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 July 1, 1998 to September 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


                                    6,220,786
       Number of shares of common stock outstanding as of November 5, 1998


                                       1
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

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

                                                                                          September 30            December 31
                                                                                              1998                   1997
                                                                                              ----                   ----
                                                           ASSETS
<S>                                                                                        <C>                    <C>    
Investments
   Available for sale:
      Fixed maturities, at market value (amortized cost: September
         30, 1998  $94,281,485;  December 31, 1997  $86,106,571)                           $98,107,313            $87,965,590
      Equity securities at market (cost: September 30, 1998
          $1,897,317;   December 31, 1997  $230,460)                                         1,769,000                223,100
   Short-term investments, at cost                                                           4,753,556              6,137,495
                                                                                           -----------             ----------
      Total Investments                                                                    104,629,869             94,326,185
Cash                                                                                           391,147                 55,768
Accrued investment income                                                                    1,873,089              1,807,364
Premiums and notes receivable, net                                                           6,430,394              7,404,606
Reinsurance recoverable:
   Paid losses and loss adjustment expenses                                                    347,024                 56,379
   Unpaid losses and loss adjustment expenses                                                1,248,913              1,413,603
Prepaid reinsurance premiums                                                                    15,373                945,563
Deferred policy acquisition costs                                                            4,864,173              4,886,684
Property and equipment (net of accumulated depreciation)                                       186,011                203,709
Deferred income taxes                                                                                -              1,005,865
Other assets                                                                                   485,440                836,658
                                                                                           -----------            -----------
     Total Assets                                                                         $120,471,433           $112,942,384
                                                                                           ===========            ===========

                                            LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses                                                 $42,288,381            $42,004,851
Unearned premiums                                                                           19,242,772             21,673,009
Advance premiums                                                                             1,576,922              1,368,114
Funds held as security for performance                                                         697,866                723,066
Accrued expenses and other liabilities                                                       4,206,866              2,095,567
Income taxes payable                                                                            23,250                 16,993
Deferred income taxes payable                                                                   15,275                      -
                                                                                            ----------             ----------
    Total Liabilities                                                                      $68,051,332            $67,881,600
                                                                                            ----------             ----------

STOCKHOLDERS'  EQUITY
Common stock,  no par - authorized  10,000,000  shares,  issued and  outstanding
   shares 6,220,786 at September 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                      2,440,357              1,222,095
Retained earnings                                                                           47,092,792             41,000,631
                                                                                            ----------             ----------
  Total Stockholders' Equity                                                               $52,420,101            $45,060,784
                                                                                            ----------             ----------

  Total Liabilities and Stockholders' Equity                                              $120,471,433           $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                        Nine Months Ended
                                                                      September 30                             September 30
                                                                      ------------                             ------------
                                                                 1998             1997                   1998               1997
                                                                 ----             ----                   ----               ----
<S>                                                          <C>                <C>                  <C>                <C>    
REVENUES
Insurance Company Revenues
     Premium earned                                          $10,048,497        $10,997,409          $31,018,804        $31,784,235
     Premium ceded                                             1,537,040          1,856,727            4,308,176          4,410,728
                                                              ----------         ----------           ----------         ----------
          Net premium earned                                   8,511,457          9,140,682           26,710,628         27,373,507
     Net investment income                                     1,385,234          1,239,020            4,045,696          3,584,168
     Net realized investment gains                               124,939             24,174              141,169             25,093
     Other income                                                     75                223                1,138                383
                                                              ----------         ----------           ----------         ----------
          Total Insurance Company Revenues                    10,021,705         10,404,099           30,898,631         30,983,151

Other Revenues from Insurance Operations
     Gross commissions and fees                                1,456,945          1,422,735            4,242,324          4,320,194
     Investment income                                            63,173             35,894              166,786            105,607
     Finance charges and late fees earned                        261,475            302,555              779,393            894,480
     Other income                                                    875                729                6,004              7,083
                                                              ----------         ----------           ----------         ----------
          Total Revenues                                      11,804,173         12,166,012           36,093,138         36,310,515
                                                              ----------         ----------           ----------         ----------

