California
(State
or other jurisdiction of incorporation or organization)
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94-2723335
(I.R.S.
Employer
Identification
No.)
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Page
No.
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Part
I: Financial Information
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Item
1:
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Condensed
Consolidated Financial Statements (Unaudited)
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2
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3
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4
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5
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Item
2:
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8
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Item
3:
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13
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Item
4:
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14
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Part
II: Other Information
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Item
1:
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14
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Item
1A:
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14
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Item
2:
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14
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Item
3:
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14
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Item
4:
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14
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Item
5:
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14
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Item
6:
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14
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March
31, 2007
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December
31, 2006
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ASSETS
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Investments
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$
322,900,266
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$
271,961,941
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Cash
and cash equivalents
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182,745,681
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136,621,578
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Notes
and other receivables, net
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16,792,410
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17,177,827
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Reinsurance
receivables
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17,053,308
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17,290,039
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Real
estate and water assets, net
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119,171,157
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102,538,859
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Property
and equipment, net
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502,495
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518,564
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Other
assets
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4,107,278
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2,934,131
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Total
assets
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$
663,272,595
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$
549,042,939
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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Unpaid
losses and loss adjustment expenses
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$
40,341,259
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$
41,083,301
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Deferred
compensation
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54,006,494
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49,776,043
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Bank
and other borrowings
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12,753,003
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12,720,558
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Deferred
income taxes, net
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21,645,681
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17,952,916
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Other
liabilities
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20,618,217
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22,282,822
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Total
liabilities
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149,364,654
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143,815,640
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Commitments
and Contingencies (Note 4)
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Common
stock, $.001 par value; authorized 100,000,000 shares,
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23,129,923
issued in 2007 and 20,306,923 issued in 2006
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23,130
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20,307
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Additional
paid-in capital
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431,758,353
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331,582,308
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Accumulated
other comprehensive income
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69,213,273
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60,950,679
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Retained
earnings
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91,196,414
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90,968,815
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592,191,170
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483,522,109
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Treasury
stock, at cost (common shares: 4,425,630 in 2007 and 4,426,465
in
2006)
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(78,283,229)
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(78,294,810)
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Total
shareholders' equity
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513,907,941
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405,227,299
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Total
liabilities and shareholders' equity
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$
663,272,595
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$
549,042,939
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Three
Months Ended March 31, 2007
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Three
Months Ended March 31, 2006
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Revenues:
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Net
investment income
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$
3,812,067
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$
2,072,326
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Net
realized gain on investments
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1,407,908
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14,685,947
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Sale
of real estate and water assets
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2,308,998
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1,256,335
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Rents,
royalties and lease income
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150,158
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186,855
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Other
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135,577
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45,176
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Total
revenues
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7,814,708
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18,246,639
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Costs
and Expenses:
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Operating
and other costs
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5,326,580
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4,158,274
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Cost
of real estate and water assets sold
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766,864
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379,886
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Depreciation
and amortization
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276,412
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312,563
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Interest
expense
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99,538
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Total
costs and expenses
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6,369,856
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4,950,261
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Income
before income taxes and minority interest
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1,444,852
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13,296,378
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Provision
for income taxes
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923,908
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4,549,314
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Income
before minority interest
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520,944
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8,747,064
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Minority
interest in loss of subsidiaries
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12,459
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Income
from continuing operations
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520,944
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8,759,523
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Loss
from discontinued operations, net of tax
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(1,541,322)
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Net
income
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$
520,944
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$
7,218,201
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Net
income per common share - basic:
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Income
from continuing operations
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$
0.03
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$
0.66
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Discontinued
operations
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(0.12)
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Net
income per common share
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$
0.03
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$
0.54
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Weighted
average shares outstanding
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16,882,284
