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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PICO HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 94-2723335
(State or Other Jurisdiction (IRS Employer Identification Number)
of Incorporation or Organization)
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
(619) 456-6022
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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JAMES F. MOSIER
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
(619) 456-6022
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
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COPIES TO:
DOUGLAS J. REIN, ESQ.
GRAY CARY WARE & FREIDENRICH LLP
4365 EXECUTIVE DRIVE, SUITE 1600
SAN DIEGO, CA 92121
TELEPHONE: (619) 677-1400
FACSIMILE: (619) 677-1477
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Effective Date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) FEE (1)
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<S> <C> <C> <C> <C>
Common Stock, ($0.001 par value) 4,572,015 $5.00 $22,860,075 $6,744.00
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</TABLE>
(1) Estimated, pursuant to Rule 457(c), solely for the purpose of
calculating the registration fee based on the average of the high and
low prices for the Common Stock, as reported on the Nasdaq National
Market on May 6, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED MAY 8, 1998
PROSPECTUS
4,572,015 SHARES OF COMMON STOCK
PICO HOLDINGS, INC.
The 4,572,015 shares (the "Shares") of Common Stock of PICO Holdings,
Inc., a California corporation ("PICO" and its subsidiaries, collectively
referred to herein as the "Company"), offered hereby are being sold by certain
shareholders of PICO (the "Selling Shareholders"). PICO will not receive any
proceeds from sales of the shares by the Selling Shareholders. See "Selling
Shareholders" and "Plan of Distribution."
The Selling Shareholders have advised the Company that sales of the
Shares may be made from time to time in the Nasdaq National Market, through
negotiated transactions or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Shareholders may
effect such transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both (which compensation to a particular broker-dealer
might be in excess of customary commissions). See "Plan of Distribution."
No period of time has been fixed within which the Shares may be offered
or sold. None of the proceeds from the sale of the Shares will be received by
the Company. The Company will pay all expenses with respect to this offering,
except for brokerage fees, commissions, transfer taxes for, and fees and
expenses of counsel to, the Selling Shareholders, which will be borne by the
Selling Shareholders. See "Plan of Distribution."
PICO's Common Stock is quoted on The Nasdaq National Market under the
symbol "PICO." On May 6, 1998, the last sale price of PICO's Common Stock as
reported on the Nasdaq National Market was $5.00.
AN INVESTMENT IN THESE SECURITIES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus in
connection with the offer described in this Prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the Selling Shareholders. Neither the delivery of
this Prospectus nor any sale made under this Prospectus shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
THE DATE OF THIS PROSPECTUS IS __________, 1998.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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AVAILABLE INFORMATION
PICO is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Regional Offices of the Commission at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and at 75
Park Place, New York, New York 10007. In addition, copies of such material can
also be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. PICO's Common Stock is traded on The Nasdaq National Market. Reports and
other information concerning the Company can also be inspected at the offices of
the National Association of Securities Dealers, Inc., Market Listing Section,
1735 K Street, N.W., Washington, D.C. 20006. Such reports and other information
may also be inspected without charge at a Web site maintained by the Commission.
The address of the site is http:\\www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933 as
amended (the "Securities Act"), with respect to the Shares offered hereby. This
Prospectus does not contain all of the information, exhibits and undertakings
set forth in the Registration Statement, certain portions of which are omitted
as permitted by the Rules and Regulations of the Commission. Copies of the
Registration Statement and the exhibits are filed with the commission and may be
obtained, upon payment of the fee prescribed by the Commission, or may be
examined, without charge, at the offices of the Commission set forth above. For
further information concerning the Company and the Shares offered hereby,
reference is made to the Registration Statement and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by PICO (Commission
File No. 0-18786), pursuant to the Exchange Act are incorporated herein by
reference:
(1) PICO's Annual Report on Form 10-K and the amendments thereto, for
the fiscal year ended December 31, 1997.
(2) The portions of the registration statement on Form 8-A filed by
PICO pursuant to the Exchange Act which contain a description of the Common
Stock.
All documents and reports subsequently filed by PICO pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the
Registration Statement, filed concurrently with this Prospectus with the
Commission, and prior to the effective date of the Registration Statement shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such documents or reports. Any statement contained in a
document incorporated by reference or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of the
Registration Statement to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement.
PICO will provide without charge to each person to whom this Prospectus
is delivered, upon oral or written request, a copy of any or all of the
foregoing documents incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates). Written or telephone
requests should be directed to James F. Mosier at PICO Holdings, Inc., 875
Prospect Street, Suite 301, La Jolla, California 92037, telephone number (619)
456-6022.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business. This Prospectus contains forward-looking statements that involve risks
and uncertainties. The statements contained in this Prospectus that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Exchange Act, including without limitation statements regarding the
Company's expectations, beliefs, intentions, plans or strategies regarding the
future. All forward looking statements included in this document are based on
information available to the Company on the date thereof, and the Company
assumes no obligation to update any such forward-looking statements.
CHANGE IN STRATEGIC DIRECTION
In late 1994, Physicians Insurance Company of Ohio ("Physicians") began
the process of changing its strategic direction from the operation of medical
malpractice liability ("MPL") insurance business to investing in businesses
which PICO believes are undervalued or will benefit from additional capital,
restructuring of operations or management or improved competitiveness through
operational efficiencies with existing PICO operations. Accordingly, in January
1995, Physicians reactivated its investment advisory subsidiary, Summit Global
Management, Inc. ("Summit"); in August 1995 Physicians acquired Sequoia
Insurance Company ("Sequoia") and entered new lines of property and casualty
insurance; in August 1995 Physicians sold its MPL insurance business; in
September 1995 Physicians purchased 38.2% of Global Equity Corporation ("GEC"),
a Canadian corporation active in international investments, agricultural
services, water rights, and other businesses; in November 1996 Physicians
acquired control of Citation Insurance Group ("CIG") pursuant to the merger; in
April 1997 PICO acquired 25.23% ownership of Nevada Land and Resource Company
which owns approximately 1,365,000 acres of deeded land in northern Nevada; in
June 1997 PICO sold its workers' compensation business; and in July and August
1997, PICO increased its ownership in GEC to 51.17%. Due to the Company's
limited experience in the operation of the businesses of each of these
subsidiaries, which currently constitutes a substantial portion of the Company's
operations, there can be no assurance as to the future operating results of the
Company or the recently acquired businesses of the Company.