EXPENSES
Losses and loss adjustment expenses                            4,372,848          4,846,266           13,567,529         14,742,677
Policy acquisition costs                                       2,286,373          2,726,391            7,312,011          7,965,440
Salaries and employee benefits                                 1,046,831            885,196            3,088,568          2,745,272
Commissions to agents/brokers                                    275,964            242,139              756,502            811,600
Other operating expenses                                         645,148            653,822            1,775,019          2,007,258
                                                             -----------        -----------          -----------         ----------
          Total Expenses                                       8,627,164          9,353,814           26,499,629         28,272,247
                                                              ----------         ----------           ----------         ----------

          Income Before Taxes                                  3,177,009          2,812,198            9,593,509          8,038,268

Income Tax Provision                                             997,213            861,392            3,065,893          2,437,724
                                                              ----------        -----------           ----------         ----------

          Net Income                                          $2,179,796         $1,950,806           $6,527,616         $5,600,544
                                                               =========          =========            =========          =========



PER SHARE DATA:
Basic
   Earnings Per Share                                              $0.35              $0.32               $1.06               $0.91
   Shares Outstanding                                          6,220,753          6,153,203           6,185,212           6,125,001
Diluted
   Earnings Per Share                                              $0.34              $0.30               $1.02               $0.88
   Shares Outstanding                                          6,421,286          6,403,457           6,428,962           6,396,280



</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                      Nine Months Ended    
                                                                      September 30                           September 30
                                                       
                                                                 1998               1997                1998              1997
                                                                 ----               ----                ----              ----

<S>                                                           <C>                <C>                 <C>               <C>       
Net income                                                    $2,179,796         $1,950,806          $6,527,616        $5,600,544
Other changes in comprehensive income
   net of tax:
     Unrealized gains on securities
        classified as available-for-sale arising
        during the period                                      1,133,531            462,926           1,218,262           209,688
     Less: reclassification adjustment for
        gains included in net income                             (82,460)           (15,955)            (93,172)          (16,562)
                                                               ---------          ---------           ---------         ---------
            Comprehensive Income                              $3,230,867         $2,397,777          $7,652,706        $5,793,670
                                                               =========          =========           =========         =========




</TABLE>































            See notes to unaudited consolidated financial statements.



                                       4
<PAGE>


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

                     FOR THE NINE MONTHS ENDED SEPTEMBER 30,

<TABLE>
<CAPTION>
                                                                                           1998                   1997
                                                                                           ----                   ----
<S>                                                                                    <C>                    <C>
Cash Flows from Operating Activities:
   Net Income                                                                          $6,527,616             $5,600,544
   Adjustments to reconcile net income to net cash from operations
      Depreciation and amortization                                                        73,120                 63,438
      Bond amortization, net                                                              495,668                393,858
      Net realized (gain) on sale of securities                                          (141,169)               (25,093)
   Changes in assets and liabilities
      Premium, notes and investment income receivable                                     908,487              1,089,572
      Reinsurance recoverable                                                            (125,955)               592,123
      Prepaid reinsurance premiums                                                        930,190                395,025
      Deferred policy acquisitions costs                                                   22,511                (14,715)
      Other assets                                                                        351,218                (38,956)
      Reserve for unpaid losses and loss adjustment expenses                              283,530              2,615,254
      Unearned premium reserve                                                         (2,430,237)              (128,879)
      Funds held as security and advanced premiums                                        183,608                (20,037)
      Accrued expenses and other liabilities                                            2,111,299               (111,733)
      Income taxes current/deferred                                                       399,807                 33,077
                                                                                        ---------             ----------
          Net Cash Provided from Operations                                             9,589,693             10,443,478
                                                                                        ---------             ----------

