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, 1997 to September 30, 1997

                           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


                                    6,153,203
      Number of shares of common stock outstanding as of November 10, 1997


                                       1 of 12
<PAGE>



                         PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

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



                                                                                           September 30,          December 31,
                                                                                               1997                   1996
                                                                                           ------------          ------------
<S>                                                                                         <C>                   <C>         
ASSETS
Investments
   Available for sale:
      Fixed maturities, at market value (amortized cost: September
          30, 1997  $85,836,196; December 31, 1996  $75,984,966                             $87,292,984           $77,109,214
      Equity securities at market (cost: September 30, 1997
         $230,460;  December 31, 1996  $0)                                                      215,630                     -
   Short-term investments, at cost                                                            3,554,947             4,861,745
                                                                                            -----------           -----------
      Total Investments                                                                      91,063,561            81,970,959
Cash                                                                                            157,782                82,637
Accrued investment income                                                                     1,605,064             1,443,551
Accounts and notes receivable, net                                                            7,647,754             8,898,839
Reinsurance recoverable:
   Paid losses and loss adjustment expenses                                                     402,060               452,943
   Unpaid losses and loss adjustment expenses                                                 2,087,779             2,629,019
Prepaid reinsurance premiums                                                                  1,252,781             1,647,806
Deferred policy acquisition costs                                                             4,967,800             4,953,085
Property and equipment (net of accumulated depreciation)                                        210,841               229,972
Deferred income taxes                                                                         1,470,430             1,503,655
Other assets                                                                                    677,811               638,856
                                                                                            -----------           -----------
     Total Assets                                                                          $111,543,663          $104,451,322
                                                                                            ===========           ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses                                                  $42,356,119           $39,740,865
Unearned premiums                                                                            21,991,362            22,120,241
Advance premiums                                                                              1,337,113             1,358,671
Funds held as security for performance                                                          731,947               730,426
Accrued expenses and other liabilities                                                        2,283,962             2,395,699
Income taxes payable                                                                            107,874                     -
Note payable - bank                                                                                   -               750,001
                                                                                             ----------            ----------
    Total Liabilities                                                                       $68,808,377           $67,095,903
                                                                                             ----------            ----------

STOCKHOLDERS'  EQUITY
Common stock,  no par -  authorized  10,000,000  shares  issued and  outstanding
   shares 6,153,203 at September 30, 1997
   and 6,028,781 at December 31, 1996                                                         2,836,781             2,836,422
Net unrealized investment gains                                                                 951,692               742,004
Retained earnings                                                                            38,946,813            33,776,993
                                                                                             ----------            ----------
  Total Stockholders' Equity                                                                 42,735,286            37,355,419
                                                                                            -----------           -----------
     Total Liabilities and Stockholders' Equity                                            $111,543,663          $104,451,322
                                                                                            ===========           ===========
</TABLE>

                 See notes to consolidated financial statements.


                                       2 of 12
<PAGE>



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

                                                                Three Months Ended                  Nine Months Ended
                                                                   September 30,                      September 30,
                                                              1997              1996             1997             1996
                                                             ------            ------           ------           ------  
<S>                                                       <C>                <C>             <C>               <C>    
REVENUES
Insurance Company Revenues
     Premium earned                                       $10,997,409        $9,847,786      $31,784,235       $28,524,110
     Premium ceded                                          1,856,727           953,363        4,410,728         3,049,660
                                                           ----------         ---------      -----------       -----------
          Net Premium Earned                                9,140,682         8,894,423       27,373,507        25,474,450
     Investment income                                      1,239,020         1,043,134        3,584,168         2,979,269
     Net realized investment gains                             24,174                 -           25,093           210,716
     Other income                                                 223                60              383               150
                                                           ----------         ---------       ----------        ----------
          Total Insurance Company Revenues                 10,404,099         9,937,617       30,983,151        28,664,585

Other Revenues from Insurance Operations
     Gross commissions and fees                             1,422,735         1,499,851        4,320,194         4,441,296
     Investment income                                         35,894            47,515          105,607           123,361
     Finance charges and late fees earned                     302,555           298,460          894,480           885,257
     Other income                                                 729             1,456            7,083             4,712
                                                           ----------        ----------       ----------        ----------
          Total Revenues                                   12,166,012        11,784,899       36,310,515        34,119,211
                                                           ----------        ----------       ----------        ----------