The Company will continue to make selective investments for the purpose
of enhancing and realizing additional value by means of appropriate levels of
shareholder influence and control. This could involve the restructuring of the
financing or management of the entities in which the Company invests and
initiating and facilitating mergers and acquisitions. This business strategy has
only recently been implemented, however, and it is not fully reflected in prior
years' financial statements, nor are the financial statements indicative of
possible results of this new business strategy in the future. There can be no
assurance that sufficient opportunities will be found or that this business
strategy will be successful. Failure to successfully implement this strategy may
negatively impact the business and financial condition and results of operations
of the Company.
Application of Physicians' new strategy since 1995 has resulted in a
greater concentration of equity investments held by Physicians, and,
consequently, the Company. Market values of equity securities are subject to
changes in the stock market, which may cause the Company's shareholders' equity
to fluctuate from period to period. At times, the Company may come to hold
securities of companies for which no market exists or which may be subject to
restrictions on resale. As a result, periodically, a portion of the Company's
assets may not be readily marketable.
INTEGRATION OF CERTAIN OPERATIONS
CIG and Physicians completed a merger with the expectation that the
merger would result in certain benefits for the combined company. Achieving the
anticipated benefits of the merger will depend in part upon whether certain of
the two companies' business operations can be integrated in an efficient and
effective manner. There can be no assurance that this will occur or that cost
savings in operations will be achieved. The successful combination of the two
companies will require, among other things, integration of the companies'
respective product offerings, medical management of health care claims and
management information systems enhancements. The difficulties of such
integration may be increased by the necessity of coordinating geographically
separated organizations. The integration of certain operations following the
merger will require the dedication of management resources which may temporarily
distract attention from the day-to-day business of the combined companies. There
can be no assurance that integration will be accomplished smoothly or
successfully. Failure to
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effectively accomplish the integration of the two companies' operations could
have an adverse effect on the Company's results of operations and financial
condition following the merger.
DEPENDENCE ON KEY PERSONNEL
The Company has several key executive officers, the loss of whom could
have a significant adverse effect on the Company. In particular, Ronald Langley,
PICO's Chairman, and John R. Hart, PICO's President and Chief Executive Officer,
play key roles in the Company's and GEC's investment decisions. Messrs. Langley
and Hart have entered into employment agreements with PICO and a wholly-owned
subsidiary of GEC as of December 31, 1997. Messrs. Langley and Hart are key to
the implementation of the Company's new strategic focus, and the ability of the
Company to implement its current strategy is dependent on its ability to retain
the services of Messrs.
Langley and Hart.
RISKS REGARDING PHYSICIANS; CONTINUING MPL LIABILITY
In August 1995, Physicians sold its and The Professionals Insurance
Company's ("PRO") MPL insurance business and related liability insurance
business. Physicians and PRO retained all assets and liabilities related to
insurance policies written prior to the sale of the recurring book of business.
Physicians and PRO will continue to administer claims and loss adjustment
expenses under MPL insurance policies issued or renewed prior to July 16, 1995.
Cash flow needed to fund the day-to-day operations and the payment of
claims and claims expenses will be provided by investment income, lease income,
and proceeds from the sale or maturity of securities. Physicians and PRO have
established reserves to cover losses and loss adjustment expense ("LAE") on
claims incurred under the MPL policies issued or renewed to date. The amounts
established and to be established by Physicians and PRO for loss and LAE
reserves are estimates of future costs based on various assumptions and, in
accordance with Ohio law, have been discounted (adjusted to reflect the time
value of money). These estimates are based on actual and industry experience and
assumptions and projections as to claims frequency, severity and inflationary
trends and settlement payments. In accordance with Ohio law, Physicians and PRO
annually obtain a certification that their respective reserves for losses and
LAE are adequate from an independent actuary. Physicians and PRO also obtain a
concurring actuarial opinion. Physicians' and PRO's reserves for losses and LAE
for prior years developed favorably in 1994, and these reserves were decreased
by $12.7 million in 1994. Reserves also developed favorably in 1995; however,
accretion of reserve discount exceeded the amount of favorable development and
retroactive reinsurance, resulting in a $3.2 million increase in liabilities for
prior years' claims. As a result of continued favorable claims experience,
reserves for prior years' claims were further reduced in the first and fourth
quarters of 1996. However, based upon actuarial indications from data through
June 30, 1997, Physicians' MPL claims reserves were increased by $2 million
during the third quarter of 1997 due to somewhat deteriorated claims experience
during the first six months of 1997. At the same time, favorable development of
Physicians' and PRO's discontinued personal lines reserves (automobile,
homeowner, etc.) allowed reserve reductions of $750,000 during the third quarter
of 1997. Management believes that the reserving methods and assumptions are
reasonable and prudent and that Physicians' and PRO's reserves for losses and
LAE are adequate. Due to the inherent uncertainties in the reserving process
there is a risk, however, that Physicians' and PRO's reserves for losses and LAE
could prove to be inadequate which could result in a decrease in earnings and
shareholders' equity. Adverse reserve development can reduce statutory surplus
or otherwise limit the growth of such surplus.
Under Ohio law the statute of limitations is one year after the cause
of action accrues. Also under Ohio law there is a four-year statutory time bar;
however, this has been construed judicially to be unconstitutional in situations
where the plaintiff could not have reasonably discovered the injury in that
four-year period. Claims of minors must be brought within one year of the date
of majority.