Investing Activities
     Purchase of fixed maturity investments                                           (17,457,379)           (15,372,354)
     Proceeds from maturity of fixed maturity investments                               7,794,600              5,098,000
     Proceeds from sale of fixed maturity investments                                   1,041,250                      -
     Purchase of equity securities - cost                                              (3,128,440)            (1,019,500)
     Proceeds from sale of equity securities                                            1,523,994                814,132
     Net increase in short-term investments                                             1,413,644              1,336,062
     Additions to property and equipment                                                  (55,422)               (44,307)
                                                                                        ----------             ---------
          Net Cash (Used) by Investing Activities                                      (8,867,753)            (9,187,967)
                                                                                        ---------              ---------

Financing Activities
     Proceeds from issuance of common stock                                                48,894                    359
     Repayment of note payable - bank                                                           -               (750,001)
     Dividends paid to shareholders                                                      (435,455)              (430,724)
                                                                                          -------              ---------
          Net Cash (Used) by Financing Activities                                        (386,561)            (1,180,366)
                                                                                          -------              ---------

Net Increase in Cash                                                                      335,379                 75,145
Cash at beginning of period                                                                55,768                 82,637
                                                                                          -------               --------
          Cash at End of Period                                                          $391,147               $157,782
                                                                                          =======               ========

Supplemental Cash Flow Information
     Cash Paid During the Period for:
          Interest                                                                           $121                $21,954
          Income taxes                                                                 $2,505,000             $2,295,000


</TABLE>

            See notes to unaudited consolidated financial statements.


                                       5
<PAGE>



                           UNICO AMERICAN CORPORATION
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 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 nine  months  ended  September  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
September 30, 1998, there were 286,366 options outstanding of which 216,035 were
currently  exercisable.  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
                               SEPTEMBER 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  September  30, 1998 and 1997,  and for the nine months ended
September 30, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                    Three Months Ended               Nine Months Ended
                                                                      September 30                      September 30
                                                                  1998             1997            1998             1997
                                                                  ----             ----            ----             ----
Basic Earnings Per Share

<S>                                                           <C>               <C>             <C>              <C>       
Net income numerator                                          $2,179,796        $1,950,806      $6,527,616       $5,600,544
                                                               =========         =========       =========        =========

Weighted average shares outstanding
     denominator                                               6,220,753         6,153,203       6,185,212        6,125,001
                                                               =========         =========       =========        =========

     Basic Earnings Per Share                                     $0.35              $0.32          $1.06             $0.91


Diluted Earnings Per Share
Net income numerator                                          $2,179,796        $1,950,806      $6,527,616       $5,600,544
                                                               =========         =========       =========        =========

Weighted average shares outstanding
     denominator                                               6,220,753         6,153,203       6,185,212        6,125,001
Effect of diluted securities                                     200,533           250,254         243,750          271,279
                                                               ---------         ---------       ---------        ---------
Diluted shares outstanding denominator                         6,421,286         6,403,457       6,428,962        6,396,280
                                                               =========         =========       =========        =========

     Diluted Earnings Per Share                                   $0.34              $0.30          $1.02             $0.88

</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 subsidiary,  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 September  30, 1998,  the
Company had cash and cash  investments of  $101,323,505  (at amortized  cost) of
which $95,574,748 (94%) were investments of Crusader.

As of the quarter ended  September  30, 1998,  the Company had  $94,281,485  (at
amortized cost) or 93% 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   fixed   maturity   investments   are   classified  as
available-for-sale,  the Company's investment  guidelines place primary emphasis
on buying and  holding  high-quality  fixed  maturity  investments  until  their
maturities.