EXPENSES
Losses and loss adjustment expenses                         4,846,266         5,159,096       14,742,677        14,274,359
Policy acquisition costs                                    2,726,391         2,269,463        7,965,440         6,734,043
Salaries and employee benefits                                885,196           928,726        2,745,272         2,762,264
Commissions to agents/brokers                                 242,139           312,200          811,600           950,274
Other operating expenses                                      653,822           598,293        2,007,258         2,089,964
                                                            ---------         ---------       ----------        ----------
          Total Expenses                                    9,353,814         9,267,778       28,272,247        26,810,904
                                                            ---------         ---------       ----------        ----------

Income Before Taxes                                         2,812,198         2,517,121        8,038,268         7,308,307

Income Tax Provision                                          861,392           768,380        2,437,724         2,210,655
                                                              -------           -------        ---------         ---------

          Net Income                                       $1,950,806        $1,748,741        5,600,544         5,097,652
                                                            =========         =========

Retained earnings January 1,                                                                  33,776,993        27,345,753
Dividend paid to stockholders                                                                   (430,724)         (418,087)
                                                                                              ----------        ----------
     Retained Earnings September 30,                                                         $38,946,813       $32,025,318
                                                                                              ==========        ==========


PER SHARE DATA
Weighted Average Shares Outstanding                         6,403,457         6,248,511        6,396,280         6,227,995
Earnings Per Share                                              $0.30             $0.28             $0.88            $0.82

</TABLE>



                 See notes to consolidated financial statements.


                                       3 of 12
<PAGE>



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

                     FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>

                                                                                             1997                 1996
                                                                                            ------               ------

<S>                                                                                      <C>                  <C>       
Net Income                                                                               $5,600,544           $5,097,652
Adjustments to reconcile net income to net cash from operations
     Depreciation and amortization                                                           63,438              109,670
     Bond amortization, net                                                                 393,858              445,872
     Net realized (gain) on sale of securities                                              (25,093)            (210,716)
Changes in assets and liabilities
     Premium, notes and investment income receivable                                      1,089,572             (260,396)
     Reinsurance recoverable                                                                592,123            1,562,915
     Prepaid reinsurance premiums                                                           395,025               (9,997)
     Deferred policy acquisitions costs                                                     (14,715)            (395,582)
     Other assets                                                                           (38,956)             425,383
     Reserve for unpaid losses and loss adjustment expenses                               2,615,254            3,065,451
     Unearned premium reserve                                                              (128,879)           1,593,069
     Funds held as security and advanced premiums                                           (20,037)             (43,876)
     Accrued expenses and other liabilities                                                (111,733)              74,862
     Income taxes current/deferred                                                           33,077             (214,742)
                                                                                         ----------           ----------
          Net Cash Provided from Operations                                              10,443,478           11,239,565
                                                                                         -----------          ----------

Investing Activities
     Purchase of fixed maturity investments                                             (15,372,354)         (14,839,296)
     Proceeds from maturity of fixed maturity investments                                 5,098,000            5,946,892
     Purchase of equity securities - cost                                                (1,019,500)          (3,546,673)
     Proceeds from sale of equity securities                                                814,132            2,767,938
     Net decrease in short-term investments                                               1,336,062            1,058,389
     Additions to property and equipment                                                    (44,307)             (48,100)
                                                                                         ----------           -----------
          Net Cash (Used) by Investing Activities                                        (9,187,967)          (8,660,850)
                                                                                         ----------           -----------

Financing Activities
     Proceeds from issuance of common stock                                                     359                1,225
     Repayment of note payable - bank                                                      (750,001)          (1,795,000)
     Dividends paid to shareholders                                                        (430,724)            (418,087)
                                                                                         -----------          -----------
          Net Cash  (Used) by Financing Activities                                       (1,180,366)          (2,211,862)
                                                                                         -----------          -----------

Net increase in cash                                                                         75,145              366,853
Cash at beginning of period                                                                  82,637                  951
                                                                                           --------             --------
          Cash at End of Period                                                            $157,782             $367,804
                                                                                            =======              =======

Supplemental cash flow information Cash paid during the period for:
          Interest                                                                          $21,954             $107,930
          Income Taxes                                                                   $2,295,000           $2,440,000

</TABLE>

                 See notes to consolidated financial statements.