LOSS RESERVE EXPERIENCE
The inherent uncertainties in estimating loss reserves are greater for
some insurance products than for others, and are dependent on the length of the
reporting tail associated with a given product, the diversity of historical
development patterns among various aggregations of claims, the amount of
historical information available during the estimation process, the degree of
impact that changing regulations and legal precedents may have on open claims,
and the consistency of reinsurance programs over time, among other things.
Because MPL and commercial casualty claims may not be fully paid for several
years or more, estimating reserves for such claims
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can be more uncertain than estimating reserves in other lines of insurance. As a
result, precise reserve estimates cannot be made for several years following a
current accident year for which reserves are initially established.
There can be no assurance that the insurance subsidiaries in the group
have established reserves adequate to meet the ultimate cost of losses arising
from such claims. It has been necessary, and will over time continue to be
necessary, for the insurance companies to review and make appropriate adjustment
to reserves for estimated ultimate losses, LAE, future policy benefits, claims
payables, and annuity and other policyholder funds. To the extent reserves prove
to be inadequate, the insurance companies would have to adjust their reserves
and incur a charge to earnings, which could have a material adverse effect on
the financial results of the Company.
REINSURANCE RISKS
Prior to the June 30, 1997 sale of Citation National Insurance Company
("CNIC"), all of CNIC's existing insurance risks and claims liabilities, except
for those insuring workers' compensation, were transferred to Citation Insurance
Company ("CIC") through reinsurance treaties in order to effect the sale of CNIC
and the Company's workers' compensation business. As with other Property and
Casualty ("P & C") insurers, CIC's and Sequoia's operating results and financial
condition can be adversely affected by volatile and unpredictable natural and
man-made disasters, such as hurricanes, windstorms, earthquakes, fires, and
explosions. CIC and Sequoia generally seek to reduce their exposure to such
events through individual risk selection and the purchase of reinsurance. CIC's
and Sequoia's estimates of their exposures depend on their views of the
possibility of a catastrophic event in a given area and on the probable maximum
loss to the insurance companies should such an event occur. While CIC and
Sequoia attempt to limit their exposure to acceptable levels, it is possible
that an actual catastrophic event or multiple catastrophic events could
significantly exceed the probable maximum loss previously assumed, resulting in
a material adverse effect on the financial condition and results of operations
of the Company.
The future financial results of the insurance subsidiaries could be
adversely affected by disputes with their respective reinsurers with respect to
coverage and by the solvency of such reinsurers. None of the Company's insurance
subsidiaries is aware of actual or potential disputes with any of their
respective reinsurers that could materially and adversely impact the financial
results of the Company, or is aware of any insolvent reinsurer whose current
obligations to CIC, Physicians, PRO, American Physicians Life Insurance Company
("APL"), or Sequoia are material to such companies.
RISKS REGARDING SUMMIT GLOBAL MANAGEMENT
Summit is registered as an investment adviser in California, Florida,
Kansas, Louisiana, Oregon, Virginia and Wisconsin, as well as with the
Commission. Summit must file periodic reports with the Commission and must be
available for periodic examination by the Commission. Summit is subject to
Section 206 of the Investment Advisers Act of 1940, which prohibits material
misrepresentations and fraudulent practices in connection with the rendering of
investment advice, and to the general prohibitions of Section 208 of such Act.
If Summit were to violate the Investment Advisers Act prohibitions, it would
risk criminal prosecution, Commission injunctive actions and the imposition of
sanctions ranging from censure to revocation of registration in an
administrative hearing.
The investment adviser business is highly competitive. There are
several thousand investment advisers registered in the states in which Summit
does business, many of which are larger and have greater financial resources
than Summit. There can be no assurance that Summit will be able to compete
effectively in the markets that it serves.
GLOBAL DIVERSIFICATION OF INVESTMENTS
As a result of global diversification, investment decisions already
made and which may be made in the future, particularly with regard to GEC, the
Company's revenues may be adversely affected by economic, political and
governmental conditions in countries where it maintains investments or
operations, such as volatile interest rates or inflation, the imposition of
exchange controls which could restrict the Company's ability to withdraw funds,
political instability and fluctuations in currency exchange rates. There can be
no assurance that the Company's future results of operations will not be
adversely affected by fluctuations in foreign currency exchange rates or by
costs associated with currency risk management strategies. Other risks inherent
in international revenue generally include uncertainties relative to regional
economic circumstance (such as economic turbulence in Asia),
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political instability and difficulties in staffing and managing foreign
operations. There can be no assurance that these factors will not have a
material adverse effect on the Company's future international operations.
FLUCTUATIONS IN HISTORICAL OPERATING RESULTS, P & C RESERVES
PICO's operating results over the past five years have been volatile.
During the past several years, the levels of the reserves for PICO's insurance
subsidiaries have been very volatile. As a result of its claims experience and
the level of existing reserves with respect to its P & C insurance business, CIC
has had to significantly increase these reserves in four of the past six years.
There can be no assurance that significant increases with respect to
the reserves for the P & C business will not be necessary in the future, that
the level of reserves for PICO's insurance subsidiaries will not be volatile in
the future, or that any such increases or volatility will not have an adverse
effect on PICO's operating results and financial condition.
COMPETITION
There are several hundred P & C insurers licensed in California, many
of which are larger and have greater financial resources than CIC, and Sequoia;
offer more diversified types of insurance coverage; have greater financial
resources and have greater distribution capabilities than the insurance
companies of the group.
