenses for the 2005 accident year were 70% of net premium earned
for the three and six months ended June 30, 2005. Losses and loss adjustment
expenses for the 2004 accident year were 71% of net premium earned for the three
and six months ended June 30, 2004. Losses and loss adjustment expenses of all
prior accident years were approximately $875,000 (favorable development) in the
three months and $1,614,000 (favorable development) in the six months ended June
30, 2005, compared to losses and loss adjustment expenses of all prior accident
years of approximately $154,000 (favorable development) in the three months and
$175,000 (favorable development) in the six months ended June 30, 2004.


                                       15
<PAGE>

As a result of Crusader underwriting losses that began in the year ended
December 31, 2000, Crusader's management has been analyzing and acting upon
various components of its underwriting activity. These components include the
following:

1. Business Outside of California
2. Habitability Exposure
3. Construction Defect Exposure
4. Special Risk Class of Business
5. Increased Cost of Settling Claims, Indemnity and Expense
6. Increased Cost of Reinsurance
7. Mold Exposure
8. Terrorism Exposure

The favorable development of prior years during 2005 was primarily due to lower
than previously anticipated losses and loss adjustment expenses being incurred
for accident years 2003 and prior. Accordingly, the Company reduced the estimate
of its ultimate losses and loss adjustment expenses for those accident years.
The Company believes that implementation of management's actions on the
underwriting components discussed above have contributed to the improved
operating results.

The Company`s consolidated financial statements include estimated reserves for
unpaid losses and related claim settlement or loss adjustment expenses of the
insurance company operation. Crusader sets loss and loss adjustment expense
reserves at each balance sheet date as management's best estimate of the
ultimate payments that it anticipates will be made to settle all losses incurred
and related expenses incurred as of that date for both reported and unreported
losses. Estimating loss reserves is a difficult process as there are many
factors that can ultimately affect the final settlement of a claim and,
therefore, the reserve that is needed. Changes in the regulatory and legal
environment, results of litigation, medical costs, the cost of repair materials
and labor rates can all impact ultimate claim costs. In addition, time can be a
critical part of reserving determinations since the longer the span between the
incidence of a loss and the payment or settlement of the claim, the more
variable the ultimate settlement amount can be. Accordingly, short-tail claims,
such as property damage claims, tend to be more reasonably predictable than
long-tail liability claims. The liability for unpaid losses and loss adjustment
expenses is based upon the accumulation of individual case estimates for losses
reported prior to the close of the accounting period plus estimates based on
experience and industry data for development of case estimates and for
unreported losses and loss adjustment expenses. Since the emergence and
disposition of claims are subject to uncertainties, the net amounts that will
ultimately be paid to settle claims may vary significantly from the estimated
amounts provided for in the accompanying consolidated financial statements. Any
adjustments to reserves are reflected in the operating results of the periods in
which they are made. The Company believes that the aggregate reserves for losses
and loss adjustment expenses are reasonable and adequate to cover the cost of
claims, both reported and unreported.

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 21% of net premium earned for the three and six months
ended June 30, 2005, and 21% of net earned premium for the three and six months
ended June 30, 2004.

SALARIES AND EMPLOYEE BENEFITS increased $174,293 (16%) to $1,271,638 for the
three months and $245,531 (11%) to $2,558,995 for the six months ended June 30,
2005, compared to salary and employee benefits of $1,097,345 for the three
months and $2,313,464 for the six months ended June 30, 2004. The increase in
salaries and employee benefits for the three and six months ended June 30, 2005
was primarily due to an increase in employee benefits.

COMMISSIONS TO AGENTS/BROKERS decreased $58,910 (25%) to $172,263 for the three
months and $144,993 (29%) to $357,303 for the six months ended June 30, 2005,
compared to commission expense of $231,173 for the three months and $502,296 for
the six months ended June 30, 2004. The decrease is primarily the result of a
decrease in premiums written in the health and life insurance program and is
related to the decrease in health and life insurance program commission income.


                                      16
<PAGE>

OTHER OPERATING EXPENSES decreased $3,957 (1%) to $668,964 for the three months
and $118,459 (8%) to $1,343,570 for the six months ended June 30, 2005, compared
to $672,921 for the three months and $1,462,029 for the six months ended June
30, 2004. The decrease in other operating expenses in the six months ended June
30, 2005, is primarily due to a decrease of approximately $113,000 in legal
expenses.

INCOME TAX PROVISION was an expense of $950,678 (36% of pre-tax income) for the
three months and $1,801,825 (36% of pre-tax income) for the six months ended
June 30, 2005, compared to an income tax expense of $712,022 (37% of pre-tax
income) in the three months and an income tax expense of $1,422,469 (36% of
pre-tax income) for the six months ended June 30, 2004. This change was
primarily due to a pre-tax income of $2,643,991 (including tax-exempt investment
income of $3,491) in the three months and $5,000,318 (including tax-exempt
investment income of $7,216) in the six months ended June 30, 2005, compared to
pre-tax income of $1,945,412 (including tax-exempt investment income of $12,430)
in the three months and a pre-tax income of $3,913,856 (including tax-exempt
investment income of $29,517) in the six months ended June 30, 2004.