                                       4 of 12
<PAGE>


                   UNICO AMERICAN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997


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  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  consolidated  financial  statements  have been prepared in conformity  with
generally  accepted  accounting  principles (GAAP) which differ in some respects
from those followed in reports to insurance regulatory authorities.

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

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

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

Income Taxes
The  provision  for income  taxes is computed on the basis of income as reported
for financial reporting purposes under generally accepted accounting principles.
Deferred  income taxes arise  principally  from certain  assets and  liabilities
which are  recognized  for income tax  purposes in  different  periods  than for
financial statements.


                                       5 of 12
<PAGE>



                   UNICO AMERICAN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                SEPTEMBR 30, 1997


NOTE 2 - RESTRICTED FUNDS
As required by law, the Company  segregates from its operating accounts premiums
collected  from  insureds into separate  trust  accounts.  As of a September 30,
1997,  these  trust  funds  represent  $2,021,155  of  the  Company's  cash  and
short-term  investments.  In addition,  $2,725,000 of the Company's  investments
represents  statutory deposits of Crusader which are assigned to and held by the
California  State  Treasurer  and the  Insurance  Commissioner  of the  State of
Nevada.  These  deposits are required  for  Crusader to write  certain  lines of
business in California and for its admission in states other than California.

NOTE 3 - FUNDS HELD AS SECURITY
Funds held as security  for  performance  represent  funds  received in order to
guarantee the contractual obligations entered into with customers.

NOTE 4 - STATUTORY CAPITAL AND SURPLUS
As of September 30, 1997,  Crusader's  statutory capital and surplus were deemed
sufficient to support its present insurance premium writings.

NOTE 5 - INCENTIVE STOCK OPTION PLAN
The Company's 1985 stock option plan provided for the grant of "incentive  stock
options"  to  officers  and key  employees.  The plan  covers  an  aggregate  of
1,500,000  shares of the  Company's  common stock  (subject to adjustment in the
case of stock splits,  reverse  stock  splits,  stock  dividends,  etc.).  As of
September  30, 1997,  374,313  options were  outstanding  of which  275,411 were
currently  exercisable.  There are no  additional  options  available for future
grant under the 1985 plan.

NOTE 6 - CLAIMS AND LITIGATION
The Company,  by virtue of the nature of the business  conducted by it,  becomes
involved  in  numerous  legal  proceedings  in which  it may be named as  either
plaintiff or defendant.  The Company is required to resort to legal  proceedings
from  time to time  in  order  to  enforce  collection  of  premiums  and  other
commissions  or fees for the services  rendered to customers or to their agents.
These routine items of litigation do not  materially  affect the Company and are
handled on a routine basis by the Company through its general counsel.

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


                                       6 of 12
<PAGE>



                   UNICO AMERICAN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997


NOTE 7 - LEASE COMMITMENTS AND CONTINGENCIES
The Company  presently  occupies a 46,000 square foot building  located at 23251
Mulholland  Drive,  Woodland  Hills,  California,  under a master lease expiring
March 31, 2007.  The lease  provides  for an annual gross rental of  $1,025,952.
Erwin Cheldin, the Company's president,  chairman and principal stockholder,  is
the owner of the building.  The terms of the lease were at least as favorable to
the Company as could have been obtained from  unaffiliated  third  parties.  The
Company utilizes for its own operations 100% of the space it leases.

NOTE 8 - RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No. 128 (SFAS No. 128),  "Earnings per Share."
SFAS No. 128 requires  the Company to disclose a basic and diluted  earnings per
share  calculation.  Basic earnings per share excludes common stock  equivalents
from the EPS  calculation,  while diluted EPS is calculated  consistent with the
Company's  primary  earnings per share  calculation.  The Company will adopt the
provisions  of  SFAS  No.  128  in  the  1997  year-end  consolidated  financial
statements.

Pro forma basic and  diluted  earnings  per share for the three  months and nine
months  ended  September  30,  1997 and 1996,  assuming  that  SFAS No.  128 was
effective as of the beginning of the year, are presented below:

                        Three Months Ended                   Nine Months Ended
                          September 30,                         September 30,
                          -------------                         -------------
                      1997             1996                1997            1996
                      ----             ----                ----            ----

    Basic EPS        $0.32            $0.29               $0.91            $0.85
    Diluted EPS      $0.30            $0.28               $0.88            $0.82

Statement of Financial Accounting  Standards No. 130 (SFAS No. 130),  "Reporting
Comprehensive  Income," and Statement of Financial  Accounting Standards No. 131
(SFAS No.  131),  "Disclosures  about  Segments  of an  Enterprise  and  Related
Information,"  were  issued  in June 1997 and are  effective  for  fiscal  years
beginning after December 15, 1997.  SFAS No. 130  establishes  standards for the
reporting and display of  comprehensive  income,  which  includes net income and
changes in equity except those resulting from  investments by, or  distributions
to stockholders.  SFAS No. 131 establishes  standards for disclosures related to
business operating segments. The Company is currently evaluating the impact that
these statements will have on the consolidated financial statements.