A.M. BEST RATINGS
A.M. Best ("Best") has assigned Sequoia a rating of B++ (Very Good) and
APL has had a Best rating of B+ (Very Good) since 1983. CIC was recently
upgraded from a B- (Adequate) to a B+ (Very Good) by Best. Physicians and PRO
are currently rated, and have been for a number of years, NR-3 (rating procedure
inapplicable). Best's ratings reflect the assessment of Best and the Company of
the insurer's financial condition, as well as the expertise and experience of
management. Therefore, Best ratings are important to policyholders. Best ratings
are subject to review and change over time. Failure to maintain or improve their
Best ratings could have a material adverse effect on the ability of the
insurance companies to write new insurance policies, as well as potentially
reduce their ability to maintain or increase market share. Management believes
that many potential customers will not insure with an insurer that carries a
Best rating of less than B+, and that customers who do so will demand lower rate
structures. There can be no assurance that any of the insurance companies'
ratings will be maintained or increased.
CYCLICAL NATURE OF THE P&C INDUSTRY
The P & C insurance industry has been highly cyclical, and the industry
has been in a cyclical downturn over the last several years due primarily to
premium rate competition, which has resulted in lower profitability. Premium
rate levels are related to the availability of insurance coverage, which varies
according to the level of surplus in the industry. The level of surplus in the
industry varies with returns on invested capital and regulatory barriers to
withdrawal of surplus. Increases in surplus have generally been accompanied by
increased price competition among P & C insurers. The cyclical trends in the
industry and the industry's profitability can also be affected significantly by
volatile and unpredictable developments, including natural disasters,
fluctuations in interest rates, and other changes in the investment environment
which affect market prices of insurance companies' investments and the income
from those investments. Inflationary pressures affect the size of losses and
judicial decisions affect insurers' liabilities. The demand for P & C insurance
can also vary significantly, generally rising as the overall level of economic
activity increases and falling as such activity decreases.
INSURANCE COMPANY CAPITAL AND SURPLUS TESTING
In the past few years, the NAIC has developed risk-based capital
("RBC") measurements for both property and casualty and life and health
insurers. The measures provide the various state regulators with varying levels
of authority based on the adequacy of an insurer's RBC. At December 31, 1997,
the PICO, PRO, APL, CIC and Sequoia annual statements reported more than
adequate RBC levels.
RISKS ASSOCIATED WITH FAILURE TO MANAGE GROWTH
The Company's growth internally and through its numerous acquisitions
has placed, and any further expansion would continue to place, a significant
strain on its limited personnel, management and other resources.
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In the future, the Company's ability to manage any growth may require it to
attract, train, motivate and manage new employees successfully, to effectively
integrate new employees into its operations and to continue to improve its
operational, financial, management and information systems and controls. The
failure to effectively manage any further growth could have a material adverse
effect on the Company's business, financial condition and results of operations.
FAILURE TO QUALIFY FOR EXEMPTION UNDER INVESTMENT COMPANY ACT WOULD RESULT IN
SIGNIFICANT REGULATORY BURDEN
The Company at all times intends to conduct its business so as not to
become regulated as an investment company under the Investment Company Act.
Accordingly, the Company does not expect to be subject to the restrictive
provisions of the Investment Company Act. However, if the Company fails to
qualify for exemption from registration as an investment company, (i) its
ability to use leverage would be substantially reduced, (ii) it would be subject
to significant additional disclosure obligations and (iii) restrictions on its
operational activities.
POSSIBLE PRICE VOLATILITY OF COMMON STOCK
The trading price of the Company's Common Stock has historically been,
and is expected to be, subject to fluctuations. The market price of the shares
of Common Stock may be significantly impacted by quarterly variations in
financial performance, shortfalls in revenue or earnings from levels forecast by
securities analysts, changes in estimates by such analysts, market conditions in
the computer software or hardware industries, product introductions by the
Company or its competitors, announcements of extraordinary events such as
acquisitions or litigation or general economic conditions. Statements or changes
in opinions, ratings, or earnings estimates made by brokerage firms or industry
analysts relating to the markets in which the Company does business relating to
the Company specifically could result in an immediate and adverse effect on the
market price of the Common Stock. In addition, in recent years the stock market
has experienced extreme price and volume fluctuations. These fluctuations have
had a substantial effect on the market prices for many companies, often
unrelated to the operating performance of the specific companies. There can be
no assurances that the market price of the Common Stock will not decline below
the levels prevailing at the time of this offering. Securities class action
lawsuits are often brought against companies following periods of volatility in
the market price of their securities. Any such litigation against the Company
could result in substantial costs and a diversion of resources and management
attention.
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's results of operations have been subject to significant
fluctuations, particularly on a quarterly basis, and the Company's future
results of operations could fluctuate significantly from quarter to quarter and
from year to year. Causes of such fluctuations may include operating performance
of subsidiaries, investment portfolio gains or losses, general economic
conditions (such as the recent economic turbulence in Asia), extraordinary
events such as acquisitions or litigation and the occurrence of unexpected
events.
The foregoing factors, individually or in the aggregate, could
materially adversely affect the Company's operating results and could make
comparison of historic operating results and balances difficult or not
meaningful.
8
<PAGE> 11
THE COMPANY
PICO is a holding company principally engaged in five industry
segments: portfolio investing; property and casualty insurance; surface, water,
geothermal and mineral rights; medical malpractice liability ("MPL") insurance;
and other operations. PICO has also been active in life and health insurance
operations through 1997, and is under contract to sell this business. PICO
operates through a number of direct and indirect subsidiaries (with PICO and its
subsidiaries, collectively referred to herein as the "Company"). The Company's
objective is to use its resources to increase shareholder value through
investments in businesses which the Company believes are undervalued or will
benefit from additional capital, restructuring of operations or management, or
improved competitiveness through operational efficiencies with the Company's
existing operations. This business strategy was implemented beginning in 1994
and was not fully in place until 1996. Guinness Peat Group PLC ("GPG"), a
strategic investment company domiciled in London, England owns approximately
17.6% of the Company. GPG is a publicly held company with its shares listed on
the London, Australia and New Zealand stock exchanges.