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13,271,440
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Net
income per common share - diluted:
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Income
from continuing operations
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$
0.03
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$
0.66
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Discontinued
operations
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(0.12)
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Net
income per common share
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$
0.03
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$
0.54
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Weighted
average shares outstanding
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17,071,198
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13,271,440
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Three
Months Ended March 31, 2007
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Three
Months Ended March 31, 2006
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OPERATING
ACTIVITIES:
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Net
cash used by operating activities - continuing operations
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$(6,683,702)
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$(14,331,744)
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Net
cash used by operating activities - discontinued
operations
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(1,545,782)
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(6,683,702)
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(15,877,526)
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INVESTING
ACTIVITIES:
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Purchases
of investments
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(43,221,699)
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(8,376,341)
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Proceeds
from sale of investments
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2,702,089
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17,705,434
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Proceeds
from maturity of investments
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3,959,300
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26,217,857
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Purchases
of property and equipment and costs capitalized to water
infrastructure
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(10,710,767)
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(2,422,847)
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Cash
used in investing activities - discontinued operations
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(587,927)
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Net
cash provided by (used in) investing activities
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(47,271,077)
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32,536,176
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FINANCING
ACTIVITIES:
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Proceeds
from common stock offering, net
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100,161,057
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Sale
of treasury stock for deferred compensation plans
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29,392
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Cash
used in financing activities - discontinued operations
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(498,272)
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Net
cash provided by (used in) financing activities
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100,190,449
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(498,272)
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Effect
of exchange rate changes on cash
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(111,567)
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(238,362)
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INCREASE
IN CASH AND CASH EQUIVALENTS
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46,124,103
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15,922,016
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CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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136,621,578
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37,794,416
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CASH
AND CASH EQUIVALENTS, END OF PERIOD
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$182,745,681
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$53,716,432
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SUPPLEMENTAL
CASH FLOW INFORMATION:
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Cash
paid for interest
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$125,523
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$99,422
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Cash
paid for income taxes
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$2,032,900
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$2,053,000
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Non-cash
investing and financing activities:
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Change
in capitalized costs included in other liabilities
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$5,896,849
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Three
Months Ended March 31, 2007
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Three
Months Ended March 31, 2006
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Net
income
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$
520,944
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$
7,218,201
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Net
change in unrealized appreciation
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(depreciation)
on available for sale investments
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7,804,376
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(5,607,260)
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Net
change in foreign currency translation
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458,218
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(281,478)
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Total
comprehensive income
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$
8,783,538
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$
1,329,463
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March
31, 2007
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December
31, 2006
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Unrealized
appreciation on available for sale investments
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$
73,997,804
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$
66,193,428
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Foreign
currency translation
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(4,784,531)
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(5,242,749)
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Accumulated
other comprehensive income
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$
69,213,273
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$
60,950,679
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5.
Segment Reporting
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Three
Months Ended March 31,
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2007
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2006
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Revenues:
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Water
Resource and Water Storage Operations
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$1,075,671
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$308,296
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Real
Estate Operations
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3,506,420
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1,765,332
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Business
Acquisitions and Financing
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1,176,406
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8,972,688
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Insurance
Operations in Run Off
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2,056,211
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7,200,323
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Total
Revenues
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$7,814,708
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$18,246,639
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Income
(Loss) Before Taxes and Minority Interest:
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Water
Resource and Water Storage Operations
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$(381,051)
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$(1,178,896)
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Real
Estate Operations
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2,200,019
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926,854
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Business
Acquisitions and Financing
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(2,074,965)
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6,747,814
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Insurance
Operations in Run Off
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1,701,849
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6,800,606
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Income
Before Taxes and Minority Interest
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$1,444,852
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$13,296,378
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6.
Private Placement of Common
Stock
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· |
Water
Resource and Water Storage
Operations;
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· |
Real
Estate Operations;
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· |
Business
Acquisitions & Financing (which contains businesses, interests in
businesses, and other parent company assets);
and
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· |
Insurance
Operations in “Run Off”.
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· |
Vidler
Water Company, Inc. (“Vidler”), a business which we started more than 10
years ago, which develops and owns water resources and water storage
operations in the southwestern United States, primarily in Nevada
and
Arizona;
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· |
Nevada
Land & Resource Company, LLC (“Nevada Land”), an operation that we
built since we acquired the company more than 10 years ago, which
owns
approximately 535,000 acres of land in Nevada, and certain mineral
rights
and water rights related to the property;
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· |
Physicians
Insurance Company of Ohio (“Physicians”), which is “running off” its
medical professional liability insurance loss reserves, and was our
original business historically;
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· |
Citation
Insurance Company (“Citation”), which is “running off” its historic
property & casualty insurance and workers’ compensation loss reserves.