NOTE 9
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all necessary adjustments,  which consist of normal recurring
adjustments,  to present fairly the results of operations for the three and nine
months ended September 30, 1997, and September 30, 1996.

NOTE 10
The results of  operations  for the three and nine months  ended  September  30,
1997,  should not be considered as  necessarily  indicative of the results to be
expected for the full year.



                                       7 of 12
<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  reinvestment of
profits into  property or equipment,  the cash flow  generated  from  operations
usually results in improved liquidity for the Company.

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,
1997, the Company had cash and cash  investments  of  $89,779,385  (at amortized
cost) of which $86,625,573 (96%) were investments of Crusader.

As of the quarter ended September 30, 1997, the Company had invested $85,836,196
(at amortized cost) or 96% of its invested assets in fixed maturity obligations.
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  investments.  The balance of the  Company's
investments  are  in  equity  securities  of  a  regional  utility  company  and
high-quality,  short-term  investments  that include a U.S.  treasury bill, bank
money  market  accounts,   certificates  of  deposit,  commercial  paper  and  a
short-term treasury money market fund.

The Company's  investments  in fixed maturity  obligations  of  $85,836,196  (at
amortized cost) include $38,539,394 (45%) of tax exempt,  pre-refunded state and
municipal bonds,  $18,472,565  (21%) of U.S.  treasury  securities,  $28,224,237
(33%)  in  high-quality  industrial  bonds  and  $600,000  (1%) of FDIC  insured
certificates of deposit. The tax exempt interest income earned for the three and
nine months ended September 30, 1997, was $448,986 and $1,353,148  respectively.
The tax  exempt  interest  income  earned  for the three and nine  months  ended
September 30, 1996, was $454,961 and $1,308,706 respectively.

The Company's investment policy limits investments in any one company to no more
than  $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's
fixed maturity  obligations  have maturities no greater than eight years. All of
the Company's investments are high-grade investment quality.

On August 15, 1997,  the Company  paid the $0.07 (seven  cents) per common share
cash dividend  which was declared by the Board of Directors on March 4, 1997, to
shareholders of record at the close of business on August 1, 1997.

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



                                       8 of 12
<PAGE>



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

(a)  Liquidity and Capital Resources (continued)

Although material capital expenditures may also be funded through borrowing, the
Company believes that cash generated from  operations,  plus cash and short-term
investments  at the quarter  end, net of trust  restriction  of  $2,021,155  and
statutory  deposits of  $2,725,000,  should be  sufficient to meet its operating
requirements  during the next twelve  months  without the necessity of borrowing
funds.  Crusader  is  restricted  in the amount of  dividends  it may pay to its
parent, Unico, without prior regulatory approval by the California Department of
Insurance.  Crusader  anticipates  that it will not be required to obtain  prior
regulatory  approval  for any  dividend  which  it may pay to  Unico in the next
twelve months.

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

 (b)  Results of Operations:

All comparisons  made in this discussion are comparing the three and nine months
ended September 30, 1997, to the three and nine months ended September 30, 1996,
unless otherwise indicated.

The Company's net income  increased  $202,065  (12%) to $1,950,806 for the three
months and $502,892 (10%) to $5,600,544 for the nine months ended  September 30,
1997,  compared to net income of $1,748,741  for the three months and $5,097,652
for the nine months ended September 30, 1996. Total revenues  increased $381,113
(3%)  for the  three  months  and  $2,191,304  (6%) for the  nine  months  ended
September 30, 1997,  when compared to the three and nine months ended  September
30, 1996.