PICO was incorporated in 1981 and began operations in 1982. Its
principal executive office is located at 875 Prospect Street, Suite 301, La
Jolla, California 92037, and its telephone number is (619) 456-6022.
SUBSIDIARIES
Unless otherwise indicated, each subsidiary is directly or indirectly
wholly-owned by PICO. The Company's operating subsidiaries and their principal
subsidiaries or affiliates are as follows:
CITATION INSURANCE COMPANY ("CIC")
CIC is a California-domiciled insurance company licensed to write
commercial property and casualty insurance in Arizona, California, Colorado,
Nevada, Hawaii, New Mexico and Utah. CIC has also written Workers Compensation
insurance; however, the Company sold that line of business through a transfer to
and sale of its wholly-owned subsidiary, Citation National Insurance Company
("CNIC"), effective June 30, 1997. CNIC wrote no new business in 1997 prior to
its sale.
SUMMIT GLOBAL MANAGEMENT, INC. ("SUMMIT")
Summit is a Registered Investment Advisor that offers investment
management services to clients throughout the United States.
NEVADA LAND AND RESOURCE COMPANY, LLC ("NLRC")
NLRC is the owner of approximately 1,365,000 acres of deeded land in
northern Nevada. On April 23, 1997, PICO acquired 25.23% of NLRC. Global-Nevada
Land Resource Corporation, a wholly-owned subsidiary of Global Equity
Corporation ("GEC") which is approximately 51.17% owned by the Company, acquired
the remaining 74.77% of NLRC. See "Global Equity Corporation" in this section.
PHYSICIANS INSURANCE COMPANY OF OHIO ("PHYSICIANS")
Physicians, an Ohio licensed insurance corporation, operates primarily
as a diversified investment and insurance company. Its operations and those of
its direct and indirect subsidiaries include strategic investing, property and
casualty insurance, the runoff of its former MPL insurance claims reserves, and
other. Through 1997, an indirect subsidiary of Physicians engaged in life and
health insurance. That company, American Physicians Life Insurance Company, is
under contract to be sold. Physicians has been licensed as a property and
casualty insurer by the Ohio Department of Insurance ("Ohio Department") since
1976 and is also licensed by the Kentucky Department of Insurance. Disclosure in
this section regarding the business of "Physicians" includes all operations of
its subsidiaries.
PHYSICIANS' SUBSIDIARIES AND AFFILIATED COMPANIES
Sequoia Insurance Company ("Sequoia"). Sequoia is a
California-domiciled insurance company licensed to write insurance coverage for
property and casualty risks within the State of California. Sequoia writes
business through independent agents and brokers covering risks located primarily
within northern and central California. Although multiple line underwriting is
conducted and at one time or another all major lines of property and casualty
insurance except workers' compensation and ocean marine have been written,
Sequoia has, over the past
9
<PAGE> 12
few years, transitioned from writing primarily personal lines of business
(automobile, homeowners, etc.) to commercial lines.
American Physicians Life Insurance Company ("APL"). APL offers critical
illness insurance through "Survivor Key" policies as well as other life and
health insurance products. APL is wholly owned by The Physicians Investment
Company ("PIC"), a subsidiary of Physicians, Sequoia, and CIC. On June 16, 1997,
Physicians entered into an agreement to sell APL and APL's wholly-owned
subsidiary, Living Benefit Administrators Agency, Inc. The closing is subject to
certain closing conditions, which have not yet been met.
The Professionals Insurance Company ("PRO"). PRO is an Ohio domiciled
insurance company first licensed to write property and casualty insurance in
Ohio in 1979. It is also licensed in Kentucky, West Virginia and Wisconsin.
CLM Insurance Agency, Inc. ("CLM"). CLM, purchased on July 1, 1995, is
an inactive California insurance agency which placed insurance with California
insurers, including Sequoia.
Global Equity Corporation ("GEC"). PICO and its subsidiaries own
approximately 51.17% of GEC, a Canadian international investment company. PICO
increased its ownership interest in GEC from 38.2% prior to July 30, 1997, to
49.9% on July 30, 1997 and to 51.17% in August 1997 and has consolidated the
accounts of GEC with those of the Company for 1997. Set forth below as of
December 31, 1997, are the names and respective jurisdictions of incorporation
of certain direct and indirect subsidiaries of GEC, all of which are
wholly-owned except for NLRC which is 74.77% owned by Global-Nevada Land
Resource Corporation, a wholly-owned subsidiary of GEC. The remaining 25.23% of
NLRC is owned by PICO. The following list includes, but is not limited to, all
subsidiaries the total assets of which constituted more than 10% of the
consolidated assets of GEC as of December 31, 1997 or the total revenues of
which constituted more than 10% of the consolidated revenues of GEC during
fiscal 1997. GEC owns approximately 13% of PICO as of December 31, 1997.
Jurisdiction of
Subsidiary Incorporation
---------- -------------
Direct:
Forbes & Walker Securities Limited........................ Canada
Forbes & Walker (USA) Inc................................. Delaware
Indirect:
Forbes & Walker International Limited..................... Barbados
Vidler Water Company, Inc................................. Colorado
Nevada Land and Resource Company, LLC..................... Delaware
Global Equity SA.......................................... Switzerland
Subsidiaries of GEC are either holding companies or inactive, with the
exception of the following: Vidler Water Company, Inc. ("Vidler"), and NLRC. The
other subsidiaries may be utilized in the future in furtherance of the
international investment, asset management or corporate finance activities of
GEC.
MAJOR BUSINESSES AND PROPERTIES OF GLOBAL EQUITY CORPORATION
Vidler Water Company, Inc.
Effective November 14, 1995, a wholly-owned subsidiary of GEC acquired
all of the outstanding common stock of Vidler. Vidler is a corporation formed
under the laws of the state of Colorado. Vidler is engaged in the water
marketing and transfer business. The business plan calls for Vidler to identify
areas where water supplies are needed in the southwestern United States and then
facilitate the transfer from current ownership to Vidler, and subsequently to
municipalities, water districts, developers and others. This process requires
knowledge and skills in the identification, certification, upgrading, managing,
transfer, marketing and financing of water projects. Vidler has created
opportunity through its ability to aggregate water supplies from disparate
owners and locations and redirect the water to its highest and best use.