The Company's  investments in fixed maturity  obligations  included  $34,298,371
(36%) of pre-refunded state and municipal tax-exempt bonds, $13,615,259 (15%) of
U.S. treasury securities, $46,067,855 (49%) in high-quality industrial bonds and
$300,000 of certificates of deposit.  The tax-exempt  interest income earned for
the three months and nine months  ended  September  30,  1998,  was $417,366 and
$1,283,319,  respectively.  The tax-exempt  interest income earned for the three
months and nine months ended  September 30, 1997,  was $448,986 and  $1,353,148,
respectively.

The balance of the Company's  investments were invested in equity securities and
high-quality,  short-term  investments  that include a U.S.  treasury bill, bank
money  market  accounts,   certificates  of  deposit,  commercial  paper  and  a
short-term treasury money market fund.

The  Company's  investment  policy  limits  investments  in any one  company  to
$1,500,000.  This limitation  excludes bond premiums paid in excess of par value
and U.S. government or U.S. government  guaranteed  issues.  The Company also
limits its  holdings of equity  securities  to no greater  than five  percent of
stockholders' equity. 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 August 14, 1998,  the company  paid the $0.07 (seven  cents) per common share
cash  dividend  that was declared by the Board of  Directors on May 1, 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 September 30,
1998, net of trust restriction of $2,769,593,  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

                                       8
<PAGE>

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

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
September  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.

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 nine months
ended September 30, 1998, to the three and nine months ended September 30, 1997,
unless otherwise indicated.

The Company's net income  increased  $228,990  (12%) to $2,179,796 for the three
months and $927,072 (17%) to $6,527,616 for the nine months ended  September 30,
1998,  compared to net income of $1,950,806  for the three months and $5,600,544
for the nine months ended September 30, 1997. Total revenues  decreased $361,839
(3%) for the three months and decreased  $217,377 (1%) for the nine months ended
September 30, 1998,  when compared to the three and nine months ended  September
30, 1997.

Premium earned before reinsurance decreased $948,912 (9%) to $10,048,497 for the
three months and  decreased  $765,431  (2%) to  $31,018,804  for the nine months
ended September 30, 1998,  compared to the three and nine months ended September
30, 1997. Crusader's commercial package business represents approximately 97% of
insurance  premiums  earned as of  September  30,  1998,  compared  to 96% as of
September 30, 1997.

Premium written before reinsurance  decreased $1,458,352 (14%) to $9,035,312 for
the three months and  decreased  $3,066,789  (10%) to  $28,588,566  for the nine
months ended  September  30,  1998,  compared to the three and nine months ended
September  30, 1997.  This  decrease in written  premium is  primarily  due to a
change in the marketing  strategy for the states of Washington  and Oregon where
premium decreased  $1,286,266 for the three months and decreased  $2,445,907 for
the nine months ended September 30, 1998,  compared to the three and nine months
ended  September 30, 1997. 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
14% of gross  earned  premium  for the nine months  ended  September  30,  1998,
compared to 17% for the three months and 14% for the nine months ended September
30, 1997.

Net investment income,  excluding realized investment gains,  increased $173,493
(14%) to $1,448,407  for the three months and $522,707  (14%) to $4,212,482  for
the nine months ended  September  30,  1998,  compared to  investment  income of
$1,274,914  for the  three  months  and  $3,689,775  for the nine  months  ended
September  30,  1997.  This  increase  was  primarily  due to a 13% increase (at
amortized cost) in invested assets.

The  Company  realized  investment  gains of $124,939  for the three  months and
$141,169 for the nine months ended  September  30, 1998,  compared to investment
gains of $24,174 for the three  months and  $25,093  for the nine  months  ended
September 30, 1997.  The increase in investment  gains is the result of gains of
$46,181 from the sales of equity  securities and a gain of $78,758 from the sale
of a U.S.  treasury note. The proceeds of the U.S. treasury note, which was sold
in the quarter  ended  September  30, 1998,  were  reinvested  into a high-grade
corporate  note with  approximately  the same maturity  date,  but with a higher
yield.