Citation was acquired because it was complimentary to our other insurance
operations at the time;
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· |
Global
Equity AG, which holds our interest in Jungfraubahn Holding AG
(“Jungfraubahn”). Jungfraubahn is a public company that operates railway
and related tourism and transport activities in the Swiss Alps.
Jungfraubahn’s shares trade on the SWZ Swiss Exchange. We believe that
Jungfraubahn was significantly undervalued at the time we acquired
our
interest, which was primarily between 1999 and
2003.
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Three
Months Ended March 31,
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2007
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2006
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Revenues:
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Water
Resource and Water Storage Operations
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$1,076,000
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$
308,000
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Real
Estate Operations
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3,506,000
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1,765,000
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Business
Acquisitions and Financing
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1,177,000
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8,973,000
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Insurance
Operations in Run Off
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2,056,000
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7,200,000
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Total
Revenues
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$7,815,000
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$18,246,000
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Income
(Loss) Before Taxes and Minority Interest:
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Water
Resource and Water Storage Operations
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$(381,000)
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$(1,179,000)
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Real
Estate Operations
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2,200,000
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927,000
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Business
Acquisitions and Financing
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(2,075,000)
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6,747,000
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Insurance
Operations in Run Off
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1,701,000
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6,801,000
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Income
Before Taxes and Minority Interest
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$1,445,000
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$13,296,000
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Three
Months Ended March 31,
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2007
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2006
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Revenues:
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Sale
of Real Estate and Water Assets
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$3,000
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$28,000
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Net
Investment Income
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960,000
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307,000
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Other
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113,000
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(27,000)
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Segment
Total Revenues
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$1,076,000
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$308,000
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Expenses:
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Cost
of Real Estate and Water Assets
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$(1,000)
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$(9,000)
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Depreciation
and Amortization
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(261,000)
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(266,000)
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Overhead
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(537,000)
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(488,000)
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Project
Expenses
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(658,000)
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(724,000)
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Segment
Total Expenses
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$(1,457,000)
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$(1,487,000)
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Loss
Before Tax
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$(381,000)
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$(1,179,000)
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·
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the
operation and maintenance of the Vidler Arizona Recharge
Facility;
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·
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the
development of water rights in the Tule Desert groundwater basin
(part of
the Lincoln County agreement);
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·
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the
utilization of water rights at Fish Springs Ranch as future municipal
water supply for the north valleys of the Reno, Nevada area;
and
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·
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the
operation of Fish Springs Ranch, and maintenance of the associated
water
rights.