10
<PAGE> 13
As a comprehensive provider of water services, Vidler performs the
following functions:
- Water asset acquisitions, purchasing appropriate water rights,
upgrading the priority and functionality wherever possible, and
marketing the product to the end-user; and
- Development and operation of water recharge (storage) facilities
directed to municipalities and water districts in the southwestern
United States. Storage provides flexibility. Surplus supplies can
be stored inexpensively and can be sold and delivered to meet peak
demands.
Since its acquisition by GEC, Vidler and its immediate parent company
have purchased water rights and related assets in Colorado, Nevada and Arizona.
Nevada Land and Resource Company, LLC
On April 23, 1997, a wholly-owned subsidiary of GEC acquired a 74.77%
interest in NLRC. The remaining 25.23% interest was acquired by PICO. NLRC's
principal asset consists of approximately 1.365 million acres of deeded land
located in northern Nevada, together with appurtenant water, geothermal and
mineral rights. NLRC is actively engaged in maximizing the property's value in
relation to water rights, mineral rights, geothermal resources, and land
development.
In August 1996, a wholly-owned subsidiary of GEC made an investment in
Conex Continental Inc. ("Conex"). Conex is a corporation formed under the laws
of Ontario, Canada. At Conex's January 7, 1998 Annual Meeting of Shareholders,
the shareholders approved a plan to change the domicile of Conex to the state of
Delaware and management is working to accomplish this change.
Conex's principal asset is a 60% interest, through a wholly-owned
subsidiary, in a sino-foreign joint venture. This joint venture operates a
manufacturing facility in Guiyang City, Guizhou Province, China and manufactures
wheeled and tracked hydraulic excavators.
Siscom, Inc.
SISCOM is a corporation formed under the laws of the state of Colorado.
SISCOM is a provider of multimedia software solutions to the electronic news
media, Internet providers, and sports industries.
GEC also has a portfolio of investments in other equity securities in
the United States, Europe and Asia. These investments include GEC's investments
in PICO. They also include investments in certain Korean equities which have
been heavily impacted by the recent decline in Korean financial markets. In
1997, GEC wrote down its investment in these securities to approximately $0.8
million through an approximate $8.0 million charge to GEC's statement of
operations, including a foreign currency loss of approximately $3.8 million. The
preceding amounts were reduced by minority interests of approximately 48% when
consolidated into the Company's financial statements.
11
<PAGE> 14
SELLING SHAREHOLDERS
The table below sets forth certain information regarding the Selling
Shareholders. The Shares are being registered to permit public sales of the
Shares, and the Selling Shareholders may offer the Shares for resale from time
to time. See "Plan of Distribution."
The table below sets forth the names of the Selling Shareholder and the
number of Shares owned by such shareholder.
<TABLE>
<CAPTION>
Selling Shareholder Shares of Common Stock
------------------- ----------------------
<S> <C>
Global Equity Corporation 4,258,415
Citation Insurance Company 313,600
Total 4,572,015
-------------------------------
</TABLE>
The Shares being offered by Global Equity Corporation hereunder were
acquired in a private placement transaction and Citation Insurance Company
acquired the Shares from the Company in connection with a reorganization of the
Company.
In connection with the above transaction, each of such Selling
Shareholders represented to the Company that it was acquiring the Shares for
investment and with no present intention of distributing such Shares. In
recognition of the fact that investors, even though purchasing Common Stock
without a view to distribution, may wish to be legally permitted to sell their
shares when they deem the sale to be appropriate, the Company has filed with the
Commission under the Securities Act the Registration Statement, with respect to
the resale of the Shares from time to time and has agreed to prepare and file
such amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective until the Shares are no
longer required to be registered for the sale thereof by the Selling
Shareholders.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Shareholders may sell
Shares from time to time in transactions in the Nasdaq National Market, through
negotiated transactions or otherwise, at fixed prices that may be changed, at
prevailing market prices or at negotiated prices.
Sales may be made pursuant to this Prospectus to or through
broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or the purchasers of
Common Stock for whom such broker-dealer may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions). The Selling Shareholders and any
broker-dealers or other persons acting on their behalf in connection with the
sale of Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit realized by
them on the resale of the Shares as principals may be deemed to be underwriting
commissions under the Securities Act. No period of time has been fixed within
which the Shares may be offered or sold.
The Company will not receive any part of the proceeds of any sales of
Shares pursuant to this Prospectus. The Company will pay all the expenses of
registering the Shares, except for selling expenses incurred by the Selling
Shareholders in connection with this offering, including any fees and
commissions payable to broker-dealers or other persons, which will be borne by
the Selling Shareholders.
12
<PAGE> 15
USE OF PROCEEDS
PICO will not receive any proceeds from sales of the Shares.
LEGAL MATTERS
The validity of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, LLP, San Diego, California.
EXPERTS
The consolidated financial statements for the year ended December 31,
1997 incorporated in this Registration Statement by reference from the Annual
Reports on Form 10-K and Form 10-K/A of PICO have been audited by Deloitte and
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements and consolidated financial
statement schedules of PICO at December 31, 1996, and for each of the two years
in the period ended December 31, 1996, incorporated herein and included in the
Company's Annual Report on Form 10-K and 10-K/A for the year ended December 31,
1997, have been audited by Coopers & Lybrand L.L.P., independent accountants, as
set forth in their reports dated April 7, 1997, accompanying such financial
statements, and incorporated herein by references. The financial statements
referred to above have so incorporated in reliance upon the reports of such
firm, which reports are given upon their authority as experts in accounting and
auditing.