The effect of inflation on net income of the Company during the three and six
months ended June 30, 2005, and the three and six months ended June 30, 2004,
was not significant.

FORWARD LOOKING STATEMENTS
--------------------------
Certain statements contained herein, including the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," that are not historical facts are forward looking. These
statements, which may be identified by forward-looking words or phrases such as
"anticipate," "believe," "expect," "intend," "may," "should," and "would,"
involve risks and uncertainties, many of which are beyond the control of the
Company. Such risks and uncertainties could cause actual results to differ
materially from these forward-looking statements. Factors which could cause
actual results to differ materially include underwriting actions not being
effective, rate increases for coverages not being sufficient, premium rate
adequacy relating to competition or regulation, actual versus estimated claim
experience, regulatory changes or developments, unforeseen calamities, general
market conditions, the Company's ability to introduce new profitable products,
and the Company's ability to expand geographically.


ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
The Company's consolidated balance sheet includes a substantial amount of
invested assets whose fair values are subject to various market risk exposures
including interest rate risk and equity price risk.

The Company's invested assets consist of the following:

<TABLE>
<CAPTION>
                                                       June 30       December 31       Increase
                                                        2005             2004         (Decrease)
                                                        ----             ----          --------
<S>                                                 <C>              <C>              <C>
Fixed maturity bonds (at amortized value)           $134,197,877     $128,489,658     $5,708,219
Short-term cash investments (at cost)                  2,078,846        3,118,118     (1,039,272)
Certificates of deposit (over 1 year, at cost)           500,000          500,000              -
                                                     -----------      -----------      ---------
     Total Invested Assets                          $136,776,723     $132,107,776     $4,668,947
                                                     ===========      ===========      =========
</TABLE>

There have been no material changes in the composition of the Company's invested
assets or market risk exposures since the end of the preceding fiscal year end.


ITEM 4 - CONTROLS AND PROCEDURES
--------------------------------
An evaluation was carried out by the Company's management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of
June 30, 2005 (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures were effective.

During the period covered by this report, there have been no changes in the
Company's internal control over financial reporting that have materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting.


                                       17
<PAGE>

PART II - OTHER INFORMATION
---------------------------

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
--------------------------------------------------------
(a)  On May 26, 2005, 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 as
     directors to serve until the next annual meeting of stockholders and until
     their successors are duly elected and qualified. There were no broker
     non-votes.

            Name                   For         Against or Withheld
            ----                   ---         -------------------
     Erwin Cheldin               5,269,441            77,646
     Cary L. Cheldin             5,243,941           103,146
     Lester A. Aaron             5,235,810           111,277
     George C. Gilpatrick        5,302,880            44,207
     David A. Lewis              5,318,698            28,389
     Warren D. Orloff            5,337,868             9,219
     Donald B. Urfrig            5,340,329             6,758


ITEM 6 - EXHIBITS
-----------------

      31.1   Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)
             or Rule 15d-14(a), as adopted pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002.

      31.2   Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)
             or Rule 15d-14(a), as adopted pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002.

      32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C.
             Section 1350, as adopted pursuant to Section 906 of the
             Sarbanes-Oxley Act of 2002.

      32.2    Certification of Chief Financial Officer pursuant to 18 U.S.C.
              Section 1350, as adopted pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.



                                   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 thereunto duly authorized.

       UNICO AMERICAN CORPORATION

Date:   August 11, 2005         By:   /s/ ERWIN CHELDIN
                                ------------------------------------------------
                                Erwin Cheldin
                                Chairman of the Board, President and Chief
                                Executive Officer, (Principal Executive Officer)



Date:   August 11, 2005         By:   /s/ LESTER A. AARON
                                ------------------------------------------------
                                Lester A. Aaron
                                Treasurer, Chief Financial Officer, (Principal
                                Accounting and Principal Financial Officer)


                                       18
<PAGE>

EXHIBIT INDEX
-------------

Exhibit No.    Description
----------     -----------
31.1           Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)
               or Rule 15d-14(a), as adopted pursuant to Section 302 of the
               Sarbanes-Oxley Act of 2002 (filed herewith)

31.2           Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)
               or Rule 15d-14(a), as adopted pursuant to Section 302 of the
               Sarbanes-Oxley Act of 2002 (filed herewith)

32.1           Certification of Chief Executive Officer pursuant to 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002 (filed herewith)

32.2           Certification of Chief Financial Officer pursuant to 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002 (filed herewith)