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Three
Months Ended March 31,
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2007
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2006
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Revenues:
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Sale
of former Railroad Land
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$2,306,000
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$1,228,000
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Net
Investment Income
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857,000
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379,000
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Other
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343,000
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158,000
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Segment
Total Revenues
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$3,506,000
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$1,765,000
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Expenses:
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Cost
of former Railroad Land Sold
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$
(766,000)
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$(371,000)
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Operating
Expenses
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(540,000)
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(467,000)
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Segment
Total Expenses
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$(1,306,000)
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$(838,000)
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Income
Before Tax
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$2,200,000
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$927,000
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Three
Months Ended March 31,
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2007
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2006
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Revenues:
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Realized
Gains on Sale of Holdings
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$8,157,000
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Net
Investment Income
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$1,177,000
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715,000
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Other
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101,000
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Segment
Total Revenues
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$1,177,000
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$8,973,000
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Segment
Total Expenses
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$(3,252,000)
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$(2,226,000)
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Income
(Loss) Before Tax
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$(2,075,000)
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$6,747,000
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Three
Months Ended March 31,
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2007
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2006
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Revenues:
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Net
Investment Income
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$816,000
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$671,000
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Realized
Gains on Sale of Investments
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1,228,000
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6,529,000
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Other
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12,000
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Segment
Total Revenues
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$2,056,000
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$7,200,000
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Expenses:
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Operating
and Underwriting Expenses
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$(355,000)
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$(399,000)
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Segment
Total Expenses
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$(355,000)
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$(399,000)
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Income
Before Taxes:
|
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Physicians
Insurance Company of Ohio
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$1,249,000
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$5,293,000
|
Citation
Insurance Company
|
452,000
|
1,508,000
|
Income
Before Tax
|
$1,701,000
|
$6,801,000
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PHYSICIANS
INSURANCE COMPANY OF OHIO -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
(In
Millions)
|
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|
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March
31, 2007
|
December
31, 2006
|
Direct
Reserves
|
$10.3
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$10.4
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Ceded
Reserves
|
(
1.0)
|
(1.0)
|
Net
Medical Professional Liability Insurance Reserves
|
$9.3
|
$9.4
|
CITATION
INSURANCE COMPANY -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
(In
Millions)
|
||
|
||
|
March
31, 2007
|
December
31, 2006
|
Property
& Casualty Insurance
|
|
|
Direct
Reserves
|
$6.5
|
$6.6
|
Ceded
Reserves
|
(1.6)
|
(1.5)
|
Net
Property & Casualty Insurance Reserves
|
$4.9
|
$5.1
|
|
|
|
Workers’
Compensation
|
|
|
Direct
Reserves
|
$23.6
|
$24.1
|
Ceded
Reserves
|
(14.3)
|
(14.5)
|
Net
Workers’ Compensation Insurance Reserves
|
$9.3
|
$9.6
|
|
|
|
Total
Reserves
|
$14.2
|
$14.7
|
|
Three
months ended March 31,
|
|
|
2007
|
2006
|
|
|
|
Loss
Before Income Taxes
|
$(2,572,000)
|
|
Income
Tax Benefit
|
866,000
|
|
Gain
On Sale of HyperFeed’s Discontinued Operations, net
|
165,000
|
|
Net
Loss After Tax
|
$(1,541,000)
|
· |
As
Vidler’s water assets are monetized, Vidler is generating free cash flow
as receipts from the sale of real estate and water assets have overtaken
maintenance capital expenditure, development costs, financing costs,
and
operating expenses;
|
· |
Nevada
Land is actively selling land which has reached its highest and best
use.
Nevada Land’s principal sources of cash flow are the proceeds of
cash sales, and collections of principal and interest on sales
contracts where Nevada Land has provided vendor financing. These
receipts
and other revenues exceed Nevada Land’s operating and development costs,
so Nevada Land is generating strong cash flow;
and
|
· |
Investment
income more than covers the operating expenses of the “run off” insurance
companies, Physicians and Citation. The funds to pay claims come
from the
maturity of fixed-income securities, the realization of fixed-income
investments and stocks held in their investment portfolios, and recoveries
from reinsurance companies.
|
Exhibit
Number
|
|
Description
|
3(i)
|
|
Amended
and Restated Articles of Incorporation of PICO.(1)
|
3(ii)
|
|
Amended
and Restated By-laws of PICO. (2)
|
4.1
|
|
Form
of Form of Securities Purchase Agreement dated February 28, 2007
between
PICO Holdings, Inc. and the Purchasers. (3)
|
10.12
|
|
Form
of Form of Securities Purchase Agreement dated February 28, 2007
between
PICO Holdings, Inc. and the Purchasers. (3)
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as
adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a)/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 (Section
906
of the Sarbanes-Oxley Act of 2002).
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section
906
of the Sarbanes-Oxley Act of 2002).
|
|
(1)
|
Incorporated
by reference to exhibit of same number filed with Form 8-K dated
December
4, 1996.
|
|
(2)
|
Filed
as Appendix to the prospectus in Part I of Registration Statement
on Form
S-4 (File No. 333-06671).
|
|
(3)
|
Incorporated
by reference to Exhibit 10.11 filed with Form 8-K dated March 2,
2007.
|