The consolidated financial statements for the year ended December 31,
1997 for Global Equity Corporation and incorporated in this Registration
Statement by reference from the Annual Reports on Form 10-K and Form 10-K/A of
PICO Holdings, Inc. have been audited by KPMG, Chartered Accountants, as stated
in their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
13
<PAGE> 16
================================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this prospectus in connection with the offering described herein,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the company. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the registered securities to which it relates, or an offer
to sell, or a solicitation of an offer to buy, in any jurisdiction in which it
is unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date hereof.
SUMMARY TABLE OF CONTENTS
Page
----
Available Information..............................3
Incorporation of Certain Documents by
Reference.......................................3
Risk Factors.......................................4
The Company........................................9
Selling Shareholders..............................12
Plan of Distribution..............................12
Use of Proceeds...................................13
Legal Matters.....................................13
Experts...........................................13
================================================================================
4,572,015 SHARES
COMMON STOCK
---------------------
PROSPECTUS
---------------------
May ___, 1998
================================================================================
14
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with the registration of the Common Stock
hereunder will be substantially as follows:
<TABLE>
<CAPTION>
Item Company Expense
---- ---------------
<S> <C>
SEC Registration Fee...............$ 6,744*
Printing and engraving expenses....$ 1,000*
Legal fees and expenses............$ 10,000*
Accounting Fees and expenses.......$ 10,000*
Miscellaneous......................$ 7,256*
Total $ 35,000
</TABLE>
- --------------
* Estimated for purposes of this filing.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to provisions of the California General Corporation Law (the
"CGCL"), Registrant's Articles of Incorporation include a provision which
eliminates the personal liability of its directors to Registrant and its
shareholders for monetary damages to the fullest extent permissible under
California law. This limitation has no effect on a director's liability (i) for
acts or omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interest of Registrant or its shareholders or that involve
the absence of good faith on the part of the director, (iii) for any transaction
from which a director derived an improper benefit, (iv) for acts or omissions
that show a reckless disregard for the director's duty to Registrant or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to Registrant or its shareholders, (v) for acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to Registrant or its shareholders, (vi) under
Section 310 of the CGCL (concerning contracts or transactions between the
corporation and a director) or (vii) under Section 316 of the CGCL (concerning a
director's liability for improper distributions, loans and guarantees). The
provision does not eliminate liability of a director for any acts or omissions
which occurred prior to November 18, 1988, the effective date of Registrant's
amended Articles of Incorporation including such provision, and it does not
eliminate or limit the liability of an officer for any act or omission as an
officer, notwithstanding that the officer is also a director or that his or her
actions, if negligent or improper, have been ratified by the Board of Directors.
Further, the provision has no effect on claims arising under federal or state
securities laws and does not affect the availability of injunctions and other
equitable remedies available to Registrant's shareholders for any violation of a
director's fiduciary duty to Registrant or its shareholders. Although the
validity and scope of the legislation underlying the provision have not yet been
interpreted to any significant extent by the California courts, the provision
may relieve directors of monetary liability to Registrant for grossly negligent
conduct, including conduct in situations involving attempted takeovers of
Registrant.
Registrant's Articles of Incorporation also include a section
authorizing Registrant to indemnify its officers, directors and other agents
through bylaw provisions, agreements with such agents, vote of shareholders or
otherwise in excess of the indemnification permitted by Section 317 of the CGCL,
subject only to the limits set forth in Section 204 of the CGCL with respect to
actions for breach of duty to the corporation and its shareholders. The By-Laws
expressly provide that Registrant shall have the right to purchase and maintain
insurance against any liability asserted against or incurred by officers,
directors and other agents, whether or not Registrant would have the power to
indemnify such person against the liability insured against.
15
<PAGE> 18
The Registrant has obtained directors and officers liability and
company reimbursement insurance pursuant to three policies currently in effect
with underwriters at Lloyd's, London-SPMI, Lloyds, London and Executive Risk
Indemnity, Inc. The limit of coverage is $7 million with a retention of
$500,000. These policies are subject to customary exclusions.
The Registrant has entered into agreements with its executive officers
and directors to provide indemnity to such persons to the maximum extent
permitted under applicable law.
Section 317 of the California General Corporation law makes provisions
for the indemnification of officers, directors and other corporate agents in
terms sufficiently broad to indemnify such persons, under certain circumstances,
against such liabilities (including reimbursement of expenses incurred) arising
under the Securities Act.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
2.2* Agreement and Plan of Reorganization, dated as of May 1,
1996, among PICO, Citation Holdings, Inc. and Physicians
and amendment thereto dated August 14, 1996 and related
merger Agreement.
2.3+ Second Amendment to Agreement and Plan of Reorganization
dated November 12, 1996.
2.4# Agreement and Debenture, dated November 14, 1996 and
November 27, 1996, respectively, by and between
Physicians and PC Quote, Inc.
2.5# Purchase and Sale Agreement by, between and among Nevada
Land and Resource Company, LLC, GEC, Western Water
Company and Western Land Joint Venture dated April 9,
1997.
4.2+ First Amendment to Rights Agreement dated April 30,
1996.
4.3+ Second Amendment to Rights Agreement dated November 20,
1996.
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
23.1 Independent Auditors' Consent - Deloitte & Touche LLP.
23.2 Consent of Independent Accountants - Cooper & Lybrand
L.L.P.
23.3 Accountants' Consent - KPMG.
23.4 Consent of Gray Cary Ware & Freidenrich LLP (Included in
Exhibit 5.1).
24 Power of Attorney (included in the Signature Page
contained in Part II of the Registration Statement).
- -----------------
* Filed as Appendix to the prospectus in Part I of Registration
Statement on Form S-4 (File No. 333-06671).
+ Incorporated by reference to exhibit of same number filed with Form
8-K dated December 4, 1996.
# Incorporated by reference to exhibit of same number filed with Form
10-K dated April 15, 1997 as amended April 30, 1997.