Premium  earned  before  reinsurance  increased  $1,149,623  (12%) for the three
months and  $3,260,125  (11%) for the nine months  ending  September  30,  1997.
Crusader's   primary  line  of  business  is  its  Commercial  Package  business
representing  96% of all  premiums  earned in both the three months and the nine
months ended September 30, 1997. The Commercial  Package  business  continued to
grow with earned premium  increasing  $1,090,596  (11%) to  $10,586,308  for the
three  months and  $2,692,302  (10%) to  $30,486,304  for the nine months  ended
September 30, 1997, as compared to the  corresponding  period of the prior year.
Crusader's other lines of business,  which include Commercial Property and Other
Liability  increased  $59,027 (17%) for the three months and $567,823  (78%) for
the nine months ended September 30, 1997 as compared to the corresponding period
of the prior year. The growth in earned premium in California represented 73% of
the total  increase in earned  premium for the three months and 63% for the nine
months ended September 30, 1997.

The ratio of premium ceded to premium  earned  increased from 10% to 17% for the
three months and increased from 11% to 14% for the nine months ending  September
30, 1997.  Although this ratio increased,  it is still less than the 18% average
over the last three fiscal years. Effective July 1, 1997, Crusader increased its
per risk loss  retention  from  $150,000 to  $250,000.  This is only one of many
factors which determine ultimate reinsurance costs.




                                       9 of 12
<PAGE>



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

(b)  Results of Operations (continued)

Losses and loss adjustment expenses were 53% of net premium earned for the three
months and 54% of net premium  earned for the nine months  ended  September  30,
1997,  compared to 58% of net premium earned for the three months and 56% of net
premium earned for the nine months ended September 30, 1996.

Policy acquisition costs consist of commissions, premium taxes, inspection fees,
and certain other underwriting costs which are directly or indirectly related to
the production of Crusader insurance policies. These costs include both Crusader
expenses  and  allocated  expenses  of  other  Unico  subsidiaries.   Crusader's
reinsurers pay Crusader a ceding commission,  which is primarily a reimbursement
of the acquisition cost related to the ceded premium.

Policy acquisition  costs, net of ceding commission,  are deferred and amortized
as the related  premiums are earned.  These costs were 30% of net premium earned
for the three  months and 29% of net premium  earned for the nine  months  ended
September 30, 1997, compared to 26% of net premium earned for the three and nine
months ended  September 30, 1996.  This increase was primarily due to a decrease
in reinsurance ceding commissions as a percentage of premium ceded.

Investment income, excluding realized investment gains, increased $184,265 (17%)
to $1,274,914  for the three months and increased  $587,145  (19%) to $3,689,775
for the nine months ended  September  30,  1997,  compared to the three and nine
months ended  September  30, 1996.  This  increase  was  primarily  due to a 16%
increase (at amortized cost) in invested assets.

Commission  and fee income  decreased  $77,116 (5%) to $1,422,735  for the three
months and  decreased  $121,102  (3%) to  $4,320,194  for the nine months  ended
September  30, 1997,  compared to the three and nine months ended  September 30,
1996.  This decrease was primarily due to a decline in commissions and fees from
the Company's health and life insurance  program of $104,177 (15%) for the three
months and $255,655 (12%) for the nine months ended September 30, 1997.

Commissions to  agents/brokers  decreased $70,061 (22%) for the three months and
$138,674  (15%) for the nine months ended  September  30, 1997,  compared to the
three and nine months ended  September 30, 1996.  The decrease was primarily due
to decreased sales in the health and life insurance program.

Other  operating  expenses  increased  $55,529  (9%) for the  three  months  and
decreased $82,706 (4%) for the nine months ended September 30, 1997, compared to
the three and nine months ended September 30, 1996.

There were no significant changes in other revenue or expense items.

The effect of inflation  on net income of the Company  during the three and nine
months ended September 30, 1997, and 1996 was not significant.


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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:
      On Form 8-K dated August 27, 1997,  with date of earliest  event  reported
      being  August  25,  1997,  Registrant  reported  under Item 4, a change in
      Registrant's Certifying Accountant.  Item 4 of the Form 8-K was amended by
      Form 8-KA dated August 29, 1997.


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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, 1997   By:/s/  Erwin Cheldin
                               ---------------------
                               Erwin Cheldin
                               Chairman of the Board, President and Chief
                               Executive Officer, (Principal Executive Officer)

Date:   November 12, 1997   By:/s/  Lester A. Aaron
                              -----------------------
                               Lester A. Aaron
                               Treasurer, Chief Financial Officer, (Principal
                               Accounting and Principal Financial Officer)


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