                                       9
<PAGE>

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

Gross  commission  and fee income  increased  $34,210 (2%) to $1,456,945 for the
three months and decreased  $77,870 (2%) to $4,242,324 for the nine months ended
September  30, 1998,  compared to the three and nine months ended  September 30,
1997.  This  increase  for the three months and the decrease for the nine months
consisted of the following:

                                                        Three Months Nine Months
                                                        ------------ -----------
             
 Workers' compensation program                            $ 4,940      $ 41,371
 Daily automobile rental insurance program                 46,543        63,949
 Health and life insurance program                         83,846        46,424
 Service fee income                                       (94,996)     (154,548)
 Commercial automobile insurance program (discontinued)    (6,123)      (75,066)
                                                           ------       -------
    Net increase (decrease) in commission and fee income  $34,210      $(77,870)
                                                           ======        ======



The decrease in service fee income for the three and nine months ended September
30, 1998, was primarily related to the decrease in written premium.

Losses and loss adjustment expenses were 51% of net premium earned for the three
months and the nine months  ended  September  30,  1998,  compared to 53% of net
premium  earned for the three months and 54% of net premium  earned for the nine
months  ended  September  30,  1997.  This  decrease  was  primarily  due to the
favorable development of prior period losses.

Policy acquisition costs consist of commissions, premium taxes, inspection fees,
and  certain  other  underwriting  costs that 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 and the nine
months ended  September 30, 1998,  compared to 30% of net premium earned for the
three months and 29% of net premium  earned for the nine months ended  September
30, 1997.

Salaries and employee  benefits  increased  $161,635 (18%) to $1,046,831 for the
three months and  increased  $343,296  (13%) to  $3,088,568  for the nine months
ended September 30, 1998,  compared to salary and employee  benefits of $885,196
for the three  months and  $2,745,272  for the nine months ended  September  30,
1997.

Commissions to agents/brokers  increased $33,825 (14%) to $275,964 for the three
months  and  decreased  $55,098  (7%) to  $756,502  for the  nine  months  ended
September  30, 1998,  compared to the three and nine months ended  September 30,
1997. The increase in the three months is primarily due to a related increase in
revenue in the health and life program,  which had  experienced  declines in the
previous periods.  The decrease in the nine month period is primarily related to
the sale of the commercial automobile program to a non-affiliated third party in
June, 1997.

Other  operating  expenses  decreased  $8,674  (1%)  for the  three  months  and
decreased $232,239 (12%) for the nine months ended September 30, 1998,  compared
to the three and nine months ended  September  30, 1997.  This  decrease for the
nine  months was  primarily  due to a $240,155  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 1.6% to 32.0% of income before taxes for the nine
months ended September 30, 1998, compared to the nine months ended September 30,
1997.  This  increase was primarily  due to an $82,646  decrease in  non-taxable
income  (interest on municipal  bonds and dividends on equity  securities) and a
$64,441  increase in the federal  income tax provision  resulting  from the full
settlement  of all tax issues which were 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 nine
months ended September 30, 1998 and 1997 was not significant.

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

Forward looking statements
Information contained in this discussion, other than historical information, are
considered  "forward  looking  statements" and may be subject to change based on
various important factors and  uncertainties.  Some, but not all, of the factors
and  uncertainties  that may cause actual results to differ  significantly  from
those expected in any forward looking  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.



PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits:
      Exhibit 27 - Financial Data Schedule.

(b)   Reports on Form 8-K:
      None.

























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                                   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: November 12, 1998   By:   /s/ERWIN CHELDIN        
                                ----------------
                                Erwin Cheldin
                                Chairman of the Board, President and Chief
                                Executive Officer, (Principal Executive Officer)



Date: November 12, 1998   By:   /s/LESTER A. AARON              
                                ------------------
                                Lester A. Aaron
                                Treasurer, Chief Financial Officer, (Principal
                                Accounting and Principal Financial Officer)



                                       12
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