16
<PAGE> 19
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
17
<PAGE> 20
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
18
<PAGE> 21
SIGNATURES
----------
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of San Diego, State of California, on May 8, 1998.
PICO Holdings, Inc.
By: /s/ John R. Hart
-------------------------------------
John R. Hart
Chief Executive Officer, President and
Director
(Principal Executive Officer)
POWER OF ATTORNEY
We, the undersigned officers and directors of PICO Holdings, Inc.,
hereby severally constitute John R. Hart and James Mosier our true and lawful
attorneys with full power to sign for us and in our names, in the capacities
indicated below, the registration statement filed herewith and any and all
amendments to said registration statement, and generally to do all such things
in our names and behalf in our capacities as officers and directors to enable
PICO Holdings, Inc. to comply with the provisions of the Securities Act of 1933,
and all requirements of the Securities and Exchange Commission, hereby ratifying
and confirming our signatures as they may be signed by our said attorney to said
registration statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John R. Hart Chief Executive Officer, President and May 8, 1998
------------------------------------- Director (Principal Executive Officer)
John R. Hart
/s/ Gary W. Burchfield Chief Financial Officer and Treasurer May 8, 1998
------------------------------------- (Principal Financial and Accounting
Gary W. Burchfield Officer)
/s/ Ronald Langley Chairman of the Board May 8, 1998
-------------------------------------
Ronald Langley
/s/ S. Walter Foulkrod, III, Esq. Director May 8, 1998
-------------------------------------
S. Walter Foulkrod, III, Esq.
/s/ Richard D. Ruppert, MD Director May 8, 1998
-------------------------------------
Richard D. Ruppert, MD
/s/ Dr. Marshall J. Burak Director May 8, 1998
-------------------------------------
Dr. Marshall J. Burak
</TABLE>
19
<PAGE> 22
<TABLE>
<S> <C> <C>
/s/ Robert R. Broadbent Director May 8, 1998
- --------------------------------------
Robert R. Broadbent
/s/ John D. Weil Director May 8, 1998
- --------------------------------------
John D. Weil
</TABLE>
20
<PAGE> 23
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
2.2* Agreement and Plan of Reorganization, dated as of May 1,
1996, among PICO, Citation Holdings, Inc. and Physicians
and amendment thereto dated August 14, 1996 and related
merger Agreement.
2.3+ Second Amendment to Agreement and Plan of Reorganization
dated November 12, 1996.
2.4# Agreement and Debenture, dated November 14, 1996 and
November 27, 1996, respectively, by and between
Physicians and PC Quote, Inc.
2.5# Purchase and Sale Agreement by, between and among Nevada
Land and Resource Company, LLC, GEC, Western Water
Company and Western Land Joint Venture dated April 9,
1997.
4.2+ First Amendment to Rights Agreement dated April 30,
1996.
4.3+ Second Amendment to Rights Agreement dated November 20,
1996.
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
23.1 Independent Auditors' Consent - Deloitte & Touche LLP.
23.2 Consent of Independent Accountants - Cooper & Lybrand
L.L.P.
23.3 Accountants' Consent - KPMG.
23.4 Consent of Gray Cary Ware & Freidenrich LLP (Included in
Exhibit 5.1).
24 Power of Attorney (included in the Signature Page
contained in Part II of the Registration Statement).
- -------------------
* Filed as Appendix to the prospectus in Part I of Registration
Statement on Form S-4 (File No. 333-06671).
+ Incorporated by reference to exhibit of same number filed with Form
8-K dated December 4, 1996.
# Incorporated by reference to exhibit of same number filed with Form
10-K dated April 15, 1997 as amended April 30, 1997.
21
<PAGE> 1
Exhibit 5.1
May 8, 1998
PICO Holdings, Inc.
875 Prospect Street, Suite 301
La Jolla, California 92037
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We are rendering this opinion in connection with the registration under
the Securities Act of 1933, as amended, of 4,572,015 shares of Common Stock (the
"Shares") of PICO Holdings, Inc., a California corporation (the "Company"),
which are held by the Selling Shareholders named in such registration statement.
We have examined all instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies. We have also assumed
that the Shares will be evidenced by appropriate certificates, duly executed and
delivered.
We are admitted to practice only in the State of California and we
express no opinion concerning any law other than the law of the State of
California and the federal law of the United States.
Based on such examination, we are of the opinion that the Shares, when
sold pursuant to the registration statement to which this opinion is an exhibit
will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement referred to above and the use of our name wherever it
appears in said registration statement.
Respectfully submitted,
/s/ GRAY CARY WARE & FREIDENRICH LLP
-----------------------------------
GRAY CARY WARE & FREIDENRICH LLP
22
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
PICO Holdings, Inc. on Form S-3 of our reports dated March 27, 1998, appearing
in the Annual Reports on Form 10-K and Form 10-K/A of PICO Holdings, Inc. for
the year ended December 31, 1997 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
San Diego, California
May 5, 1998
23
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in this registration statement on
Form S-3 of our reports dated April 7, 1997 on our audits of the consolidated
financial statements and consolidated financial statement schedules of PICO
Holdings, Inc. We also consent to the reference to our Firm under the caption
"Experts".
COOPERS & LYBRAND, L.L.P.
San Diego, California
May 6, 1998
24
<PAGE> 1
EXHIBIT 23.3
ACCOUNTANTS' CONSENT
KPMG
The Board of Directors
PICO Holdings, Inc.
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of PICO Holdings, Inc. of our report dated March 17, 1998 relating to
the consolidated statement of financial position of Global Equity Corporation as
at December 31, 1997, and the related consolidated statements of operations,
deficit and changes in financial position for the year then ended, which report
appears in the annual report on Form 10-K of PICO Holdings, Inc. dated March 31,
1998.
"KPMG"
Chartered Accountants
Toronto, Canada
May 5, 1998
25
